Emerging market investors take note: Argentina’s Rosario Futures Exchange (ROFEX) is eyeing international institutional investors, providing them with direct market access (DMA) to trade derivatives on agricultural, financial and other commodities, as well as stocks, bonds and other securities on its exchange.
Founded in 1909, ROFEX is the primary commodities exchange in Argentina. Starting out life as a futures exchange, it was the first in the world to list agricultural futures without delivery. The company now trades in a range of derivatives, and offers access to stocks and bonds through a cross-listing agreement with MerVal, the Buenos Aires Stock Exchange. It also owns and operates a clearing house and a software development company.
With volumes steadily growing over the past few years, ROFEX now ranks 28th in the world among derivatives exchanges in terms of volumes, according to the Futures Industry Association.
Direct Access from Afar
In 2010, ROFEX launched a DMA platform for domestic brokers. Five years later, it is rolling out the platform, along with associated services, to offshore institutional investors.
We now have a new window for international institutional investors to trade via the DMA platform.
In an exclusive interview with Finance Magnates, Chief Business Officer at ROFEX, Ivan M Dalonso, explained: “We now have a new window for international institutional investors. International investors that would like to trade here can now do so via the DMA platform and a specific account, which is called a special settlement account.”
The platform gives investors not only access to live market data, but allows them to trade directly on the exchange’s central book.
Investors can set up a Special Settlement Account to directly settle operations with the exchange’s Clearing House. To make the financial logistics easier, ROFEX has a US-domiciled bank account for collaterals.
According to the company, benefits of DMA access include:
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- Visualize the order book of the market’s electronic system in real-time.
- Allocate their own orders and achieve greater operational autonomy by increasing control over them (confirmation, modification and/or cancellation).
- Greater speed, thus increasing efficiency in business operation.
- Favour capture of business opportunities, from the analysis of the various products and/or markets conditions.
- Reduction in the frequency of operational mistakes (execution mistakes), and other problems related to verbal orders given to the intermediary, since the orders are directly placed on the system by the client.
- Possibility to develop trading strategies based on computer programs, also called ATS (Automated Trading Systems) or algorithmic trading.
Since the service became internationally available half a year ago, ROFEX has signed up three US-based hedge funds. Volumes of trades are increasing.
Products and Opportunities
International investors will be able to access and trade in all products offered by the exchange, ranging from FX and commodity futures to equities and bonds.
Mr. Dalonso was keen to point out trading opportunities on the Argentinian exchange for sophisticated investors. He noted strong interest in USD/ARS (Argentine peso) futures due to high levels of liquidity and volatility.
Given the country’s floundering currency and contracting economy, such opportunities are only for those sophisticated investors with an appetite for risk.
With licences to list CME Soybean and Corn, ROFEX also offers traders interesting spreads between the local contract and the CME contract. Coupled with the fact that agricultural commodities volumes are sizable, opportunities for arbitrage abound.
Mr. Dalonso would particularly welcome algorithmic trading, which he sees as mutually conducive to the market’s low prices, increasing volumes and high levels of volatility.
“We are interested in attracting international investors and sophisticated traders … We think we have a lot of opportunities; we know that the instruments here (in agricultural derivatives, bonds and commodities) are cheap now. Because they are volatile, traders can take advantage of this opportunity.”
Furthermore, ROFEX and the Algorithmic Trader’s Association (ATA) have signed a deal, in which ATA will offer advanced training to members of the exchange to further benefit from the advanced DMA access on offer. ATA is an international professional organisation and resource centre for the discussion of algorithmic trading strategy, methods, software, and technical analysis.
Given the Latin American country’s floundering currency and contracting economy, such opportunities are certainly only for those sophisticated investors with an appetite for risk. According to FT, presidential elections in October are expected to bring in a more market-friendly administration, and investors hope that untangling capital controls will be one of the top priorities for the new government.