Grupo BMV, operator of Mexico’s main stock exchange, is moving to launch options on the underlying for the major US equities, including Amazon and Apple, by the end of the year.
It is a big step from the exchange in a bid to onboard more retail investors and increase liquidity.
According to the CEO, Jorge Alegria, the new exchange-traded equity options will be concentrated on large US technology stocks that are extremely popular among Mexican investors.
The offerings will be localised in Mexico, traded in pesos and settled in cash, and aim to complement the existing cash trading of foreign equities already offered on the exchange.
“We are putting money into technology to allow a more active options market for equities in Mexico,” Alegria told Reuters.
The endeavour exemplifies Grupo BMV’s broader aim of reviving activity on a market that has battled to keep big listings in recent years.
Alegria, who took over the exchange last year, has been entrusted with increasing market participation and updating its offers.
New rules expected to drive IPOs
Apart from the options trading, Grupo BMV is also gearing up for what could be an increase in listings of small and mid-sized companies.
Alegria highlighted how special purpose acquisition vehicles (SPACs) have been a route for companies to list publicly.
Mexico has developed its own structures for investment, such as CKDs (Certificados de Capital de Desarrollo) and CERPIs (Certificado de Proyectos de Inversión), which have been used to date primarily by infrastructure-focused managers, like Mexico Infrastructure Partners, Credit Suisse and BlackRock.
In late 2023, Mexico simplified its listing rules; Alegria expects this will allow many more mid-sized firms to access the capital markets. The first transaction under the revised regime could happen before the end of the year, he said.
The rules aimed to lower the barriers for smaller companies to come to market as well as make it easier for companies already on the market to undertake follow-on offerings and debt issues.
Those changes formed the foundation of wider efforts to reactivate Mexico’s equity market, one of the most reluctant to lure initial public offerings.
For instance, last year, retailer BBB Foods decided on a US listing instead of a Mexico listing amid higher valuations abroad. Grupo BMV is trying to cool this trend by hoping activity will speed up on domestic IPOs.
High-profile IPO candidates
Aeromexico and Citi’s retail banking unit in Mexico, Banamex, are among the corporations expected to sell shares in the near future.
Both companies had previously evaluated listing in New York, highlighting the difficulty for the local exchange to compete with larger foreign marketplaces.
Nonetheless, Alegria expressed hope that Mexico’s new listing climate, as well as the exchange’s quest for modernisation, will entice some of these well-known brands to return to the local market.
Expanding into bonds and data
In addition to equities, Grupo BMV intends to enter electronic bond trading.
Alegria referred to this as “the logical next step,” claiming that moving Mexican bonds to an electronic platform will attract global liquidity and dovetail with developments already underway in the US Treasury and corporate debt markets.
At the same time, Grupo BMV is investing in technology upgrades that might prepare the market for increased trading volumes and, eventually, 24-hour stock trading.
While 24/7 activity is not envisaged in the near future, the exchange wants to be prepared for the changeover.
Alegria, who formerly worked for CME Group, emphasised the value of data monetisation and foreign licensing as new revenue streams.
He explained that these activities are part of a strategy to help the exchange close its valuation gap with larger global peers.
“We need to be seen as a growth story,” Alegria said.
Outlook amid global competition
Grupo BMV, which is trying to strengthen Mexico’s capital markets through a multi-pronged strategy that includes plans to open options on US tech stocks, refresh IPO activity under recently adopted listing rules, and expand into electronic bond trading.
Global competition for listings is heating up, and domestic companies are notoriously seeking listings abroad, so Alegria now faces the challenge of making Mexico more attractive, for both sides of the equation, though at present it is the latter doing the seeking.
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