Derivatives Laws and Regulations for Alternative Asset Managers

Argentina’s derivatives market has a long history, and is a dynamic and evolving sector. Main asset classes are agriculture commodities, interest rates, equities, and foreign exchange, playing a crucial role in Argentina’s financial system. Given the country’s history of macroeconomic volatility, derivatives are particularly important for managing currency risks and agriculture commodities price risks. The market operates through a combination of onshore and offshore trading activities. Key participants include banks, commodity traders, institutional investors, importers, and alternative asset managers. Regulatory oversight is primarily provided by the Comisión Nacional de Valores (CNV) and the Central Bank of Argentina (BCRA), ensuring compliance with financial market regulations. However, offshore derivatives trading, particularly in foreign exchange and interest rate derivatives, remains significant due to capital controls and local market restrictions. Derivatives transactions in Argentina are conducted through both over-the-counter (OTC) markets and regulated exchanges. OTC derivatives are customized contracts negotiated directly between parties, offering flexibility in structuring terms. Alternative asset managers use derivatives transactions for both investment and risk management purposes. In the case of investment strategies, funds utilize derivatives to actively seek returns, particularly in commodities, foreign exchange, and fixed-income markets where price movements and interest rates in Pesos can create profitable opportunities. Conversely, derivatives also serve as essential tools for mitigating financial risk, helping funds and corporates hedge against currency fluctuations, interest rate volatility, and inflationary pressures.

Argentina’s Derivatives Market: Historical Development and Regulatory Evolution Argentina’s prominence as a derivatives market is rooted in its history as a key player in commodity trading. The establishment of MATba (Mercado a Término de Buenos Aires) in 1907 and ROFEX (Mercado a Término de Rosario) in 1909, two of the oldest futures exchanges in Latin America, laid the foundation for the country’s commodities derivatives market. The subsequent merger of MATba with ROFEX in 2019 (that created MATba-ROFEX) and then with MAE (Mercado Abierto Electrónico) in 2024, created A3 Mercados S.A., Argentina’s largest regulated derivatives exchange, further strengthening the market’s institutional infrastructure. The Comisión Nacional de Valores (CNV) and the Central Bank of Argentina (BCRA) oversee the market, implementing risk management and transparency measures to align with global financial standards. However, Argentina’s derivatives landscape has been significantly influenced by macroeconomic volatility, particularly in response to currency fluctuations, inflationary pressures, and FX and capital controls. The global financial crisis of 2008 led to enhanced regulatory scrutiny of derivatives markets worldwide, with frameworks such as Basel III and the Dodd-Frank Act influencing derivatives trading standards. While Argentina was not directly impacted by these reforms, the country’s regulators have sought to modernize risk management and financial stability measures in response international regulatory expectations.