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U.S. Interactive Brokers halts purchases of Venezuela debt
September 1, 2017 / 3:28 PM / 19 days ago

U.S. Interactive Brokers halts purchases of Venezuela debt

CARACAS (Reuters) - U.S. electronic brokerage firm Interactive Brokers (IBKR.O) has informed clients that it will no longer buy Venezuelan bonds for them, according to a message to clients seen by Reuters and confirmed by the company.

    The move comes after the United States imposed financial sanctions on the government of President Nicolas Maduro last week that include a ban on buying new Venezuelan debt but allow for continued trading of most existing bonds.

Venezuelan traders consulted about the issue said they believe other U.S. firms may temporarily limit services associated with trading of Venezuelan securities while compliance departments review the scope of the restrictions.

“You currently hold a position in a Venezuelan bond, which Interactive Brokers has decided to put into a closing-only state,” the Connecticut-based company said in the message.

    A spokeswoman for the firm confirmed the message but declined to provide details on the reasons for the measure.

    The U.S. sanctions specifically block trading of one bond issued by the government of Venezuela and a second issued by state oil company PDVSA.

They also include a general license that exempts most of the country’s debt, which is attractive to Wall St. and emerging market investors because of its high yield.

Interactive Brokers is a leading global electronic trading firm, though it is primarily focused on stock trading services and is a relatively small player in emerging market bonds.

Venezuela’s opposition-controlled congress this year pressured Wall Street to stop international financing for Maduro and harshly criticized bond purchases by banks, including Goldman Sachs (GS.N) and Nomura (9716.T).

Prior to the most recent sanctions, investment bank Credit Suisse barred trading of certain Venezuelan bonds and required that business involving Venezuela’s government and related agencies undergo a reputation risk review.

“It’s possible that other (firms) could make this type of decision given the increase in reputational risk associated with Venezuela,” said one local trader.

“But there will always be someone who trades Venezuelan bonds because of the economic incentive.”

    The U.S. sanctions were primarily motivated by the creation of an all-powerful legislative body called the constituent assembly, which has largely supplanted congress and has been widely criticized as the consolidation of a dictatorship.

Maduro has described the sanctions as a financial blockade against the country that is fueling triple-digit inflation and chronic product shortages. His adversaries say these problems are the result of dysfunctional socialist policies.

Writing by Brian Ellsworth; Editing by Dan Grebler

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