Five of the world’s largest emerging markets -- Brazil, Russia, India, China and South Africa -- forged an alliance to cross-list their respective equity-based products.

The National Stock Exchange of India and rival BSE have signed letters of support and will join the alliance after finalizing requirements. Trades on each of the exchanges will be settled in local currencies and the local trading time zone. That means that an investor in one country can bet on the performance of an index in another country without absorbing any curency risk.

The initiative involving BM&F Bovespa from Brazill, MICEX from Russia, Hong Kong Exchanges and Clearing representing Chna and the Johannesburg Stock Exchange was announced at the annual general meting of the World Federation of Exchanges in Johannesburg on Wednesday. The countries hope to list the contracts based on their flagship equity indexes by June 2012.

The seven exchanges, which represent a total market capitalization of $9.02 trillion, will eventually develop products to track the BRICS exchanges, thereby permitting investors to get an exposure to the equity markets of the group. Although the term BRICS, coined by Goldman Sachs, refers to Brazil, Russia, India, China and South Africa, Hong Kong is taking the place of mainland China.

“The alliance enables more investors to gain exposure to the BRIC block of emerging economies, with its increasing economic power,” says Ronald Arculli, chairman of HKEx and of the World Federation of Exchanges in a s tatement issued by the WFE. “From a global perspective this alliance points to the growing relevance of the BRICs economies and financial markets in the coming decade and further underlines the reason for the BRICs relationship.”

-- This article first appeared on Securities Technology Monitor.



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