11.21.2011
By Terry Flanagan

BMV Builds Liquidity

Mexican stock exchange leverages institutional based to attract cross-border order flow.

If you build it, they will come – ‘it’ being an institutional-based liquidity pool and ‘they’ being foreign traders.

That was the message of Bolsa Mexicana de Valores Chief Executive Luis Tellez who said the Mexican exchange has attained sufficient scale to attract traders from North America and elsewhere.

“The most important structural change is that we now have an important institutional investor base” with about $150 billion in assets under management, Tellez told reporters at a Nov. 17 press briefing in New York. “Foreign institutions feel very comfortable that Mexico has an institutional base. This brings more liquidity to the market.”

Bolsa Mexicana, known as BMV, has seen average daily trading volume surge more than twentyfold over the past two and a half years, from about 120,000 orders to 2.6 million orders, Tellez said. High-frequency traders attracted by technology upgrades have driven the increase, he said.

BMV’s technology is “up to date with other [global] exchanges,” Tellez said. For example, after an upgrade was completed in August, BMV’s trading latency narrowed to 100 microseconds, or equivalent to Singapore Exchange’s latency. HFT makes up about 20% of BMV’s trading volume.

The market volatility over the past few months has about doubled BMV’s average trading volume. Tellez said it was remarkable that much of volatility that affected Mexican markets was rooted in events exogenous to Mexico, such as actions by the government of Greece.

Regarding consolidation, Tellez said BMV would consider a merger or acquisition once the company’s technology upgrades are complete and it builds a stronger pipeline of initial public offerings. The Mexican exchange, the largest stock exchange in Latin America after BM&F Bovespa, is also focusing on its existing joint venture with CME Group.

“We are open to looking at whatever possibility can enhance the company,” Tellez said. A merger, acquisition or alliance with another exchange “would be a possibility,” he said.

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