B3 Evolves to Meet the Demands of a Changing Market

By: Gilson Finkelsztain, CEO, B3 Feb 2022

The pandemic has brought many changes to the way we work. In your view, what changes are here to stay that will shape the workplace of the future? 

 The pandemic has placed society in a complex and challenging landscape, forcing us to develop new ways of communicating with our friends, family and colleagues. As well as the obvious – and tragic – impact on public health, coronavirus has dramatically changed the professional world with many of us now working from home, a change that happened practically overnight. Digital communication channels are now critical for the continuity of any business. They also show that remote working, which was only adopted by a few companies until recently, will be a reality from now on.

With the advancement of the vaccine rollout and B3’s mentality of always putting the safety of our employees first, B3 chose to adopt a hybrid work model based on a strict safety protocol. This brings the added benefit of providing greater flexibility to our employees, who can strike a better balance between their work and personal lives. Despite facing many challenges, together we managed to develop a culture that offers a dynamic, innovative work environment with enough space to grow and learn from each other.

There´s another important side to the story. From a social standpoint, Brazilian companies took on a prominent role during the pandemic. For B3, this was not only through the business side of things, but also by assisting society during these difficult times. Through B3 Social, our branch focused on social impact activities, we’ve donated BRL100 million over the past two years.

In 2020, BRL50 million was allocated to initiatives related to emergency health-care provision and food safety, as well as to providing support for micro-entrepreneurs, sustainable farmers and business owners undertaking peripheral operations, helping them preserve their income and livelihoods.

In 2021, alongside continued efforts to mitigate the impacts of the pandemic, BRL20.2 million was allocated to 24 projects focused on the structural improvement of public education across Brazil. These projects included literacy initiatives, programs to combat school avoidance and dropout, and even the implementation of an AI program to support the development of writing skills among high school students.

 What do you see as the biggest challenges and opportunities for your exchange in the year ahead? 

B3 is constantly engaged in the evolution and transformation of the Brazilian financial market, which has more demanding and sophisticated clients than ever before, powered by technological innovation. Our organisation aims to always anticipate market trends. Our growth will be driven by two aspects that are outlined in our strategic plan; the first is to grow within our core business, which comprises the main capital markets trades in Brazil, via the sophistication and diversification of products. The second is to expand our presence in underlying trades in markets close to B3's core business, such as insurance, receivables and energy contract registration, as well as trading screens (with the acquisition of BLK) and services for banks' financing chain (the acquisition of the Documents Portal).

Within this context, in 2021 we took an important step by entering into a partnership with TOTVS, one of Latin America’s main software companies. This partnership resulted in the creation of a new company, Dimensa, which will offer technological solutions to the financial market.

We also finalised the acquisition of Neoway, marking B3's entry into the data, analytics and artificial intelligence business. With this, we will be able to create a data-distribution platform based on the combination of our own data and public market data, expanding the offer of products in the areas of credit, retail, KYC (user verification), compliance and capital markets.

We are strongly committed to listening to the demands of an increasingly agile and disruptive market and use our expertise and credibility to build - alongside regulators, clients and partners - solutions and products that the market will need in the coming years.

We will only be able to deliver these if we continue to invest in operational capacity and resilience so that our systems can support growing trade volumes. We are optimistic about our company's growth in the coming years given the appetite and space that the Brazilian market has to grow and develop.

What was your most memorable moment this year as a leader?

2021 was an extremely intense and challenging year. In 2020 we lived the equivalent of two or three years in a single year. At the start of the year, we faced an extremely volatile market with the world trying to understand the impact of the pandemic on people's lives and economic activities. B3 responded quickly to the trials and tribulations it was put through, demonstrating its preparedness for the acceleration of the Brazilian capital markets agenda. And good surprises emerged.

B3 seized the opportunity and made the most of an important positive cycle for the capital markets, growing solidly with financial discipline. For example, the cash equity market’s ADTV nearly tripled, growing from BRL12.3 billion in 2018 to BRL35 billion in 2021. We also didn’t anticipate that IPOs would continue throughout 2020, but were surprised to end the year with a turnover of around BRL118 billion in 28 IPOs and 25 follow-ons. 2021 followed at an accelerated pace and we ended the year with 46 IPOs and a raised financial volume of BRL130.4 billion.

But what surprised us most besides these figures was B3’s ability to participate in the transformation of the capital markets with a great diversity of sectors focused on health, agribusiness, businesses with embedded technology, in addition to companies born with a strong DNA in ESG issues (environmental waste management, wind energy, etc.).

On the demand side, we had 1.5 million individual investor accounts in 2019 and ended 2021 with the unprecedented mark of 4+ million individual accounts in equity investments. These investors are more aware of opportunities, are well-educated and continuously improving their knowledge of the products offered. To meet investor demand, we have offered new products and diversification alternatives such as ETFs (including cryptocurrency ETFs), flexible BDRs and ETF BDRs for retail. Furthermore, we saw major regulatory advances such as the change in the Plural Voting (Super ON) rule.

Another key factor that contributed to the increase in the number of individual investors was the digital transformation of the distribution sector. Today, brokerage houses, banks and autonomous investment agents facilitate and streamline access to products that were previously only offered to a few select clients. I’d also like to highlight the performance of market players who are doing an excellent job in the financial education of investors by emphasising the importance of asset diversification and balancing in their portfolio. It was also a year in which our positive impact was recognised - both at home and abroad: B3 is currently among the best companies to work for in Brazil and the best financial services company in our market. We were also awarded Best Technology Innovation by an Exchange at London's FOW International Awards.

Looking ahead, we need greater economic stability so that entrepreneurs can think of long-term strategies for their businesses, so that the demand for investments can be consolidated and the number of local investors, whether institutional or individual investors, continues to grow.

Capital markets’ development goes hand-in-hand with economic development and both are closely linked to Brazil’s economic and business environment reform agenda.

What are three key industry themes you will be focused on in 2022?

We understand that technology will be increasingly critical for business, processes will become simpler, there will be an increase in traded volumes, portfolio diversification, and more clients will access our market. B3’s role as a market infrastructure is to be prepared to provide efficient access to all investors while also helping companies raise funds via capital markets for their investment cycles.

Another vision we share is that we will play an increasingly important role in working with data and analytics, which have been a growing source of revenue for international exchanges. We believe that, in the case of B3, this business will gain greater focus, speed and know-how as we bring in Neoway’s skills, track record and successful platform that we recently acquired.

I would also like to highlight our strategy to expand into new business fronts, such as digital assets. This area is responsible for developing an infrastructure for cryptocurrencies, facilitating the launch of new crypto products.

The Brazilian exchange already offers cryptocurrency products, such as ETFs, COEs (Structured Transaction Certificates) and derivatives. We hope to expand into the regulated world of cryptocurrencies and offer services to those who trade crypto as tokenization in order to facilitate asset digitization. This would enhance distribution and liquidity, trading and access to liquidity hubs, custody of digital assets, OTC facilitation to provide greater security and efficiency to digital asset transfers, capital efficiency gains to mitigate the pre-funded nature of trades, and crypto as a service that enables clients to explore the crypto market with low friction.

 Finally, I think the ESG agenda remains an important pillar for capital markets in 2022. B3 plays an active and pioneering role in fostering good market practices on the ESG theme, whether to adopt governance rules for Novo Mercado, which was created more than two decades ago, or to create and improve indicators that allow us to map the evolution of Brazilian companies in their practices. We were the first stock exchange in the world to issue a Sustainability-Linked Bond (SLB) in the capital markets as well as the first issue by a Brazilian company abroad with exclusively social targets.

In 2022, we hope to further our commitment to having a more diverse workforce and to offering opportunities to all.

Tell us one thing that will change in 2022 and one thing that won’t?

Things that won’t change in my opinion: our client focus, governance, operational resilience and technology investment. It’s essential to put our clients at the centre of business decisions, to keep an open and healthy dialogue, and to use facts and data for the company's strategic decisions.

What will change - not only in the financial market but in all industries - is the increasing speed with which we will need to respond to our clients, regulators, and investors.

Finally, I believe that the greatest challenge ahead is demonstrating the ongoing competitiveness of the Brazilian market. Technology and the use of analytical data will be key factors to creating value for our clients and for our business.


The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.