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A recent report by Nasdaq and The Value Exchange – “Building Better Markets for Tomorrow” – showed that 84% of investors plan to increase their exposure to LatAm over the next 12-24 months.
Institutional and global investor demand is there. But in order for Sao Paulo, Mexico City, Buenos Aires, and other LatAm financial centers to fully unlock foreign investment flows, the region needs a new operating model, as 59% of investors reported encountering significant market inefficiencies that obstruct or limit their investment capabilities. The primary issue identified is regional variance in post-trade processes such as settlements, securities lending, collateral management, and proxy voting; this fragmentation complicates transactions while increasing costs and risks.
To overcome these barriers, the report advocates for regional consolidation or harmonization of market practices, as well as efforts toward platform modernization and standardization. Such reforms could streamline operations, reduce costs, and enhance the overall investment climate. This approach is seen as essential for building the LatAm operating model of tomorrow, which promises greater efficiency and competitiveness.
One example of this approach is nuam, which was formed in 2023 as the regional holding company that integrates the stock exchanges of Santiago, Lima, and Colombia.
The end goal is “a common securities market with a unique trading platform, designed to improve liquidity, access and scale,” BNP Paribas said in a report. It represents progress in modernizing the region’s financial infrastructure… By using advanced technology and innovative strategies, nuam intends to solve some inefficiencies in the traditional financial systems in Latin America.”
The upside of post-trade change is less costly and risky buy-side operations, which ideally would lift regional investment activity. On average, survey respondents anticipate an 11% cost saving from the standardization of post-trade processes. Specifically, significant savings are expected in areas like securities lending and settlements, with some investors predicting cost reductions of up to 20%.
Looking ahead, the survey participants ranked changes in market infrastructure as the most impactful factor for a modern and future-proofed operating model. There is also a strong belief in the benefits of post-trade transformation, and moreover, addressing current challenges could position Latin American markets to capitalize on emerging opportunities in new asset classes, such as tokenized digital assets and voluntary carbon credits.
The survey underscores a critical juncture for Latin America’s financial markets. By addressing the inefficiencies and embracing regional harmonization, the region can unlock significant investment flows and establish a more robust and efficient financial ecosystem. This transformation will not only cater to the needs of today’s investors but also pave the way for future innovations and growth.
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