Background on Bolsa Institucional de Valores (Biva)
The Bolsa Institucional de Valores (Biva) is Mexico’s secondary market for government securities, aiming to provide liquidity and transparency. It was established in 2016 as part of financial market reforms to separate the trading of government securities from other financial instruments.
Inefficiencies and Regulatory Challenges
María Ariza, Biva’s director, highlights that regulatory hurdles are hindering the full competitiveness of Mexico’s stock market and stifling growth, primarily affecting retail investors.
According to Ariza, these inefficiencies make Mexican regulations appear overly complex and costly for investors, especially international ones. This poses a risk as large international funds might opt to operate in other countries like Brazil or Chile instead of Mexico.
Ariza emphasizes that the issue isn’t competition between Mexican stock exchanges but rather driving investors away from Mexico. The goal, she asserts, should be to expand the market for better liquidity and financing opportunities.
Although regulatory changes at the end of 2022 allowed for increased competition, directors claim that inefficiencies caused by the “best execution” regulation persist.
Biva maintains that current regulations continue to create barriers to competition and operational inefficiencies, despite their market participation being similar to regulatory requirements.
IPC Index Controversy
Santiago Salinas, Biva’s director of Institutional Relations and Governance, points out another point of contention: the Índice de Precios y Cotizaciones (IPC).
Salinas explains that the IPC, Mexico’s primary market index, requires large companies meeting participation conditions to list exclusively on the Mexican Stock Exchange (BMV), effectively excluding Biva as an option.
He describes the IPC as a “closed” index, contrasting it with the FTSE Biva index (comprising 42 issuers), which is open, diverse, and includes values like fibers, better reflecting Mexico’s economy.
Salinas asserts that Biva aims to break this barrier, allowing any company to choose its listing exchange regardless of the index.
Key Questions and Answers
- What is Biva and why is it important? Biva is Mexico’s secondary market for government securities, established in 2016 to separate trading of government securities from other financial instruments. It aims to provide liquidity and transparency.
- What regulatory challenges does Biva face? Biva’s directors claim that complex and costly regulations make Mexican markets unattractive to investors, especially international ones. This risks driving large international funds away from Mexico in favor of countries like Brazil or Chile.
- What is the IPC index controversy? The IPC, Mexico’s primary market index, requires large companies meeting participation conditions to list exclusively on the BMV. This excludes Biva, prompting calls for change to allow companies to choose their listing exchange regardless of the index.
- What is Biva’s stance on these regulatory issues? Biva acknowledges that while recent regulatory changes have increased competition, inefficiencies caused by “best execution” regulation still exist. They aim to break barriers created by the current regulatory framework, allowing companies greater flexibility in choosing their listing exchange.
