Unlocking potential: The future of investment in Latin America’s new capital market
Creating a unified capital market for Chile, Colombia and Peru represents a significant step towards enhancing Latin Americas’ economic resilience and global competitiveness. Harmonising regulations, reducing barriers to cross-border investments, and fostering greater cooperation among financial institutions, will yield a more robust market. A unified market will facilitate greater access to capital for businesses and will offer investors a broad array of opportunities. This will contribute to growth and stability across the region, as it continues to navigate complex economic dynamics. In August 2023, the stock markets of Chile, Colombia, and Peru joined efforts to create nuam exchange, a new capital market for Latin America.
What is nuam?
Nuam is the result of the integration of the stock exchanges of the three countries: BCS – Santiago Stock Exchange in Chile, BVC – Colombia Stock Exchange, and BVL – Lima Stock Exchange in Peru. This will create a common securities market with a unique trading platform, designed to improve liquidity, access and scale. It represents progress in modernising the region’s financial infrastructure. The platform seeks to provide a more efficient, transparent, and accessible marketplace for trading a range of financial instruments, including stocks, bonds, and derivatives.
By using advanced technology and innovative strategies, nuam intends to solve some inefficiencies in the traditional financial systems in Latin America. Its launch is expected to generate new opportunities for investors and companies across the region, as well as enhance operational flows through the standardisation of processes and adoption of best market practices.
How does nuam plan to address market inefficiencies?
Traditional trading platforms normally face issues such as high transaction costs, limited liquidity, and a lack of technological innovation. Nuam plans to fix these through a series of strategic measures and the implementation of state-of-the-art technology.
Initially, the platform aspires to optimise transaction costs by improving technology and streamlining processes. By using advanced algorithms and automation, nuam can reduce expenses and, ultimately, generate savings that may benefit the full ecosystem. Additionally, the platform intends to raise liquidity by attracting a wider range of market participants by allowing direct market access and offering a diverse variety of financial products. This strategy is expected to promote a more competitive trading environment while facilitating access to all listed securities.
What makes nuam different from existing platforms?
As a single trading platform, the significant feature of nuam is its focus on technology and innovation. This platform uses advanced technology to deliver a more efficient trading experience. This includes real-time data analytics, high-frequency trading capabilities, and sophisticated risk management tools.
Nuam’s vision is powered by a strategic partnership with Nasdaq. By leveraging Nasdaq’s infrastructure, and standardising access to the market through standard industry APIs, nuam will improve market accessibility and transparency, ensuring resilience.
Nuam’s risk control systems are essential to maintaining market integrity, particularly as the exchange aims to attract larger global participants. Key aspects of these controls include pre-trade validation, real-time monitoring, and post-trade risk management, all designed to ensure trades are executed safely and within regulatory limits. These safeguards are bolstered by Nasdaq’s real-time risk management tools.
Nuam stands out by providing a wide range of financial products and services, such as equities, bonds, and derivatives. The platform’s objective is to provide both retail and institutional investors comprehensive market access and advanced trading features. On the other hand, the harmonisation of operating rules, the interoperability model for CCPs and interconnected CSD platforms for the three markets, seeks efficiencies and a seamless and standardised operating process.
What are the expected benefits for investors and companies?
For investors, nuam offers multiple advantages. The market will provide a unique and direct access to the securities of the three markets to local, regional and international investors. It will also improve liquidity and depth, which is expected to create more appealing investment opportunities. Additionally, the advanced technological features provide investors with immediate insights and enhanced trading strategies, potentially leading to better returns. With a combined market-cap USD 342.3 bn, the combined market offers a larger scope for investing under a single system.
For companies, nuam provides a more efficient and transparent method for raising capital. Objectives of nuam include incorporating new listings of high growth companies, providing more financing alternatives and IPOs, as well as more ‘follow-on’ capital raisings. By having their shares available on the exchange, companies can reach a larger investor base and gain increased visibility and market credibility. This can be especially valuable for start-ups and mid-sized enterprises seeking capital to expand operations or for new projects.
How does nuam exchange fit into the wider regional market?
Nuam’s launch aligns with significant changes in Latin America’s financial markets. Historically characterised by fragmented and underdeveloped financial systems, the region is now moving towards modernisation and integration.
Nuam is positioned as a key player in this new scenario. By offering a unique platform that addresses many regional financial market challenges, it supports broader efforts to advance economic development and improve investment attractiveness in Latin America. Its success could inspire similar initiatives in other countries, further promoting regional financial innovation.
What are the challenges and risks associated with nuam?
Despite its potential benefits, nuam faces some technological, regulatory and structural challenges. These include harmonisation of rules and operational practices in the three markets. Building trust and credibility among investors and companies is critical. As an integrated new market, it must show its reliability and effectiveness by addressing the issues it targets.
Another challenge is related to the possibility of trading securities in the currency of origin or in USD. In a changing economic environment, nuam must foster innovation and adapt to evolving market conditions.
How will nuam impact the future of capital markets in Latin America?
The impact of nuam on the future of Latin America’s capital markets is still developing, but its potential is significant. By dealing with important inefficiencies and adopting technological advancements, the new integrated market sets a new reference point for financial trading in the region. Its success could support a more dynamic and competitive market environment, benefiting investors, companies, and all market participants.
Nuam’s focus on sustainability and innovation aligns with larger global trends towards responsible investing and technological progress. As Latin America continues to evolve economically, platforms like nuam will be pivotal in shaping the future of the region’s financial environment.
How is BNP Paribas positioned for the new market?
At BNP Paribas, we firmly believe that a single market offers significant advantages for investors. These include unified operational processes, streamlined market access, a wider range of investment options, and increased trading volumes. In line with this vision, we established our custody services in Chile, Colombia and Peru, adopting a remote operational model based in Bogota. This setup ensures direct access to the infrastructure of all three markets through a single point of contact, supported by centralised processes that drive operational efficiency and enhance service delivery.
Throughout the project, we have actively engaged with various working groups, collaborating closely with nuam and key market stakeholders. By leveraging our global expertise in similar initiatives, we have consistently advocated for market development that aligns with the rigorous standards demanded by international investors.