SAO PAULO, Aug 17 (Reuters) – Haitong Securities Co Ltd’s Brazilian broker-dealer unit has stopped taking and processing equity orders directly from some clients, two people with direct knowledge of the matter said on Wednesday, the latest such step by a brokerage as mounting competition and eroding trading fees cut into profits.
The brokerage, known in Brazil as Haitong Securities do Brasil CCVM, will drop a full license at financial bourse operator BM&FBovespa SA and obtain a narrower one, said the people, who asked for anonymity to speak freely about the issue. About a dozen employees, including four traders, have left, the people said.
Under terms of the new license, which is being negotiated with the bourse’s Bovespa equity market trading section, Haitong will have to hire a third party to order, execute and clear equity and derivatives transactions directly with the BM&FBovespa. The decision will allow Haitong to free up capital that remains at the bourse as collateral for transactions, the people said.
A spokeswoman at the São Paulo-based unit of Haitong could not be reached for comment. Usually, the process needs approval from BM&FBovespa and could take around 60 days.
The broker-dealer, which the China-based securities firm acquired from Portugal’s failed Banco Espírito Santo SGPS SA about a year ago, has become the latest victim of Brazil’s increasingly concentrated broker-dealer market, where the top 10 players control 70 percent of trading.
Rising volatility and reduced activity in equities and other financial products have triggered years of losses for independent broker-dealers, according to central bank data. In April, Banco Fator SA’s broker-dealer made a similar request, in order to sharpen focus on other activities. (Reporting by Guillermo Parra-Bernal and Bruno Federowski; editing by Grant McCool)