An upcoming Mexican trading venue taking on incumbent bourse
BMV believes it can add supply to the country’s
securities lending market.
BIVA, short for Bolsa Institucional de Valores, has been in
the works four years now but is set to launch later in 2017
a full fledge stock exchange, subject to regulatory
It would then leverage the assets of its
holding company, Cencor, which runs an interdealer broker
business, fair value price provider, institutional broker and
securities lending platform, MEI.
In a note to clients last week, analysts at broker ITG
pointed out that skeptics question whether a new exchange is
warranted, given that 12 securities were responsible for
trading more than 50% of 2016 volumes in Mexico.
However, BIVA’s executives point to that fact
that four pension funds have backed the project with a 450
million pesos (US$22m) investment through a private equity
firm, which demonstrates investors’ appetite for
an additional, competitive venue.
The new exchange also signed a deal with Nasdaq X-Stream
technology two years ago, meaning it has a technical edge to
attract market participants and strengthen adjacent areas,
including securities lending.
"Competition is the right way to go," Rodrigo Velasco,
BIVA’s director of operations, told Global
Investor/ISF. "Although Mexico’s fixed income
market is deep and liquid, our equity market continues to lag
"This spills over to securities lending, which works pretty
well in Mexico, but hasn’t seen enough
development in terms of supply and demand on the equity
Part of the problem, Velasco admits, is that only a handful
of hedge funds are based in the country. Most are domiciled
outside of Mexico and do business in the US.
"Right now we’re working with institutional
investors, brokers, banks and regulators who are very open to
sensible market adjustments which would create a level playing
field similar to what clients are used to in the US.
"Crucially, we want to create a flexible securities lending
environment, not a restrictive one."
Upon BIVA’s launch, firms will be able to trade
on both existing bourse BMV - still the second largest stock
exchange in Latin America with a total market capitalization of
over US$530bn - and BIVA.
Clearing and settlement will continue to be through the
Contraparte Central de Valores (CVV).
Meanwhile, firms already trading on BMV bourse have the
option to change their primary listing to BIVA once the new
venue is up and running.
In terms of asset classes, BIVA’s initial focus
on the cash equity market, derivatives will be explored at a
Velasco adds that the group is talking to the Latin
American Private Equity & Venture Capital Association to
steer some of the country’s alternative assets to
the public market.
"Mexican authorities have made it easier for companies to
list," he adds. "Requirements have been lowered.
That’s been a positive step."
The country now faces headwinds this year from three
fronts—local politics, the economy and international