{"id":24368,"date":"2013-04-15T15:00:00","date_gmt":"2013-04-15T20:00:00","guid":{"rendered":""},"modified":"2013-04-15T15:00:00","modified_gmt":"2013-04-15T20:00:00","slug":"tt-mexder","status":"publish","type":"post","link":"https:\/\/tradingtechnologies.com\/blog\/2013\/04\/15\/tt-mexder\/","title":{"rendered":"Mexico, The Emerging Latin American Powerhouse"},"content":{"rendered":"

For the past few years, coverage of Mexico in the U.S. media has largely been dominated by stories of violence stemming from the country\u2019s drug cartels. Lately though, the media have increasingly been turning their attention to the story of Mexico\u2019s booming economy, and new president Enrique Pe\u00f1a Nieto\u2019s bold moves to radically reshape it. This robust growth in Mexico looks set to continue for some time, which has led the Financial Times<\/i> to label Mexico as the \u201cAztec Tiger.\u201d1<\/a><\/p>\n

MexDer, the nation\u2019s only futures exchange, has been taking steps to ensure that it grows apace with the nation\u2019s economy by making substantial upgrades to its matching engine, while continuing to make it easier for foreign investors to access the market. As a result of these changes, as of yesterday, April 14, north-to-south routing to MexDer via CME Group\u2019s Globex\u00ae platform is available on TT. You can read the details in the news release<\/a> that we published today.
\n<\/a><\/p>\n

<\/span>The Aztec Tiger <\/span><\/h3>\n

A perfect storm of positive influences is coming together to make Mexico one of the world\u2019s emerging economic powerhouses. Mexico has a young and growing population, low levels of government debt and low inflation. The country is developing into a leading exporter due in part to widespread implementation of new manufacturing processes, but also due to the fact that Mexico has free trade pacts with 44 countries\u2014more than any other nation on earth.<\/p>\n

These forces have combined to make Mexico\u2019s economy one of the few bright spots in a global economy still working off the hangover resulting from the credit bubble. Mexico\u2019s economy grew at around four percent in 2012, quadruple the growth rate of Latin America\u2019s largest economy, Brazil.2<\/a> The Mexican peso hit a 19-month high against the U.S. dollar in March, and has outpaced 16 other major world currencies over the last month.3<\/a><\/p>\n

With its growth track record and favorable conditions for growth to continue, a Nomura Equity Research report in July 2012 predicted that Mexico would overtake Brazil to become the largest Latin American economy within the next decade.4<\/a> In addition, Standard & Poor’s and Fitch have indicated that in the near future, they are likely to upgrade Mexico\u2019s debt, which is already investment grade.5<\/a> <\/p>\n

<\/span>\nA Pact for Mexico, An Open Door for Growth <\/span><\/h3>\n

Much of the optimism for Mexico\u2019s future can be traced back to its new president, Enrique Pe\u00f1a Nieto. He hails from the Institutional Revolutionary Party (PRI), which ruled Mexico uninterrupted for 71 years and was identified with corruption and inefficient bureaucracy. That being said, President Nieto is quickly making himself known as a risk taker, willing to take on fights in which none of his predecessors seemed willing to engage. <\/p>\n

Within two days of his swearing-in last December, Nieto\u2019s PRI signed a \u201cPact for Mexico\u201d6<\/a> with the opposition National Action Party (PAN). This pact outlines 95 proposals to modernize and liberalize Mexico\u2019s economy. Nieto began by taking on the richest man in the world, Carlos Slim, by announcing plans to foster competition in the telecommunication and television industries, which are currently dominated by monopolies. Later this year, Nieto is expected to propose his most significant change, opening up Mexico\u2019s energy market and allowing the state-run oil concern Pemex to work with the world\u2019s largest oil companies. It\u2019s expected that these reforms, once enacted, will increase Mexico\u2019s GDP growth from four percent to six percent a year.7<\/a><\/p>\n

<\/span>\nMaking MoNeT <\/span><\/h3>\n

In parallel, MexDer and the Mexican government have done quite a bit to attract foreign investors, and to make it easy for them to access the market. Perhaps one of the most significant changes has been the development of the MoNeT matching engine, which went live on Bolsa Mexicana de Valores (BMV), the equities segment, last fall.
\n
\nThe MoNeT matching engine was designed to attract high-frequency traders, mainly from the U.S. and Europe. It boasts internal latencies of 90 microseconds, which is faster than the 110 microseconds of NASDAQ or 125 microseconds at the London Stock Exchange.8<\/a> BMV volumes have increased 30 percent to 40 percent since the launch of the new matching engine.9<\/a> <\/p>\n

For international traders and investors, accessing MexDer is straightforward. The north-to-south routing available via CME Globex allows any TT customer with an existing CME infrastructure to route orders to MexDer\u2019s matching engine. MexDer is also accessible now in TT\u2019s MultiBroker<\/a> environment, which is currently available in beta. Additional information regarding how CME users can access MexDer is posted on the CME website<\/a>. <\/p>\n

There are a number of other reasons why doing business in Mexico is easier than most other Latin American countries. Unlike Brazil, there is no withholding tax of any kind on foreign investment. The Mexican peso is a freely traded and easily convertible currency, and MexDer\u2019s clearing house, Asigna, accepts U.S. dollar-denominated collateral.<\/p>\n

<\/span>\nLa Oportunidad Est\u00e1 En Todas Partes <\/span><\/h3>\n

Owing to the fact that the U.S. does $1.5 billion per day in trade with Mexico,10<\/a> the Mexican markets are, predictably, highly correlated with America\u2019s. North-to-south customers trading MexDer via Globex have access to a number of financial futures that allow for arbitrage opportunities against their American counterparts. <\/p>\n

MexDer lists the IPC index of the BMV, which in general tracks closely to the S&P 500. The full Mexican yield curve is available on MexDer, from one-month bills to 30-year bonds, and it converges with the U.S. yield curve. Finally, MexDer lists a Mexican peso\/U.S. dollar FX future, one of the 20 biggest FX futures contracts in the world by volume, which sets up arbitrage opportunities with the CME\u2019s equally liquid peso\/U.S. dollar future. In a recent MarketsWiki interview<\/a>, MexDer CEO Jorge Alegria indicated that going forward, the exchange would likely look to list commodity futures linked to similar contracts listed on CME Group. <\/p>\n

The ascent of the Aztec Tiger is no sure thing. There is always the danger of President Nieto\u2019s PRI party losing its appetite for reform and returning to its old ways. There\u2019s the chance that the hiccups in the U.S. economic recovery may impact Mexico, given that 30 percent of the Mexican economy is tied to U.S. exports. There may even be signs that Mexico\u2019s economy is stalling already, which led the central bank to reduce interest rates for the first time since March 2009. Either way, TT users now have the ability to participate in one of today\u2019s most interesting markets. <\/p>\n

1 Thomson, Adam. “Mexico: Aztec tiger.” Financial Times<\/i>. January 30, 2013.<\/a>
\n2 Rathbone, John-Paul. “Mexico\u2019s reform plan lifts hopes for greater prosperity.” Financial Times<\/i>. March 20, 2013<\/a>
\n3 Kwan Yuk, Pan. “Mexican peso hits 19 month high”. Financial Times<\/i>. March 14, 2013.<\/a> 
\n4 “Mexico could pass Brazil as top LatAm economy in 10 years-Nomura.” Reuters. August 8, 2012.<\/a>
\n5 Bases, Daniel. “S&P revises Mexico sovereign credit outlook to positive.” March 12, 2013 <\/a>
\n6 “With a little help from my friends.” The Economist<\/i>. December 8, 2012.<\/a>
\n7 Thomson, Adam. “Mexico: next stop, a rating upgrade?” Financial Times<\/i>. March 12, 2013.<\/a>
\n8 Thomson, Adam. “Homegrown software fuels Mexican exchange\u2019s efficiency.” Financial Times<\/i>. October 3, 2012.<\/a>
\n9 Kledaris, George. “Down Mexico way.” Advanced Trading<\/i>. February 26, 2013.<\/a>
\n10 Friedman, Thomas. “How Mexico got back in the game.” New York Times<\/i>. February 23, 2013.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

For the past few years, coverage of Mexico in the U.S. media has largely been dominated by stories of violence stemming from the country\u2019s drug cartels. Lately though, the media have increasingly been turning their attention to the story of Mexico\u2019s booming economy, and new president Enrique Pe\u00f1a Nieto\u2019s bold moves to radically reshape it. […]<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[18],"class_list":["post-24368","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-market-access"],"acf":[],"_links":{"self":[{"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/posts\/24368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/comments?post=24368"}],"version-history":[{"count":0,"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/posts\/24368\/revisions"}],"wp:attachment":[{"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/media?parent=24368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/categories?post=24368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tradingtechnologies.com\/wp-json\/wp\/v2\/tags?post=24368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}