Brazil and Mexico remain the two most influential FX markets in Latin America, supported by their large economies, very deep liquidity markets which brings substantial institutional participation, and more developed trading infrastructures.
However, according to Sebastian Rzezak, Head of LatAm Sales at Edgewater Markets, there are meaningful opportunities emerging beyond these two markets, helped by a relevant change in the political land scale to more market friendly governments in the Andean and southern cone regions.
“Chile is particularly interesting because of its established institutional investor base, significant commodity-related currency exposure, and demand for more sophisticated FX hedging solutions,” says Rzezak. “Colombia presents opportunities as international participation grows and institutions seek greater access to peso liquidity and derivative products. Peru remains a smaller market, which keeps off shore institutional investors heavily invested due to their trust in the BCRP policies, having the highest international reserves ratios across Latam. It is also where we find the greatest opportunities to grow as improved connectivity and electronic pricing could help increase participation over time,” says Rzezak.
The latest BIS survey reinforces this broader development. Colombia’s domestic FX activity increased 48% between the April 2022 and April 2025 surveys, while Chile’s central bank identified substantial FX activity relative to the size of its economy. “The opportunity is not necessarily for these markets to overtake Brazil or Mexico, but for technology to make their liquidity more accessible, transparent, and efficient,” says Rzezak.
Bridging the divide
Latin American FX liquidity has been fragmented between domestic banking markets and offshore financial centres, says Rzezak. “Local banks maintain the strongest relationships and access to domestic liquidity, while international institutions rely on offshore counterparties or derivative instruments to obtain exposure. The real liquidity sources are in the domestic markets (Datatec for Chile and Peru, SETFX for Colombia, BMF for Brazil, Siopel and Rofex for Argentina), hence offshore players have to rely on their credit relationships with local institutions.”
Electronic trading technology is helping bridge that divide, says Rzezak. “Through improved connectivity, liquidity aggregation, and electronic execution, international investors can access multiple pricing sources through a more centralized trading environment instead of relying exclusively on traditional bilateral relationships. Non-deliverable forwards are particularly important in this evolution, allowing institutions to manage currency exposure without physically delivering the underlying local currency.”
So technology is a good part of the solution, but it is not enough, says Rzezak.
“On the other side we have credit, a relevant component of the equation that needs to be tackled. Local regulations, settlement arrangements, credit requirements, balance sheets costs, cross boarded risks and differences between onshore and offshore pricing continue to influence how institutions participate. So it is also key to combined the FX platforms with credit solutions,” says Rzezak.
“The greatest potential lies in moving beyond simply executing trades electronically toward automating the entire FX trading lifecycle.”
Sebastian Rzezak
“The opportunity is to connect these liquidity pools more efficiently while maintaining the necessary controls, local market requirements, but also minimizing balance sheet usage and credit risk exposure. The goal is not to eliminate the distinction between onshore and offshore markets, but to make accessing both significantly easier.”
Rzezak believes there is still considerable room for electronic FX trading to expand across Latin America, particularly in markets where execution remains heavily dependent on traditional dealer relationships, manual workflows, and voice-based trading. “While currencies such as the Mexican peso and Brazilian real already benefit from relatively developed electronic trading infrastructure, there is significant opportunity to introduce greater automation across the Chilean peso, Colombian peso, Peruvian sol and Argentine Peso,” says Rzezak.
The next phase of electronification will likely extend beyond spot FX into more complex instruments, including NDFs, FX swaps, and options.
“We expect increased demand for automated pricing engines, multi-bank liquidity aggregation, request-for-quote functionality, and more sophisticated execution tools that allow institutions to manage larger transactions efficiently,” says Rzezak.
For example, Colombia’s 2025 BIS survey results showed a 64.2% increase in local forward trading volumes compared with 2022, demonstrating the importance of the derivatives market to the region’s FX development.
“But the biggest opportunity to improve the infrastructure supporting execution itself, including not only real-time pricing, but most importantly using AI capabilities to improve market making roles through more sophisticated tool in terms of execution, risk management, statistics analysis, automated hedging, transaction reporting and integration with existing risk-management systems,” says Rzezak. “The greatest potential lies in moving beyond simply executing trades electronically toward automating the entire FX trading lifecycle.”
Both regional and international FX providers been expanding their electronic trading capabilities, liquidity provision, pricing, analytics, and pre- and post-trade services for Latin American clients. “We are seeing a broader shift in the industry toward delivering more comprehensive electronic FX solutions rather than simply providing pricing and execution,” says Rzezak. “Institutional clients increasingly expect access to multiple liquidity providers, competitive pricing, sophisticated order management, and seamless integration with their existing systems.”
For Rzezak, the real opportunity is providing financial institutions with the underlying technology to modernize their FX operations without requiring them to build everything internally. “This includes liquidity aggregation, automated pricing, electronic execution, order matching, and connectivity to different market participants. We also see growing importance in the services surrounding a transaction, including risk controls, transaction reporting, and operational automation.”
As institutional requirements become more sophisticated, technology providers must deliver flexible solutions that can accommodate different currencies, trading products, and regulatory environments. “But our job does not stand alone with technology products,” says Rzezak. “Providing credit access to local financial institutions adds tremendous value, which really differentiate us from the competition. Ultimately, competition is increasingly centred on the quality of the entire trading experience, not simply who can provide the best price.”
Another important development is the ability to connect institutions to multiple markets through a common technology infrastructure. “Historically, accessing liquidity across Latin America could require separate integrations, local market relationships, and operational processes for each country,” says Rzezak. “This created significant complexity, particularly for international participants looking to expand into multiple regional markets.
Today, technologies such as APIs, FIX connectivity, hosted trading platforms, and liquidity aggregation are helping simplify that process. “Rather than building separate trading environments, institutions can connect through a centralized platform that supports multiple currencies, liquidity providers, and execution workflows,” says Rzezak.
For example, a global asset manager seeking exposure to the Mexican peso, Colombian peso, and Chilean peso could potentially access pricing and execution through a common technology layer, even where the underlying liquidity comes from different banks or regional markets.
“This approach can reduce integration costs, shorten onboarding timelines, and simplify trading operations,” says Rzezak. “However, technology does not eliminate local licensing requirements, credit arrangements, clearing obligations, or market-specific restrictions. Those requirements still need to be addressed and here is where we add value.
There is significant value in providing the infrastructure that connects institutions to regional liquidity while allowing them to maintain healthy trading relationships, pricing arrangements, and operational controls, says Rzezak. “The most important change is that institutions no longer need to recreate the entire technical infrastructure every time they enter a new market.”
Looking ahead, Rzezak believes the biggest opportunities will come from improved market access, greater liquidity transparency, facilitate credit lines, minimize cross-boarder risks and the continued development of electronic execution across regional currencies and derivatives. “Brazil and Mexico will remain important markets because of their established liquidity and institutional participation. However, markets such as Chile, Colombia, and Peru offer opportunities as electronic infrastructure becomes more sophisticated and international access improves.”
One of the most significant opportunities is the ability for institutional investors to access multiple Latin American markets through a more connected trading environment, says Rzezak. “This creates greater flexibility for managing regional currency exposure, diversifying investments, and implementing more sophisticated hedging strategies. We also see considerable potential in the continued growth of NDFs, FX swaps, and other derivatives, particularly as investors seek more efficient ways to manage risk and deploy capital.”
From a technology perspective, liquidity aggregation, algorithmic execution, and automated pricing will play an increasingly important role in making these markets more accessible, says Rzezak. “Institutions that can access a broader range of liquidity providers, evaluate execution costs, and transact efficiently will have a meaningful advantage. Ultimately, the next stage of Latin America’s electronic FX evolution is about connecting regional liquidity with global institutional demand. The greatest opportunity lies in making markets that have historically been fragmented more accessible, efficient, and competitive,” says Rzezak.
The technology layer
Having spent a lot of time with banks and market participants across Latin America, one theme comes up repeatedly for Scott Gold, head of Americas at SGX FX. “The liquidity is there, but historically it has been difficult to connect that liquidity efficiently to the global investor community,” says Gold. “What is changing today is the technology layer. Regional banks no longer need to build separate infrastructures and relationships for every client, while global investors do not need to recreate local connectivity market by market.”
With current technology, banks can access onshore spot pricing data and distribute offshore liquidity through a single framework that connects them to a broader international network. “The same technology-led shift is also helping banks improve how they service retail clients, and how the buy side engage with their liquidity via mobile technology. In LATAM, being available via mobile is key to future success as it creates a more seamless digital route from underlying FX pricing and execution capabilities through to the end customer,” says Gold.
“As liquidity becomes increasingly electronic and observable, investors are able to evaluate execution quality with far greater precision than was previously possible in many Latin American markets.”
Scott Gold
The relationship between onshore and offshore liquidity is becoming much more connected than it was in the past, says Gold. “Historically, international investors often faced a choice between accessing local markets directly or trading offshore products that did not always reflect the full depth of onshore liquidity. Today, technology is helping to bridge that gap.
“We’re seeing regional banks increasingly distribute their pricing to a broader international audience through offshore channels, while continuing to manage and hedge those flows in their domestic markets. As a result, global investors are gaining more efficient access to local liquidity without needing to establish extensive local infrastructure or bilateral relationships in every market. As participation grows, both sides benefit. Regional banks can extend the reach of their liquidity, while investors gain access to more pricing and counterparties. Over time, that creates deeper pools of liquidity and a more efficient marketplace overall,” says Gold.
Brazil and Mexico remain the largest and most internationally recognised FX markets in Latin America, and they continue to play a critical role in attracting global investor participation, says Gold. “The Mexican peso, in particular, has become one of the most actively traded emerging market currencies globally, highlighting the scale of international interest in the region. At the same time, we’re seeing increasing attention on the Andean markets. Chile, Colombia and Peru have all continued to develop in terms of market depth, investor participation and the sophistication of their hedging activity.”
What is particularly interesting is that growth is no longer concentrated solely in the region’s largest economies, says Gold. “In Colombia, for example, forward markets have grown significantly over the past decade, reflecting rising demand for more sophisticated risk management tools. Similar trends are evident across the broader Andean region. While Brazil and Mexico will remain central to regional FX activity, we see substantial opportunities emerging beyond those two markets.”
There is still considerable room for electronification across Latin America, says Gold. “Adoption levels vary by market, but overall they remain below those seen in more mature FX centres, which creates a meaningful opportunity for growth. Non-deliverable forwards (NDFs) are likely to remain a key driver because they provide an efficient link between offshore demand and local market pricing. More broadly, forward markets continue to play a central role across much of the region, yet many workflows remain relatively manual and relationship-driven.
“What we’re hearing from clients is a growing focus on efficiency, transparency and workflow automation. As those priorities continue to shape market behaviour, we expect electronic trading adoption to increase across both spot and derivatives markets. The opportunity extends beyond simply putting more trading volume onto screens. It is about creating a more connected, transparent and scalable marketplace for all participants,” says Gold.
There is still considerable room for further electronification of FX across Latin America
One of the most notable trends in LatAm FX markets for Gold is that client requirements are becoming increasingly global, regardless of whether they sit on the buy side or the sell side. “Asset managers, hedge funds, pension funds, and other institutional investors are managing portfolios that span multiple regions and asset classes,” he says. “They increasingly expect the same level of workflow efficiency, analytics and execution tools in Latin America that they have access to in developed markets. That includes access to options, benchmark execution capabilities, integrated post-trade services and increasingly seamless digital experiences. At the same time, regional banks are expanding beyond their traditional domestic markets. They are looking to serve a broader client base, provide liquidity across additional currencies and distribute pricing more efficiently across international networks.”
Although the starting points may be different, both trends lead to the same conclusion, says Gold. “Market participants want simpler workflows, better connectivity and more efficient access to liquidity across multiple jurisdictions. The providers that can deliver those capabilities through a single, integrated environment will be best placed to support the next phase of growth in the region.”
The next stage of Latin America’s electronic FX evolution is likely to be defined by greater accessibility, transparency and continuity of liquidity across markets and time zones, says Gold. “One important development is the extension of trading opportunities beyond local market hours. Our partnership with B3 is a good example. The BRL/USD futures contract can be traded during the Asian trading day, giving market participants greater flexibility to manage risk and access liquidity when the Brazilian market itself is closed.
“We’re also seeing growing demand for more sophisticated execution analytics and transaction cost analysis. As liquidity becomes increasingly electronic and observable, investors are able to evaluate execution quality with far greater precision than was previously possible in many Latin American markets. Our Real Time Composite (RTC) FX data feed supports that evolution by providing an independent view of execution quality, including clean-price validation and best-execution analysis. That gives participants greater transparency around the quality of their FX execution and better information with which to assess trading outcomes,” says Gold.
Growing sophistication
One of the biggest changes we are seeing in Latin America is that clients are becoming much more sophisticated in how they manage FX risk, says Kat Furber, Bloomberg’s global head of FX trading (FXGO). “They are broadening their use of futures, options, NDFs and swaps, selecting instruments based on liquidity, cost and specific hedging needs. As a result, exchange-traded and OTC markets are increasingly becoming complementary rather than competing alternatives. Clients want the flexibility to move across instruments and liquidity pools, while technology is making it easier to connect these markets within a more integrated execution workflow.”
There is still significant room for further electronification across Latin America, where voice trading continues to play an important role, says Furber. “While FX Spot and NDFs are already highly electronic in many markets, we see the next wave of growth coming from more complex instruments, particularly FX Options. We expect these types of capabilities to become particularly relevant in Latin America as clients look to automate more sophisticated trading workflows.
“More broadly, Brazil and Mexico represent the largest opportunities for further electronification given the size of their FX markets, while we also see significant potential across currencies such as CLP, COP and PEN. The opportunity is not simply to move existing voice trading onto electronic platforms, but to create more efficient end-to-end workflows spanning price discovery, execution, automation and post-trade processing,” says Furber.
“The opportunity is not simply to make FX trading more electronic, but to make Latin American markets more accessible, efficient and integrated into the global investment ecosystem.”
Kat Furber
Demand for algorithmic FX execution is clearly growing across Latin America, particularly among hedge funds and larger asset managers that are increasingly focused on automation and systematic execution, says Furber. “At Bloomberg, we see this evolution through FXGO in several ways, from clients accessing bank algos within their existing workflows to more sophisticated firms automating execution through APIs and integrating trading directly with their OMS and internal systems. The challenge in regional currencies is liquidity. Markets can be more fragmented and less deep than G10, so simply applying the same execution strategies does not always work. Access to local liquidity, high-quality market data and execution analytics therefore becomes increasingly important. This is where combining Bloomberg’s data and analytics with FXGO’s execution workflows can be particularly valuable, helping clients determine when, where and how to execute.”
The evolution of the FX market is increasingly about the entire FX workflow, not just execution, says Furber. “Clients expect liquidity, pricing and execution to be seamlessly connected with pre-trade analytics, risk management, order management and post-trade processing. For Latin American institutions, where workflows can vary significantly across currencies, instruments and local market structures, bringing these capabilities together within an integrated suite of solutions can reduce manual processes and enable a more efficient and scalable trading workflow.”
As liquidity becomes available through more venues and execution channels, market data, liquidity analytics, smart order routing, transaction cost analysis and execution quality measurement are becoming fundamental to the execution process, says Furber.
“As liquidity fragments across more venues, dealers, algos and execution channels, access to liquidity itself is becoming less of a differentiator. The real challenge is determining which liquidity is actually relevant and executable at a given point in time. This is particularly important in Latin America, where liquidity conditions can change significantly by currency, instrument, time of day and market event,” says Furber.
“A price on the screen does not necessarily tell you how much liquidity is available behind it, how that price will behave for a larger order, or what market impact the execution may generate. That is why we are seeing greater focus on the entire execution lifecycle. Pre-trade analytics can help determine when and how to execute, liquidity analytics and smart routing can identify the most appropriate liquidity sources during execution and TCA allows institutions to evaluate the outcome against relevant benchmarks and understand spread, market impact and execution consistency. The next step is increasingly about connecting those elements. Execution quality should not simply answer ‘what price did I get?’ but also ‘why did I get that outcome, could I have executed differently, and what can I learn from it for the next trade?’ as institutional FX becomes more electronic and data-driven, that feedback loop will become increasingly important,” says Furber.
The biggest change is that FX is becoming a much more strategic part of the investment process, says Furber. “As Latin American institutions increase their international exposure, they are managing more currencies, more counterparties and increasingly complex hedging requirements. For pension funds and asset managers, FX is becoming more closely connected to portfolio construction. Investments in international fixed income, equities and alternatives create currency exposures that need to be actively monitored and hedged using instruments such as forwards, NDFs, swaps and options. This is also driving greater demand for automation, particularly around recurring hedging and portfolio rebalancing. Corporates are evolving as well,” says Furber.
“As their businesses become more international, they need to manage exposures across multiple currencies, subsidiaries and time zones, while improving visibility and control over execution. Across these segments, we see a common trend: FX is moving from a relatively isolated transaction toward an integrated risk-management process. This is increasing the importance of liquidity access, automation and analytics, as well as stronger integration across portfolio management, treasury, execution and post-trade workflows.”
with global institutional demand
Electronic growth
Latin America is entering a particularly exciting phase of electronic FX trading, says Furber. “The biggest opportunity is no longer simply moving traditional voice execution onto electronic platforms, but expanding automation into more sophisticated instruments, investment strategies and workflows. Brazil and Mexico are particularly interesting given the size and sophistication of their institutional markets.
“In Brazil, we see significant potential in FX Options, algorithmic execution and systematic trading, particularly among hedge funds and asset managers that are increasingly investing in automation and technology. Mexico offers opportunities for further electronification of institutional FX hedging, particularly across forwards, swaps and more automated execution strategies,” says Furber.
“Chile presents a different opportunity where we see greater demand for more sophisticated hedging, collateral management and integrated execution workflows. In Colombia and Peru, we see opportunities to expand electronic access to local currency liquidity, particularly for international investors, while improving price transparency and execution efficiency.
“Looking ahead, I believe the real transformation will come from connecting these developments,” says Furber. “Institutional investors will increasingly expect the same level of automation, transparency and execution sophistication in Latin American currencies that they already experience in major global FX markets. The opportunity is not simply to make FX trading more electronic, but to make Latin American markets more accessible, efficient and integrated into the global investment ecosystem.”
