Mila Should Take a Page Out of Nasdaq Nordic’s Book

A journalist really worth his or her salt is one who is always trying to find a common theme for every story. The mark of a good writer is someone who is able to tie things together.

So when I first started researching the Mercado Integrado Latinoamericano (Mila) for a potential feature, a comparison to Nasdaq OMX Nordic immediately popped into my head. Why, despite having a similar makeup and goals, has one been so much more successful than the other?

True, it’s not exactly fair to compare the two groups considering Nasdaq Nordic’s market cap ($1.2 billion) is larger than Mila’s ($828 billion). The former has the benefit of having been in place for over a decade while Mila isn’t even five years old. Most importantly, Nasdaq Nordic ultimately benefited from the supervision of a single exchange operator.

But let’s not forget that Nasdaq Nordic didn’t exactly have a smooth start either. According to Peter de Verdier, chief financial and operating officer for market technology for Nasdaq, everyone wasn’t exactly on the same page in the beginning.

“I think I see a lot of similarities [between the two]. You might think the Nordic region is all the same and very harmonized, but at the time they were all very different,” de Verdier he told me. “Different currencies. Different systems. Different regulators with different agendas. So it did take a lot of effort from our side to get everyone on the idea that we should work together.”

Cooperation

de Verdier says one of the key parts of the entire process being a success was cooperation amongst all the exchanges. This might seem obvious, but it can’t be overstated. The reason Nasdaq Nordic has been successful was because those involved were all willing to give up a little for it to succeed.

Take the example de Verdier provides of the voting process: every exchange gets an equal vote, regardless of market cap. When that decision was first made, the Stockholm Stock Exchange made up about half the volume of the entire market while other Baltic exchanges were barely a blip on the radar. 

“The bigger players, at least in our case, had to give up some of their ability to get others to accept the overall concept of working together to win,” de Verdier says. “You have to be willing to work together. You really have to want this, because there is going to be so much hard work with a lot of other players that don’t want this to happen. You need to want it.”

Burning Desire?

How badly do the Latin American exchanges want it? That remains to be seen.

On the surface, everyone involved is very supportive of Mila. The group completely revamped its website to tout the upcoming “Mila Day” events at the Deutsche Börse and London Stock Exchange, which are being sponsored by BNP Paribas, Goldman Sachs and Inter-American Development Bank. There is still tremendous interest in the region, and this is one of its keystone projects.

But with Latin American markets dampening in the last few years, are the exchanges really focused on Mila? And can we really blame them when they’re just trying to keep their heads above water? There’s no point worrying about the turkey in the oven when the entire kitchen is on fire. 

And then there is the issue of whether they even actually like each other — something that was brought up to me more than once. Peru, Colombia, Chile and Mexico don’t exactly have a long history of all getting along. Wars have been fought. Those wounds don’t heal easy.

Comparable?

One of the most interesting points I heard while researching Mila for my story came from Adrian Landgrebe, CEO and portfolio manager for Sagil Partners, a London-based hedge fund that specializes in investing in Latin America. 

Landgrebe said that just because these countries are neighbors and share a coastline or language doesn’t mean they need to be partners. Landgrebe isn’t necessarily interested in investing in French equities because his country shares the English Channel with France.

“We’re going to look globally and make decisions on where we see the most amount of growth, the lowest level of risk and the highest level of capital appreciation,” Landgrebe said. “It can be anywhere in the world. It doesn’t mean that your closest country is the logical investment decision.”

When I asked Luis Carballo, CEO of technology for Bolsa Mexicana de Valores (BMV), if he saw a similarity between Nasdaq Nordic and Mila, he said no. People don’t see Latin America as one big region like they do the Nordic, Carballo said. In Latin America, people see different needs, different risks and different investments for each country.

“It doesn’t seem to me like it’s equally comparable,” said Carballo of Nasdaq Nordic and Mila.

Fitting, considering that — for now, at least — neither do the Mila exchanges.