Chapter 2: The Mexican Financial System and its Components
The Mexican Stock Exchange and the brokerage houses are just a part of the whole Mexican Financial System. They are the most known, and the ones that you should master so that you can make your company go public. But knowing the whole panorama is always an additional help to be informed of your rights as an investor and the tools that you can use to your advantage.
The Mexican financial system
The Mexican financial system is supervised by seven authorities:
- The Bank of Mexico
- The National Commission of the Retirement Savings System (Consar by its acronym in Spanish)
- The Ministry of Finance and Public Credit (SHCP)
- The National Banking and Securities Commission (CNBV)
- The Institute for the Protection of Bank Savings (IPAB)
- The National Commission of Insurance and Bonds (CNSF)
- The National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF)
- The Banco de México is the one who regulates monetary policy and preserves the value of the currency; It is also the issuer of paper money and the financial agent of the Federal Government. It is also in charge of ensuring that the payment systems work correctly.
- CONDUSEF is a specialized public institution that promotes financial education and transparency so that users make informed decisions about the benefits, costs, and risks of the products offered in the Mexican Financial System. It promotes advice and support in customer claims and monitors transparency in the rest of the financial services.
- The CNBV is a decentralized body of the Ministry of Finance and Public Credit with authority or matters of authorization, regulation, supervision and sanction on the various sectors and entities that make up the financial system in Mexico.
- CONSAR defines pension policies. It is made up of individual accounts in the name of the workers who manage the AFORE.
- CNSF is a decentralized body of the Ministry of Finance and Public Credit in charge of supervising that the operation of the insurance and surety sectors adheres to the regulatory framework.
- IPAB is a government institution that is in charge of administering Bank Deposit Insurance for the benefit and protection of savers.
The financial system, in addition to authorities, also has intermediaries. These are banks, brokerage houses, insurance and investment companies, landlords, factoring companies, and exchange houses.
The Mexican Stock Exchanges
The Mexican Stock Exchange (BMV)
It is the second-largest stock exchange in Latin America with a total market capitalization of more than 530 billion dollars. The group of the Mexican Stock Exchange is made up of companies that together offer comprehensive services to facilitate the operation and post-negotiation of the stock market in Mexico. These companies and sub-exchanges include:
- MexDer: Is the Mexican Derivatives Exchange. It offers instruments that allow planning, hedging and managing financial risks, as well as optimizing the performance of investment portfolios.
- Asigna: It is a management and payment trust. It is the counterparty and guarantor of all financial obligations that derive from the operation of derivative contracts.
- Indeval: Provides the financial system with the services of custody, administration, compensation and settlement of securities.
- Bursatec: It is a subsidiary of Indeval and its goal is to design, implement, integrate and operate a wide variety of automated information and communication systems for the financial sector. It is merged with the Mexican Corporate Stock Market.
- The Mexican Corporate of the Stock Market (CMMV by its acronym in Spanish) is the one who hires, manages and controls the personnel of the Mexican Stock Exchange.
- the Central Securities Counterparty (CCV): It is an entity that complements the clearing and settlement services of purchase and sale operations. It is responsible for the buyer obtaining the securities he acquired and the seller obtaining the corresponding cash.
- Operational Valuation and Market References (VALMER) Is dedicated to providing daily updated prices for the valuation of financial instruments; In addition, it has comprehensive calculation, information, analysis and risk services related to these prices. It is regulated and supervised by the National Banking and Securities Commission.
- InterGloval: It was founded in 2011 and is a company that offers global financial messaging services. InterGloval clients can access more than 9,000 banks around the world to make everything from a simple payment to more complicated operations, such as buying and selling securities and currencies.
The Institutional Stock Exchange (BIVA by its acronym in Spanish)
It started operations as Mexico’s new stock exchange in July 2018. Its foray into the market improves the offer of services, generates new stock indices. With the existence of this new stock exchange, companies have the option of listing their debt or equity securities on one of the two existing stock exchanges, and their stocks are listed on both.
The liquidation of the securities is done through the CCV and the Indeval, mentioned above. The different brokerage houses will choose either of the two stock exchanges depending on the price, volume and probability of execution. All companies that are listed on the Mexican Stock Exchange are automatically listed on BIVA and vice versa. The same emissions cannot be listed on the two exchanges, although different emissions from the same company can be put in each of the exchanges.
Finally, you need to know these three associations that also make up the Mexican financial landscape:
- SIF- ICAP: The Financial Integration Services (SIF in Spanish) company was created to promote equality in the negotiation of debt securities within the market. In 2000 they merged with ICAP, an English company considered to be the largest brokerage in the world in terms of capital and positioning. SIF-ICAP is the only financial brokerage company backed by the Mexican Stock Exchange. Its function is that, through a broker, it finds a person or company interested in investing.
- The Mexican Association of Stock Institutions (AMIB): It is a non-profit institution that focuses on strengthening stock market intermediation and the development of the stock market by certifying the technical capacity of the promoters, operators and advisers of the stock market.
- Association of Banks of Mexico (ABM): It represents the general interests of banks. Initially, it was created with the participation of 32 banks and currently has an association with 50 multiple banking institutions in the country. Among its main services are counselling, the exchange of statistical information between participating institutions to find out trends and meet the requirements of the various authorities; Union services to deal with issues between authorities and top organizations of the private sector, and the development and coordination of training programs on various topics of interest.
Regulate the market
The knowledge of all the components of the Mexican financial system– both the government and those affiliated with the Mexican Stock Exchange– that regulate the market is essential. Each one has its specific purpose and they collaborate with their advice and experience so that there is a balance in the different sectors of the financial market.
Keep reading our series, in which we will later address topics such as the process of listing a company on the Mexican stock exchange, the instruments available to do so and its legal requirements.
Keep learning with Pr1me Capital.
Sources: Banco de México, Bolsa Mexicana de Valores, Condusef, CCV,
Valmer, BBVA, Expansión, sif-icap, AMIB, ABM, gob.mx