Marcos Ayerra, Chairman, National Securities Commission (Comisión Nacional de Valores, CNV) : Interview

Interview : Marcos Ayerra

How will the Production Financing Law impact Argentina’s capital markets sector?

MARCOS AYERRA: The law was approved by the Senate in May 2018, and it continues to represent an important advancement in reforming Argentina’s capital markets sector, with a clear objective towards fully recognising the country’s financing potential.

Multiple improvements have been made through the sanctioning of this law. One key step was the improvement in corporate governance with the elimination of Article 20, which allowed the CNV to intervene in the governing body of any listed company. Not only was this unconstitutional, it also served to deter private sector players from entering the stock market. In addition, the closed-end mutual funds segment is unlocked, allowing for the creation of venture capital, real estate and private equity funds, among others, with a potential impact for the real economy. Being required to raise funds through public offerings will improve accountability and transparency. The law also seeks to broaden the base by facilitating the development of inflation-linked mortgage securities, allowing banks to issue more mortgages. Exchange-traded funds are now available, and together with the International Swaps and Derivatives Association close-out mechanism for derivatives, is key in reducing capital requirements and systemic risk. One of the biggest accomplishments is providing greater financing mechanisms for small and medium-sized enterprises. The law not only unlocks the closed-end funds segment, but also the factoring one, which was previously inhibited based on legal weaknesses making it unattractive to buyers. This is expected to generate greater investor activity in capital markets while boosting interest from local firms.

Historically, Argentina’s capital markets industry has shown low levels of movement. However, between 2015 and 2017 we have been able to grow in market capitalisation from 9.6% of GDP to over 17%. We know that we are still far from our regional peers, but we remain confident that through the sanctioning of this law and overall economic transformation, we will see industry activity grow in the years to come.

What measures are being taken to adjust the number of brokers to current market demands?

AYERRA: There are approximately 350 brokers in Argentina, 150 of which were created in the three-year period prior to the current administration. This is the result of Argentina’s previous market conditions, when the business model relied heavily on blue chip swaps to sort market restrictions. With recently implemented regulations, we raised the minimum capital requirements from $200,000 to $900,000, while adding higher anti-money laundering, transparency, and investor protection standards. Due to these changes, we expect nearly 100 brokers will become financial advisors or introductory brokers in the near future.

What plans are in place to improve overall operations within the CNV?

AYERRA: Until now, Argentina’s central bank had legal authority to halt market activity and control margins in the derivatives market. The new law eliminated this, ensuring the independence of the regulating body while also entitling the CNV to supervise and sanction external audit firms. Bureaucracy and red tape are an important part of our efforts. We are looking at simplifying many operative processes with a greater reliance on technology, data analytics and digital tools through a complete overhaul of our existing IT systems. In addition, market infrastructure is being transformed, with a greater emphasis on the regulation of central counter-parties, central securities depositories and trade repositories, following international standards.

In essence, transparency is the underlying concept for all of our efforts; and it is the basis for the transformation period at CNV, as we both want and need information to be provided seamlessly to investors.