Investors Turn to Mexico11.16.2011
The trading landscape in Mexico continues to evolve with the rise of algorithmic trading.
Mexico is looking to move up and position itself among the top emerging markets for the global investing community.
“Our goal is to take Mexico to a higher level in the emerging markets priority list of global investors,” Hector Casavantes, head of Electronic Trading at Finamex, told Markets Media. “We wanted to offer automated algo strategies in order to let investors know how active and easy this market can be to trade. All algorithms were architected with profitability in mind. They’re highly customizable, completely auditable and comprehensive, fully meeting our clients’ demands.”
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 in part designed to arbitrage any price discrepancies or inefficiencies between venues due to data latency.
The move is part of a shift in the Mexican trading landscape toward more algorithmic-based strategies. Exchange operators Bolsa Mexicana de Valores and MexDer have each entered into strategic partnerships with CME Group whereby they utilize the Chicago derivative exchange’s technology. In the past several years, the market has seen speed and efficiency increase.
Mexican broker-dealers such as Finamex offer investors a chance to trade in U.S. equities while avoiding the competitive U.S. markets, “where there are plenty of people using advanced calculations, super low latency and high-frequency trading strategies, which don’t exist in Mexico,” Dan Watkins, a Finamex spokesperson, told Markets Media.
The enactment of regulation has also made Mexico a more attractive destination for trading. In 2005, certain 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.
Also implemented 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.