Thursday, May 23, 2024

ECONOMY | 03-05-2023 14:44

Parallel rates calm as Argentina tightens rules for taking dollars out of country

Exchange markets react coolly as the government imposes restrictions on operators in order to reduce access to MEP and CCL rates.

Argentina’s National Securities Commission (CNV) has tightened rules to prevent currency flight through the Bolsa stock exchange by limiting the ability of traders to access the ‘medio electronico de pagos’ (MEP) and ‘contado con liquidación’ (CCL) exchange rates.

The attempt to curb new runs and have greater control over financial dollar transactions partially slowed the weakening of the peso on parallel exchange markets, with both rates remaining relatively stable.

As of Wednesday midday, the CCL was trading at 433 pesos per greenback, with the MEP at 430. The unofficial ‘blue’ dollar stood at 468.

According to the details of Resolution 959/2023, published on May 1, the purpose of the government’s move is to "regulate more intensely the foreign exchange regime and, consequently, strengthen the normal functioning of the economy, contribute to a prudent management of the foreign exchange market, reduce the volatility of financial variables and contain the impact of fluctuations in financial flows on the normal functioning of the real economy."

The CNV stipulated that Broker Dealers (Settlement and Clearing Agents, or ALyCs, and Trading Agents) “may neither execute nor settle transactions of sale of negotiable securities with settlement in foreign currency to clients who have positions in bonds and/or passes, whatever the settlement currency.”

A second resolution established that ALyCs will face limits on operations referred to the amount of marketable securities sold with respect to the amount of marketable securities purchased – with settlement in foreign currency and in local or foreign jurisdiction – carried out in the segment of concurrence of offers, with priority price time.

This means that brokers at the end of the day will have to have done the same volume of buying and selling (in net terms) in their MEP and CCL trades. They will therefore have to trade with their own liquidity.

"In the demand for financial dollars there are operations by individuals and by brokerage firms and traders with trading experience. What we have noticed is that there is an increase in the demand for dollars in operations by professional traders. In other words, they are speculative manoeuvres looking for rates," explained the CNV.

The new regulations are a bid to cut the ability of brokers to access “cauciones o pases” ("guarantees or passes," or credits) and with that money access the MEP and CCL rate, which increases demand and favours the rise in the quotation.

By carrying out such operations, traders expect a rise in the price of financial dollars and then pocket the difference in favour.

Last week, at the peak of an exchange rate run, the CNV joined with the UIF financial investigation money-laundering watchdog to carry out a series of raids on stockbrokers in search of irregular manoeuvres.



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