BOLSA DE COMERCIO DE SANTIAGO (SANTIAGO STOCK EXCHANGE) Megan Creahan Keith Steelman Justin Satterfield.

BOLSA DE COMERCIO DE SANTIAGO(SANTIAGO STOCK EXCHANGE)

Megan Creahan Keith Steelman Justin Satterfield

Intro to Chile

Economy Large focus on international trade, with US

accounting for largest portion of exports and China for imports

Growing GDP near $246.482 billion in 2008 Shrinking unemployment around 7%

Business Community Tight knit and heavily reliant on trust and

personal relationships Growing due to the relatively new focus on

international trade and business investment

History of Chile’s Stock Exchange 1840

First attempt at creating a stock trading system resulted in little success

1844 160 companies were present Created a need for an exchange program to trade

securities Founded November 1893, with 329 joint stock

companies the majority of which were in the mining industry

Stock Market experienced its first crisis in the 1930’s. This downturn continued until the mid 1970’s.

Country went through what they refer to as Unidad Popular in which there was a hyperinflation with rates near 400% annually, driving the already weak economy to struggle even further

Stock Market Turnaround

Both a pension fund reform as well as new free-market economy adapted in 1973 assisted in the market’s growth.

Economic Expansion Stock market operation development Increased securities in circulation Transactions became diversified Added Pension Funds Management Institutions,

Insurance Companies, Foreign Investment Funds, and Mutual Funds to the Exchange

In the 1990’s Chilean companies were opened to international markets via participation in ownership of key Latin American companies.

Industry Analysis

Competition from Rivals Low seeing as there are only a few small rivals and

there is growing demand for stocks and other tradable assets

Competition from New Entrants Low due to Bolsa de Comercio de Santiago’s

advanced technology as well as their already large portion of the market share

Competition from Substitutes Depending on how narrowly you define substitutes

it can be either low or moderate. If referring only to stock exchanges the completion

is low but in reference to alternative methods of holding wealth the competition increases.

Industry Analysis cont.

Relative Power of Customers Moderate to high seeing as there is no inherent

need for stocks and customers have complete control to pull out their money at any time

Relative Power of Suppliers Low seeing as once stock is issued companies have

extremely limited opportunities to withdraw the shares

Overall the stock market industry seems attractive, indicating that potential profitability is high

Objectives

To facilitate the flow of saving and investment in the capitals market

To carry out primary placement of the equity market securities and bonds

To promote the free pricing and the transparency in the operations

To promote measurements that enhance liquidity at market prices in the secondary market

To regulate the operations of the market and to supervise the operations and to provide services, systems, and infrastructure required by the stockbrokers and participants of the stock market

2008 Financial Specs

Net Revenue $5,133.09 CLP

Net Profit Margin 39.99%

Is the majority shareholder of Camara de Compensacion Bolsa de Comercio de Santiago SA

Holds 23% interest in Deposito Central de Valores SA which is a for profit Central Securities Depository

Organization and Technology Composed of three market indices including

a General Price Index, Selective Stock Price Index, and an Inter-10 Index

Trades stocks, bonds, investment funds, stock options, futures, gold and silver coins, and U.S. dollars

Implemented the use of technology in 1981with computerized main processes Created a network of over 100 Tandem brand

computer products The main system run by Bolsa Comercio

Santiago is Telepregon Currently accessible to worldwide customers

Telepregon

The Telepregon computer system allows stock, currency, options, and futures to be traded over the network

The transactions run through the systems verification to determine if they are valid transactions to be conducted

The system will not verify these the offers of trade until they are valid in which case the offer is “held” for a period of time

The information system of the Santiago Stock Exchange keep an extensive database of all the transaction conducted

Teleranta

This is the system that informs the necessary parties on the offers

The electronic auction system aspect allows offers to be placed in a given time and after this period ends the it gives the offer to the best purchase bid

Other Services

The Bolsa Comercio Santiago also provides its customers with other technical services FonoBolsa allows access to the stock prices,

trade amounts, dividends, and other information. This system is operated over the telephone.

InfoMail, like FonoBolsa, offers access to some of the same information summarizing the market, its index as well as closing prices

Similarly StockView offered directly through the website allows the traders access to company information and market transactions

IBM System

On December 10, 2008 it was revealed that Bolsa Commercial de Santiago, would begin using an IBM security trading system that would: Allow for faster transactions; 3000 orders

per second Better communications Improve security Automatic order processing

Employees

The employees who operate these systems need to have some background in the computer technology used as well as the software employed

A background in science for these employees would go hand in hand with their engineering knowledge and capabilities

Interesting Trends

Transition from interpersonal transactions to entirely electronic

Role the government plays in economic growth and decline

Good example of market fluctuation

QUESTIONS (for professionals) What was cost effects of switching to a computerized

system? What use does the old exchange hold? What percent of business is performed in Spanish? English?

Where are your computer systems housed? For how long do you back up your recorded information? How was the change to computer systems handled in 1981? Do you expect any more large scale changes such as the

incorporation of IBM technology? What percentage of your investors are foreign? How long has the Telepregon system been in place? What do you feel is the largest obstacle necessary for the

Bolsa Comercio Santiago to overcome concerning its technology?

QUESTIONS (for students)

Where do the majority of business/engineering students work after graduation?

What do you see as the biggest difference between business in Chile and the United States?

Why do you believe the Chile has been less affected by the global financial crisis?

What are the most popular fields of study for Chilean student?

What specific types of engineering (chemical, civil, electrical, etc.) are the most popular?

Sources

http://www.bolsadesantiago.com/english/index/asp

http://www.nomura.com/research/QuantsPublication/ResearchReports/QuantitativeStrategies/GlobalMarketGuide2008.pdf

http://www.wallstreetandtech.com/exchanges/showArticle.jhtml?articleID=212400133

http://en.wikipedia.org/wiki/Santiago_Stock_Exchange