Emerging Markets: The Capital Is Willing. Is the Access Ready?

Global liquidity is looking for returns beyond the established markets, and emerging markets are firmly on the list. The firms we work with at Beeks have lists of 20 or more exchanges they want to trade on. The reality depends on what it costs to access the market vs what they expect to make from it. For a mid-sized venue, the numbers often don't add up, and the operational cost of getting there is a huge hurdle. Every piece of friction an exchange removes brings in liquidity that would otherwise have gone elsewhere.

The problem: Where the numbers fall apart

The friction becomes clear when you look at what is traditionally involved in entering a new market. A global broker needs a local entity, imported hardware, a data centre contract, rack space, power, switches, servers, configuration and certification. This is six to nine months of work and a seven-figure outlay before a single order is placed. Multiply that across the 40 or 50 colocation sites a large bank supports globally, add a hardware refresh every four to five years, and the total cost is significantly larger than the initial budget.

Then there's everything around the infrastructure. Owning hardware in a country can create permanent establishment and tax exposure. Non-standard FIX dialects, proprietary APIs and specifications published only in the local language turn each new market into a certification project that sits in an Order Management System (OMS) provider's release queue for six to twelve months. None of these barriers is fatal on its own. Together, they stretch time-to-market to 18 months or more, which is what kills the business case.

Current market conditions have made it worse. Demand from AI has pushed server prices up 300–400% in 18 months, with lead times back to pandemic levels. The assumption that a firm can simply buy hardware when it decides to enter a market no longer holds.

Access as a product

The response gaining ground across emerging markets is for the exchange itself to offer managed, cloud-like infrastructure inside its own data centre. This provides compute, connectivity and market data delivered as a service.

It's the approach we've built our Exchange Cloud® platform around, but the principle matters more than any one product: the infrastructure sits inside the exchange and is procured through it, so a participant that once needed months and a full cabinet import can be up and running in a day, in test or in production.

That speed changes behaviour. Firms can answer the fundamental question, “Can we make money on this venue?”, without committing capital first. Testing a market becomes a decision taken in days, not a million-dollar bet, and markets that were previously too expensive to even evaluate become worth a look.

The early adopters give a sense of where this leads. The Johannesburg Stock Exchange was the first to offer managed infrastructure this way, and three and a half years on, it originates around 10% of the exchange's total volume across all asset classes, heading for 25% as the large banks, once committed colocation clients, move workloads across because it's simpler, cheaper and more scalable. In Mexico, participants on the BMV managed offering have seen transaction activity increase by around 200%.

The view of the exchanges

The exchanges running this model talk about it commercially, not technically. Speaking on the WFE's recent webinar, The Emerging Market Exchange Opportunity, Andres Araya Falconi, CTO of nuam, said managed infrastructure is “a revenue and liquidity question, not an IT cost”. Hosting and connectivity bill every month, giving the exchange income that doesn't rise and fall with trading volumes. Lower barriers bring in international market makers, who tighten spreads and deepen the order book, and a deeper order book pulls in local institutional and retail flow that comes back as trading and clearing fees. The infrastructure pays for itself twice: once directly, and once through the volume it creates. It works for participants too. Brokers can resell the capability to their own international clients; “we are giving them something to sell”, as Andres put it.

On the same panel, Rocio Muñoz-Reyna, deputy director at the BMV, described it as “a credibility signal, not just an IT decision”. A market doesn't have to be the fastest in the world to attract flow, but it can't keep having outages. International firms want evidence rather than assurances, such as published latency figures, disaster recovery testing and capacity headroom.

The view of the market

In our recent panel, the questions raised were not around whether emerging markets are worth accessing; they asked what comes after access: how exchanges should run their data businesses, and what AI does to the value in market data; what international HFT flow means for the local participants already there; whether the same model can lift liquidity in frontier markets, from sub-Saharan Africa onwards. When the questions move from “Can we get in?” to “What happens once we're in?”, the original barrier is already falling.

That shift is the opportunity. For years, capital allocation followed a sorting rule: markets that were easy to access got tested, and markets that weren't got skipped, whatever the returns on offer. Managed infrastructure breaks that rule. Geography and size now matter less than whether an exchange can put a global firm into production in days and prove it stays up when it matters.

Infrastructure alone won't hold the liquidity that arrives. Post-trade modernisation and regulatory reform decide that, and they run on timelines no exchange fully controls. But technology is the one piece an exchange can commit to a date on, and once it lands, everything else finds it harder to lag. The exchanges that make themselves easy to test will be the ones firms get to first.

---

The Emerging Market Exchange Opportunity, featuring nuam, the BMV and Beeks, is available to watch on demand here. To discuss what managed infrastructure could look like for your exchange, contact the Beeks team.