BMV Attracts Foreign Traders01.10.2012 By Terry Flanagan
Through a host of several initiatives, the Mexican Stock Exchange has been increasingly looking to boost foreign interest in its capital markets.
“BMV has had several initiatives in the past few years, including in derivatives with the alliance with CME Group, and in cash equity markets, through upgrading our technology,” Jorge Alegria, senior vice president of market operations for BMV and MexDer. “Also important is that we are increasing our functionality to accommodate and attract new participants to Mexico.”
In May, BMV will introduce a new trading platform that can process an order in less than 100 microseconds, or process 200,000 transactions per second. The $18 million upgrade, developed in-house with Carnegie Mellon University and Tibell & Associates, is 200 times faster than the current system. It is expected to launch in May.
Scheduled to launch at the end of January is a new version of its trading engine, which will include the introduction of a new hidden order book for block trading.
The move by the BMV to boost the speed of its trading platform is part of a larger overall move by the Mexican markets to diversify its business operations as well as expand outside its borders.
Finamex, a Mexican agency-only broker-dealer, recently announced the launch of a new suite of algorithms aimed at trading U.S.-based securities in the Mexican market. The algorithms are designed to arbitrage any price discrepancies or inefficiencies between venues due to data latency, showing the increasing shift toward algorithmic trading in the nation. BMV and MexDer have entered into strategic partnerships with CME Group whereby they utilize the Chicago derivative exchange’s technology. Since the partnerships began, the markets have seen speed increase and become more efficient.
BMV recently launched a sustainability index, only the third such index in the global financial markets. Sustainability indexes are intended to objectively measure the performance of companies that meet certain corporate responsibility standards. It’s a tool used by consultants, asset owners, fund managers, investment banks, stock exchanges and brokers when assessing or creating responsible investment products.
Mexico also recently enacted regulation aimed at increasing interest from foreign investors. Certain trading withholding tax rules, which for certain countries could be as high as 35%, were abolished. This meant that investors outside of Mexico could invest in Mexican fix-income securities while avoiding this tariff.
Introduced in 2005 was remote trading, which allowed foreign traders to become official members of local exchanges without being a resident of Mexico. Remote clearing is also being considered for the future.