I mentioned it under the Colombia exchange, but seeing now it has a separate holdco listed in Chile apparently.
Latin America has a poor track record on cross-border financial integration though. Merging exchanges from 3 different latam countries is messy with politicians pulling in different directions, different tax regimes, different currencies, different regulations.
Nice overview! These are moaty and interesting businesses, often with very long history. There is also a certain irony in your qoute "There have been multiple studies showing that exchange owning stocks outperform the index of their own exchange."
One factor worth considering is ownership structure. I have looked at the Philippine Stock Exchange, though it seemed a bit too expensive, and also the Budapest Stock Exchange. In the latter case, I am not comfortable with the very high level of state ownership. It raises questions around incentives, commercial drive, capital allocation, and alignment with minority shareholders.
Is ownership structure something you factor into your analysis of exchange operators? Or rather, how much?
Yeah, ownership structure is really important. For the Polish exchange, the Polish treasury has a controlling-ish stake which may be a contributing factor to it being inexpensive.
B3 is quite structurally clean btw. Roughly 61% of B3 is held by institutions, with the general public/retail at ~39%, and the top 22 shareholders collectively hold about 50% - no single shareholder has a majority. It's listed under one-share-one-vote rules, with a majority-independent board, full tag-along rights for common shareholders, and no golden share or special voting privileges. (But Im actually ok with an owner/founder having special voting privileges as long as they are minority-aligned and show good capital discipline - look at Investor AB.)
Best is where there is a controlling shareholder that is also an owner operator with a history of good capital allocation. And that the controlling shareholder treats the listed entity as their primary vehicle, not one of many holdings. Founders/owners running multiple private companies alongside a listed company is a problem because capital and opportunities can leak out.
Exchanges are typically formed by the brokers/participants, so you dont really get a single founder/owner-operator. For exchanges I think the B3 set up is perfectly fine.
worth noting, even mediocre exchanges usually outpace inflation, which is always a 3rd-world fear. (ref:horizon kinetics)
agree re: argentina except 1 key point. milei has not been a panacea if you attempt a balanced review. nor has lula's nth term destroyed capitalism by any stretch. good biz, minus gov interference\ownership, survive in both nations.
the sgx has slowed a bit since trump, as switching from a china listing for better ethics\optics for foreign capital is less obvious. but i expect it remains expensive, and more so if the slowdown is temp.
KASE and Warsaw look really interesting. I have exposure to Poland through an ETF , but have really wanted to get into KASE as I’ve been tracking it for about 14 months. I haven’t been able to find a brokerage or gain investment access to it though. Any recommendations where I could trade KASE? Thanks for the piece, super interesting!
Freedom Finance (NASDAQ:FRHC)'s subsidiaries Freedom24.com (Cyprus based) and ffin.kz (Kazakhstan based) both provide KASE access. Both accept foreign clients (from the EU, in my case).
Would add NUAM to the list
I mentioned it under the Colombia exchange, but seeing now it has a separate holdco listed in Chile apparently.
Latin America has a poor track record on cross-border financial integration though. Merging exchanges from 3 different latam countries is messy with politicians pulling in different directions, different tax regimes, different currencies, different regulations.
That’s also the opportunity you’re describing! - There’s both margin and increasing revenue potential if. Not easy though
Nice overview! These are moaty and interesting businesses, often with very long history. There is also a certain irony in your qoute "There have been multiple studies showing that exchange owning stocks outperform the index of their own exchange."
One factor worth considering is ownership structure. I have looked at the Philippine Stock Exchange, though it seemed a bit too expensive, and also the Budapest Stock Exchange. In the latter case, I am not comfortable with the very high level of state ownership. It raises questions around incentives, commercial drive, capital allocation, and alignment with minority shareholders.
Is ownership structure something you factor into your analysis of exchange operators? Or rather, how much?
Yeah, ownership structure is really important. For the Polish exchange, the Polish treasury has a controlling-ish stake which may be a contributing factor to it being inexpensive.
B3 is quite structurally clean btw. Roughly 61% of B3 is held by institutions, with the general public/retail at ~39%, and the top 22 shareholders collectively hold about 50% - no single shareholder has a majority. It's listed under one-share-one-vote rules, with a majority-independent board, full tag-along rights for common shareholders, and no golden share or special voting privileges. (But Im actually ok with an owner/founder having special voting privileges as long as they are minority-aligned and show good capital discipline - look at Investor AB.)
Best is where there is a controlling shareholder that is also an owner operator with a history of good capital allocation. And that the controlling shareholder treats the listed entity as their primary vehicle, not one of many holdings. Founders/owners running multiple private companies alongside a listed company is a problem because capital and opportunities can leak out.
Exchanges are typically formed by the brokers/participants, so you dont really get a single founder/owner-operator. For exchanges I think the B3 set up is perfectly fine.
worth noting, even mediocre exchanges usually outpace inflation, which is always a 3rd-world fear. (ref:horizon kinetics)
agree re: argentina except 1 key point. milei has not been a panacea if you attempt a balanced review. nor has lula's nth term destroyed capitalism by any stretch. good biz, minus gov interference\ownership, survive in both nations.
the sgx has slowed a bit since trump, as switching from a china listing for better ethics\optics for foreign capital is less obvious. but i expect it remains expensive, and more so if the slowdown is temp.
KASE and Warsaw look really interesting. I have exposure to Poland through an ETF , but have really wanted to get into KASE as I’ve been tracking it for about 14 months. I haven’t been able to find a brokerage or gain investment access to it though. Any recommendations where I could trade KASE? Thanks for the piece, super interesting!
IBKR has Poland actually. And let me respond about KASE access in a dm.
I'm in Poland on IBKR. Will check.
Freedom Finance (NASDAQ:FRHC)'s subsidiaries Freedom24.com (Cyprus based) and ffin.kz (Kazakhstan based) both provide KASE access. Both accept foreign clients (from the EU, in my case).