B3 offered direct access through securities linked to shares traded abroad, known as BDRs, or Brazilian Depositary Receipts. To make the product more accessible to retail investors, the exchange structured SpaceX’s BDR so that five receipts corresponded to one share — meaning each BDR represented one-fifth of a share in Musk’s rocket company, whose stock would cost nearly R$700 after currency conversion. It was the first time B3 launched a BDR on the same day a company debuted on a foreign exchange.

The results were immediate. Trading volume reached R$145 million on the first day, climbed to R$216 million the next, and hit R$397 million on the third day. To put that in perspective, the BDR ranked 34th among the most traded assets on B3, including all products and stocks.

The same model is expected to be used for other mega-deals still in the pipeline in the U.S., especially those likely to become market hype, even though current volatility in the technology sector could push some offerings into next year. The IPOs of OpenAI and Anthropic, for example, are also expected to have BDRs trading on B3 on their debut day, said Luiz Masagão, B3’s vice president for products and clients.

“This is an evolution of the business, offering simpler access to individuals who want to invest abroad,” Masagão said. He noted that investing through BDRs can also be cheaper from a tax standpoint, since buying the security locally avoids the Financial Transactions Tax (IOF) charged on international transfers.

Retail access

Created in 2006 to allow local investors to buy shares of global companies through Brazil’s own exchange, BDRs only gained real traction in 2020, when a regulatory change opened the product to retail investors. Until then, only qualified investors were allowed to buy them. Today, 818 BDRs are listed on B3, up from 608 in 2020.

The stock of BDRs rose to R$50 billion last year from R$16 billion in 2020. According to the latest available data, 954,000 investors hold BDRs in their portfolios. That figure was twice as high in 2022, but has declined since then as risk aversion increased amid Brazil’s high-interest-rate environment.

Beyond global companies, BDRs have also given investors access to Brazilian companies that chose to go public abroad, such as investment platform XP, or migrated their listings overseas, as lender Banco Inter and, more recently, meatpacking giant JBS did. In those cases, investors who wanted to remain shareholders had to accept BDRs.

XP, Inter, and JBS were among the five most traded BDRs on B3 last year. Nvidia, whose market capitalization has soared amid the race for chips, ranked first. Tesla, Musk’s electric-vehicle maker, came second.

Another segment of the market is made up of BDRs linked to global exchange-traded funds (ETFs). There are now 300 listed in Brazil, held by 57,100 investors.

New markets

According to Masagão, B3 will continue launching BDRs, not only for U.S. and European assets but also with an eye on other regions. He said the exchange is in talks with the Securities and Exchange Commission of Brazil (CVM) to gain flexibility for the launch of certain BDRs. The discussions involve technical issues, he said, aimed at adjusting market features so the assets can be listed locally.

In the beginning, foreign companies had to be interested in having their BDRs listed in Brazil, which limited the number of available assets. Since 2010, however, unsponsored BDRs have existed and have become the most common format, as they can be issued by a depositary institution without the foreign company’s involvement.

To provide liquidity, the securities rely on market makers — financial institutions hired to ensure buy and sell offers and accurate prices on trading screens.

Investor demand

At research firm Eleven Financial, specific reports on BDRs began being produced for clients a year ago, reflecting stronger demand. Fernando Siqueira, head of research at Eleven, said demand has grown in recent years in line with major market events.

During the strong rally in U.S. stock markets, the BDR tied to the S&P 500 ETF attracted investors in Brazil. Now, he said, the SpaceX IPO has similar potential. “Information is easier to obtain today, and that has helped,” Siqueira said.