RIO DE JANEIRO, Brazil -- The National Association of Securities Dealers Automated Quotation System has opened a Sao Paulo, Brazil, office, its second outside the United States.
Nasdaq's goal is to obtain listings of Latin American companies whose stocks trade on non-U.S. over-the-counter markets and are ready to be listed abroad.
In Latin America "there are more companies ready to be listed abroad or with the potential to do so than anywhere else in the world," said Achilles Couto, Nasdaq's director for Latin America. Nasdaq chose Brazil for its Latin American base "because it is at the center of the region's equity trading."
In the mid-1980s, Nasdaq, headquartered in New York, opened its first non-U.S. office in London to sell its services in Asia, the Mideast and Europe.
Foreign firms can list on Nasdaq either directly or through Level-2 or Level-3 American Depository Receipts, negotiable certificates issued by U.S. banks for shares of stock foreign companies.
Firms interested in being listed abroad usually start by issuing Level-1 ADRs, which are traded on over-the-counter markets as their initial step.
Shares of 41 firms in Brazil currently trade Level-1 ADRs abroad on the OTC market. Seven Brazilian firms have Level-2 and Level-3 ADRs -- six on the New York Stock Exchange and one on Nasdaq -- and four Brazilian companies have shares listed directly -- not through ADRs -- on Nasdaq.
Nasdaq's target list includes: the 41 Brazilian companies with Level-1 ADRs; 11 in Argentina with Level-1 ADRs; and 20 in Mexico and several dozen in Venezuela, Colombia, Peru, Chile and the Caribbean with or without ADRs.
"We expect between 50 to 100 Latin American firms will be listed abroad in the next three years," Mr. Couto said.
Companies ordinarily seek foreign listings for added visibility, greater balance-sheet transparency and overall easier access to foreign capital markets.
In Mr. Couto's view, most Latin American firms listed abroad have so far chosen the NYSE out of lack of familiarity with Nasdaq's offerings. These include: approximately 500 market makers around the world that provide trading liquidity and commit capital to Nasdaq-listed companies. Nasdaq requires listed firms to work with at least three market makers, he said.
In contrast, the NYSE uses a specialist system designed not to promote the listed companies' stock but simply to match buyers and sellers, Mr. Couto said.
Companies with foreign listings have the valuation advantage that their stock prices might be higher abroad than they would be in local markets. If the company later chose to list locally, it would obtain that higher price, Mr. Couto said.
Nasdaq isn't trying to deflect business from local stock markets, Mr. Couto said. "When companies list abroad, they increase their investor base both here and abroad because in attracting higher foreign investor visibility they induce those investors to buy shares abroad and in local markets."
The preliminary agreement to merge Nasdaq and the American Stock Exchange will boost Nasdaq's Latin American marketing plans because of the exchanges' different approaches, he said.
