“Not many emerging markets have a history as long as that of Argentina,” says Ismael Caram, chief operating officer of the Rosario Futures Exchange.

It’s a double edged comment. Trading volumes on Rofex, relative to the size of the economy, are lower now than they were in the 1920s, in the boom years before the last great global financial crisis.

The bourse is 50% owned by the Rosario Board of Trade, a non-profit making mutual entity owned by its market-making members. Rofex is based in Afrgentina’s third city – a port on the shores of the River Paraná, 300km inland from Buenos Aires. The legacy of the boom years lives on, evident in the exchange’s stunning Beaux Arts headquarters, opened in 1926.

Rofex enjoyed a busy January, with trading volume 55% up year on year at 4.5m contracts. On January 27 the exchange broke its daily trading record, when 757,588 contracts changed hands, beating the previous record by 7%.

Even the international turbulence of the past two years has not hurt the bourse’s volumes significantly – although perhaps, as Gustavo Picolla, CEO of the neighbouring Mercado a Término de Buenos Aires (Matba), noted recently, this is because crisis is almost the norm in Argentina.

“In the 1990s, we had a deregulated economy, from a liberal government. We had a brilliant decade,” enthuses Caram (pictured). “Then we had the crisis of 2001, when we left the exchange rate mechanism.”

Crisis breeds invention

When the peso lost most of its value in the early 2000s, the Argentine government put a near-total freeze on cash withdrawals. Most banks simply began lending in dollars, and the country’s prime lending rate briefly hit 67%.

But from the crisis came opportunity. In 2004, Rofex launched its innovative US Dollar Index Futures, tracking the peso/dollar exchange rate.

“Both interest rates and currency became more volatile, so Rofex saw the opportunity to launch new financial contracts,” Caram says. “Before these, trades were OTC.”

Attracting existing corporate customers – mainly in the agricultural sector – was key to the contracts’ success, Caram recalls. In fact, the dollar future now accounts for virtually all Rofex’s volumes. So successful were the contracts that the Argentine cash markets soon tried to copy them, Caram says, “but they didn’t succeed”.

“We’ve been trying to list interest rate futures on the Badlar,” the local interest rate for deposits in excess of $1m, Caram adds. “We’ve approached several banks.”

The bourse did introduce the futures in 2004, but they failed to trade. “We think maybe the market wasn’t ready,” Caram notes. “But now, there’s liquidity emerging in the OTC markets.” Similar contracts are already offered on the rival Mercado Abierto Electrónico.

“Now, what we are thinking about is bond futures – futures on financials,” Caram reveals. “But we can’t forget about agricultural contracts. They are part of our history.”

In addition, the bourse is committed to establishing direct market access for its users, Caram says, with government approval expected to be granted in March. “We are also looking at tapping the retail market,” he adds. “It’s growing, especially in 2008-2009 following the crisis.”

Time to catch up

Caram grows wistful when I ask about the bourse’s regional expansion plans. “When you see Brazil, it’s frustrating,” he says. Sitting in a hotel in São Paulo’s Garden district the day before the region’s largest derivatives conference, it’s easy to see his point.

The merged BM&F Bovespa accounts for more than 90% of Latin America’s trading volumes. “The difference is, they have a plan,” Caram says bluntly. “[In Argentina], we never even get to a consensus about simple things.”

Caram may be too modest. On March 17 Rofex and its sister equity market, the Mercado de Valores de Rosario (Mervaros signed a letter of intent to merge. The exchanges said the move was designed to create synergies between the complementary products offered on either bourse. “Our clients will perceive an important benefit from the integration of securities and derivatives trading, as well as from the participation of the agricultural and financial sector,” said Rofex’s president, Luis Ossola, in a statement.

Instead of thinking too big, Caram suggests, the next logical step would be a merger with Matba. The idea was endorsed in principle by Picolla last week and backed wholeheartedly by Comisión Nacional de Valores (CNV), the country’s regulator.

Caram brightens when he expresses his hope that the second phase of talks, begun this month, may lead to productive synergies. “We serve broadly the same parts of the market, but in different places,” he says.

On paper, the deal looks mutually beneficial. Few of Rofex’s agricultural contracts attract any serious liquidity. Matba’s do, however, with its soybean futures and options averaging a combined 1m contracts a month over the past year. On the other hand, the Buenos Aires bourse lists no financial derivatives.

CNV president Alejandro Vanoli suggested a combined exchange would give Argentina a unified voice in regional negotiations: “I commend Rofex and Matba – I foresee strong [market] support,” he told FOW. “They are very similar... The sum of the two markets will be greater and stronger than now.”

For now, R is still for Rofex. Amid the excitement, I forget to ask what any merged exchange might be called.