Overview December, 2017. History • 1998 Open Outcry Trading starts & MXP/US Dollar Future Contract listing. • 1999 Interest Rates and Index Futures Contracts listing. • 2000 Electronic Trading. • 2001 Local Market Makers. • 2003 Partnership with MEFF for the Options Market. • 2004 Development and launching of the equity options market. • 2005 Omnibus Accounts. • 2006 Remote Participants. • 2007 Emerging Market of the year. • 2008 BMV Group IPO. • 2009 Colocation. • 2011 Order Routing Agreement Implementation. • 2012 Yellow Corn Future- 1st Commodity Futures Contract . • 2013 MoNeT Derivatives TIIE Swap Listing • 2014 10-Year Future Bond (M241205) Listing. Mini IPC Future Listing • 2015 Capital requirement rules. www.mexder.com.mxwww.mexder.com 2 MexDer Overview • MexDer is the Mexican Derivatives Exchange, subsidiary of the Mexican Stock Exchange (BMV Group), that began operations in 1998. • A self-regulated entity, MexDer along with Asigna (Clearing House), offer transparent benchmark derivative products based on Interest Rates, Foreign Exchange and Stock Indexes. www.mexder.com.mxwww.mexder.com 3 What makes MexDer so attractive? • No Withholding Taxes when trading in MexDer from a country with a double taxation agreement with Mexico. • Free convertibility. • No local presence required in Mexico. • Omnibus Accounts: Rule 30.7 (CFTC) segregation • Proprietary trading. • Customer trading. • Remote Membership • CFTC no action letter to offer products like Equity Indexes, Fx and Fixed Income contracts in the US & Foreign Board of Trade status pending. • Co-location and Sponsored DMA. • Collaterals may be pledged in the US. • Risk Management Controls www.mexder.com.mxwww.mexder.com 4 Our products S&P/BMV IPC/Fut : 28 Day TIIE Swap MXN/USD Alfa A 28 Day TIIE America Movil L 2 Yr. Deliverable SWAP Cemex CPO 10 Yr. Deliverable SWAP Femsa UBD M3 Bond GMexico B Swaps M10 Bond ICA* M20 Bond Lala B M30 Bond Mexchem* M181213 Bond Naftrac ISHRS M241205 Bond Options: Peñoles* M310529 Bond Pinfra* M421113 Bond Tlevisa CPO CETE 91 Walmex V MXN/USD MXN/EURO ETF´s S&P/BMV IPC iShares S&P 500 Index Futures: Mini S&P/BMV IPC America Movil L Cemex CPO Femsa UBD Gcarso A1 Gmexico B Walmex V Mextrac09 Individual Stocks Yellow corn www.mexder.com.mxwww.mexder.com 5 Asigna: Central Counterparty Clearing House BUYER SELLER Local Rating Global Rating Fitch Rating AAA (mex)/F1+(mex) Standard & Poor’s mxAAA/mxA-1+ BBB+/A-2 Moody’s Aaa.mx A3 www.mexder.com.mxwww.mexder.com 6 Collaterals • Asigna accepts collaterals in the following currencies and securities (“Haircuts” apply) Source: www.asigna.com • Securities pledged as collateral may be exchanged at any time. • Cash Collateral proceeds are credited to the client. • Additional Margins may be requested by Clearing Members due to credit quality. www.mexder.com.mxwww.mexder.com 7 How to participate in MexDer? Participate in MexDer Clearing Contract Clients Contract ( Omnibus Account included) Client’s Trading Member Clearing Member Local or foreign (*) • Proprietary Trading Member(*) • Market Maker • Third Parties Trading Member (*) • Proprietary Trading Member and Third Parties Trading Member(*) • Global Accounts Derivatives Exchange Clearing House Matching Engine www.mexder.com.mxwww.mexder.com 9 Products MXN/USD Futures Contract Description • The MXN is the eighth most traded currency in the world, the third most traded in the Americas and the most traded in LATAM. • MXN has become the main hedging currency for emerging countries, whose currencies don’t have enough liquidity • Due to current high yields offered by Mexican Fixed Income Instrumets, large international cash flows are generated thus incrementing FX Derivatives trading volumes • Very useful contract to create synthetic rates given daily deliveries that can be simultaneously spread traded versus a Monthly delivery, replicating an FX Swap. www.mexder.com.mxwww.mexder.com 12 Specifications Underlying: US Dollar. Contract Size: $10,000 Dollars. Delivery Months: Daily, monthly and quarterly, up to 15 years. Trading Symbol: DA Quotation: Pesos per Dollar. Tick: 0.0001 Pesos. Tick Value: $1 Peso. Tick Ratio/ Fee: 0.31 times. Initial Margin: $13,600 Pesos. Opposite Margin: $6,875 Pesos. Trading Hours: 7:30 to 14:00 hours. Last Trading Day: Monday of the week of the third Wednesday of the contract month. Maturity date: Monday of the week of the third Wednesday of the contract month. Settlement: Physical delivery. Bloomberg <MMDD> DSA<CRNCY>CT Reuters MXN/FUTEX1 0#MXP: www.mexder.com.mxwww.mexder.com 13 MXN/USD Futures Contract • Participants: Banks, FCM’s, Pension Funds, Mutual Funds, liquidity providers. • Competitive trading and clearing costs. Notional Value: Pesos USD $6,169,421,651.01 $326,391,614.12 2017 Average Daily Volume Pesos USD www.mexder.com.mxwww.mexder.com 14 MXN/USD Futures Contract Uses • Hedging • Importers with USD commitments. • Exporters that receive USD flows. • Dollar Credits. • Infrastructure financing. • Arbitrage • Currencies with significant correlation. • Strategies: • USD funding. • Synthetic Interest Rates in pesos and dollars. (FX Strip). www.mexder.com.mxwww.mexder.com 15 S&P/BMV IPC Futures Contract Underlying Asset • The Price and Quotation Index (S&P/BMV IPC) is the main index issued by the Mexican Stock Exchange. • It is a market capital weighted index formed by 35 of the most important and representative issuers, from different sectors of the Mexican economy. • This Index is the main Mexican benchmark used by Financial Institutions in the equity market. • The S&P/BMV IPC Futures Contract was created to hedge, manage and mitigate the risks associated with investing in the Mexican Stock Market. www.mexder.com.mxwww.mexder.com 17 Specifications Underlying: S&P/BMV IPC or MexBol (Mexican Stock Exchange Index) Contract Size: $10 (Ten pesos 10/100)) multiplied for the S&P/BMV IPC Value. Delivery Months: Quarterly : March, June, September, December up to one year. Trading Symbol: IPC Quotation: S&P/BMV IPC Index Points. Tick: 5 Points. Tick Value: $50 Pesos Tick Ratio/ Fee: 1.25 times Initial Margin: $39,600 MXN Opposite Margin: $23,850 MXN Trading Hours: 7:30 to 15:00 hours Last Trading Day: Third Friday of the maturity month or the previous business if such Friday is a non-business day. Maturity date: Third Friday of the maturity month or the previous business if such Friday is a non-business day. Settlement: Next business day after maturity date. Bloomberg <MMDD> ISA <INDEX> CT Reuters MXN/FUTEX1 0#IPC: www.mexder.com.mxwww.mexder.com 18 S&P/BMV IPC Futures Contract . Easiest and most simple way to hedge and take short positions in the Mexican Equity Market. Traded Volume: 2016 vs 2017 2016 2017 Average Daily 3,923 3,172 Volume Aug-17 www.mexder.com.mxwww.mexder.com 19 S&P/BMV IPC Futures Contract Main Participants: Trading Ideas: • FCM’s • S&P/BMV IPC Future vs Cash basket. • Mutual Funds • S&P/BMV IPC Future vs Naftrac (IPC ETF) • Institutional Clients • S&P/BMV IPC Future vs Mini S&P/BMV • HFT IPC Future • S&P/BMV IPC Future vs Other Indexes and ETF´s (S&P, DOW, EWW, etc.) www.mexder.com.mxwww.mexder.com 20 Mini S&P/BMV IPC Futures Contract Specifications Underlying: S&P/BMV IPC (Mexican Stock Exchange Index) Contract Size: $2 (Two pesos 00/100)) multiplied by the S&P/BMV IPC Value. Delivery Months: Quarterly : March, June, September, December up to one year. Trading Symbol: MIP Quotation: S&P/BMV IPC Index Points. Tick: 10 Points. Tick Value: $20 Pesos Tick Ratio/ Fee: 1.25 times Initial Margin: $7,920 MXN Opposite Margin: $4,770 MXN Trading Hours: 7:30 to 15:00 hours Last Trading Day: Third Friday of the maturity month or the previous business if such Friday is a non-business day. Maturity date: Third Friday of the maturity month or the previous business if such Friday is a non-business day. Settlement: Next business day after maturity date. Bloomberg <MMDD> MIPA<INDEX> CT Reuters MXN/FUTEX1 0#MIP: www.mexder.com.mxwww.mexder.com 22 Mini S&P/BMV IPC Futures Contract Traded Volume: 2016 vs 2017 Average Daily 2016 2017 Volume 2,039 685 www.mexder.com.mxwww.mexder.com 23 Mini S&P/BMV IPC Futures Contract Main Participants: Trading Ideas: • Retail Investors • Mini S&P/BMV IPC Future vs Cash basket • FCM’s • Mini S&P/BMV IPC Future vs Naftrac (ETF) • Mutual Funds • Mini S&P/BMV IPC Future vs ADR’s • Institutional Investors • Mini S&P/BMV IPC Future vs Other Indexes • HFT and ETF´s (S&P, DOW, EWW, etc.) www.mexder.com.mxwww.mexder.com 24 Benefits • Lower transactional costs compared to the cash market. • Leverage benefits and lower capital consumption. • Optimal and efficient way to take short positions. • Hedging accuracy due to the contract’s size. • High liquidity and arbitrage opportunities between the Future and the Naftrac (ETF) • CFTC approved • Attractive product for FCM’s and retail clients www.mexder.com.mxwww.mexder.com 25 10-Year M Bond Futures Contract (DC24 ) Underlying asset specifications • The Federal Government Development Bond M241205 is the most liquid bond in the market (about 25% of the total daily volume). • It is the main Government rate benchmark for the 10 years node. • Highly demanded by both local and foreign investors. • Due to its credit rate and performance, it has an International Investors holding of about 50%. • The DC24 Future is a Bond Forward, without Deliverable basket. www.mexder.com.mxwww.mexder.com 27 Specifications Underlying: Bond M241205 Contract Size: 1,000 Bonds = $100,000 pesos. Delivery Months: Quarterly, up to one year Trading Symbol: DC24 Quotation: Bond Futures Price using ‘Dirty Price’ Tick: 0.05 Pesos Tick Value: $0.05 Pesos Tick Ratio/ Fee: 7.5 times Initial Margin: $3,900 Pesos Opposite Margin: $1,770 Pesos Trading Hours: 7:30 a 14:00 hours.