Latin American Capital Markets

22 KENROY DOWERS, FELIPE GOMEZ-ACEBO, AND PIETRO MASCItory framework for trading and market activity, and cross-listing agreements. More workis needed in this area along the lines described in the section on regional integration.Market Institutions and ActorsTo increase market competitiveness, countries should also focus on enhancing primaryand secondary market institutions. The primary market needs good transparencyand disclosure as a main requirement. In addition, development of the primarymarket relies on standardized and uniform securities issuance methods andestablished initial offering requirements, specifically regarding information that allowsinvestors to evaluate the condition of the firm issuing the securities. However; theserules should not impose any unnecessary restrictions on the mechanisms of public offering.It is also important to explore other types of instruments that could be introducedin the marketplace using venture funds, securitization, and products that helpsmall and medium enterprises gain access to capital markets. Efforts should be madeto implement standards that subscribe to international best practice and allow forwider dissemination among the public.For secondary market activity, market institutions must play a central role inincreasing liquidity. A market without liquidity cannot develop its functions. In an idealregulatory framework, with the holding structure or the equivalent tailored to thecountry's needs, market institutions should act as "champions of the security industry."However; these institutions must also graduate from being merely "the meeting pointof supply and demand" to being "the meeting point of potential demand and supply."This can be achieved through the following channels: transformation of market institutionsinto venture capital leaders, creation of virtual meeting points between possiblesuppliers and demanders, and massive education of investors.An important element in the process is the market infrastructure, comprisingthe systems and institutions that facilitate the trade, transfer, and custody of securities.Market infrastructure that functions well reduces obstacles to trading flows andcustody and builds controls for systemic risk Efficiency and reliability are the main concerns.There are many recommendations for what constitutes best practice; someexamples are the G-30 recommendations and the revisions suggested by the InternationalSociety of Securities Administrators, the Lamfalussy standards, and the conclusionsof the task force between the Committee on Payment and Settlement Systemsand IOSCO.Although much has been done in recent years, the following improvements toreduce transaction costs and attract potential investors and issuers are still necessary:Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub