Bolsa de Valores de Colombia wants to position itself as a major market in Latin America catering to both the domestic and international investment community.

Bolsa de Valores de Colombia (BVC) has decided to enter the derivatives marketplace as a way to solidify its position as a major market in Latin America. With strong demands for futures and options, BVC understands that if it doesn’t offer these instruments in Colombia, the business would go elsewhere.

At the same time, BVC understands the need to implement systems and trading practices that comply with international standards and have been tested in larger international markets. Most important, the technology platform must serve as a gateway for all types of participants to access the market.

In 2006, the exchange launched a new trading platform for the fixed income market. BVC also acquired an OMX trading platform for equities and derivatives. “This new top-of-theline technology we have acquired will position BVC as a significant player in the marketplace,” says Juan Pablo Córdoba, CEO of BVC. “Both our retail and institutional customers will be able to execute various types of orders securely and efficiently. The technology is scalable so it can meet our needs now and in the future as our volumes increase. In addition it is flexible, so we can introduce new products and trading models quickly.”

A demutualized exchange governed by an independent board and monitored by an independent selfregulatory organization (SRO), BVC is the only exchange in Colombia and has made great strides in developing the country’s capital markets.

According to the World Federation of Exchanges, Colombia’s equity trading volume more than doubled from 2004-2005, albeit from a relatively low base. Moreover, the country is ranked fourth in the world in exchangetraded fixed income securities, most of which is government debt.

Around 100 companies are listed on the BVC, but the exchange has succeeded in attracting new issuers. In 2007, BVC listed seven new companies; five of them raised more than USD 3.5 billion from the local market. The recent Ecopetrol IPO raised almost USD 2.5 billion, and the issue attracted 480,000 investors.

BVC is trying actively to increase retail investor participation. “Just a small percentage of the Colombian population participates in our market, and we want to change that,” says Córdoba. “It’s very important for us to reach retail investors and make it easy for them to access the BVC. We’re working with all market participants to reduce transaction costs, not just at the exchange, but throughout the value chain.”

To grow the market, BVC’s new derivatives market will launch in mid-2008 and will offer futures and options on local interest rates, foreign exchange and stock indexes. Getting the regulation passed and putting a secure legal framework in place was a major effort, but those important steps are now complete. Now an independent central counterparty clearinghouse is being established based on international standards.

BVC is also cooperating with other Latin American exchanges to create regional investment opportunities. Brazil’s Bovespa and México’s Bolsa Mexicana de Valores have proposed to interconnect their two marketplaces by facilitating cross-border investments. BVC signed up as a third participant and, together with Chile and Perú, these exchanges are trying to facilitate regional investment.

Over the past four years Colombia has attracted international attention due to the many significant and positive changes taking place in the country. The capital market, led by the BVC, has been at the forefront of these efforts. With new technology, new product development, and the introduction of on-exchange derivatives, BVC is poised to become a leading exchange in Latin America.