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José Miguel "Mak" De Dios, MexDer CEO
MexDer General Directorate/CEO José Miguel “Mak” De Dios

When we announced last October our plans to offer connectivity to the Mexican Derivatives Exchange (MexDer) through the TT® platform, our customers responded enthusiastically. MexDer is a subsidiary of the Mexican Stock Exchange (Bolsa Mexicana de Valores), one of the largest stock exchanges in Latin America, with widely followed futures and options contracts on the S&P/BMV IPC Mexican Equity Index, MXN/USD FX and Mexican Government Bond. MexDer is now available through TT, so we sat down with the exchange’s General Directorate/CEO José Miguel “Mak” De Dios to learn more about MexDer and the Latin American market. To learn more about MexDer, visit the exchange’s website here.

Tell me about your career. How did you get into this business, and what brought you to MexDer?

José Miguel: I started a long time ago in 1990 in a small brokerage house, ABACO, trading short-term fixed income products for four years. Afterwards I worked at Banco Bital, a large Mexican bank, later acquired by HSBC, where I traded long-term fixed income products, but I only worked there for less than a year because I joined Invex, at the time a start-up financial group with a brokerage house and a bank, where I had my first contact with derivative products. I was the trader for Exchange Coverage, a mix of options and FX forwards. Later I opened the FX trading desk for Invex Bank; I stayed there for five years. In November 1998 I received an offer to work for the BMV Group to open SIF, a new interdealer broker. I oversaw the OTC TIIE trading desk, and two years later, I had the chance to join MexDer to start the market making program with all Mexican banks and brokerage houses. We made significant changes to MexDer’s regulations and implemented a hybrid trading model in which clients could trade electronically. Also, we offered market makers the possibility to place orders by phone with us, so we would input them to the trading screens, and MexDer started to grow due to such changes. In October 2019, we shifted again to a 100% electronic trading market, so we changed the market making program, which is focused on showing tight bid-offer spreads on screen. Eventually, in April 2019, I was appointed CEO of MexDer. 

Most of our clients are institutional and professional traders who reside outside of Mexico. For those unfamiliar with the exchange, what are your most popular products, and what trading opportunities exist for international traders? 

José Miguel: The most popular products are the IPC Index (MexBol) Futures and the MXN/USD Futures. The first one is the most important benchmark for the Mexican stock market, being a weighted average index that includes the 35 most liquid stocks in Mexico, so it is the best way to invest or to hedge in Mexican equities. Additionally, it is quite easy for the algo-traders to do arbitrage between the IPC Futures and the Naftrac (the most popular ETF that tracks the IPC in the Mexican Cash Market).

The other product is the MXN/USD Future. Considering that the Mexican Peso is the eighth most-traded currency in the world and the first Latin American one, that is, the reference within the emergent Latin American countries. It is very liquid and extremely easy to do arbitrage between the spot market and the futures, or with some other similar OTC or similar products listed in other exchanges’ products.

Besides these two products, I consider it important to remark that MexDer also offers a wide variety of other listed derivatives, such as Mexican Government Bonds, Interest Rate Swaps, and IPC and Single Stock Options.

What’s the current trading climate like within Mexico? How do you see it evolving over the next few years?

José Miguel: Currently, the interest rates in Mexico are around 5.50%, an extremely high level compared to other countries with zero or even negative rates—and even to Latin American countries without investment grade, like Brazil, with rates at 3.75%—so Mexico looks like a good opportunity to get paid a high interest rate. In other matters, the USMCA will be effective from July 1 and I think there is going to be a new commercial era between the three North American countries, so we will have more economic relations and thus more opportunities and hedging needs between the three countries.

This also can help Mexican stocks to recover from their last years’ underperformance compared to other emerging and developed countries, and to increase local and foreign risk appetite for Mexican assets.

What about the greater Latin trading community? How does MexDer fit within that market, and what are the trends there?

José Miguel: That is an exceptionally good question; Mexico is one of the two largest economies in Latin America, we have the second biggest financial market of the region and the Peso is the most traded Latin American currency globally. For hedgers or investors in Latin America, it is very important to participate in MexDer since we offer the MXN/USD Future to hedge currency risk, the IPC Future to hedge Mexican equity exposure, TIIE Swaps and Government Bond Futures for fixed income hedgers. So, we are a very good solution to cover Latin American financial risks.

What’s in store for the exchange into 2020 and 2021?

José Miguel: This year has been very special, with a pandemic that we never thought would happen in the XXI century, but markets reacted in a very good way, traders moved to home offices, exchanges became 100% electronic and markets continued trading, understandably with some difficulties and problems. Still, we saw that all markets around the world continued open, which was an incredibly good signal for investors that markets are committed and have the facilities to offer access in difficult situations. For this year, we had to change our new listings plans; we foresee to list in Q2 the Overnight Interest Rate Fund Futures and Mexican Electricity Price Futures, but we had to delay this until the second half of the year since we had to focus in the implementation of the Business Continuity Plan and getting closer to all our clients during the pandemic. We have high expectations in these two new contracts, the first overnight derivative in Mexico and the first product in the Mexican energy market, so we expect that the launch of these two products will be a great success.

Because the MexDer TIIE Futures was the fourth most active global Short-Term Interest Rate Futures Contract in 2006, we expect strong local and international interest in the new MexDer Overnight TIIE Funding Rate Futures. We will be looking for market makers once we have regulatory approval.

We also expect for this year that with the inclusion of MexDer products in the TT platform, we will increase the number of participants in our exchange, allowing them an easier access that will help to boost liquidity and trading volumes.