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President Enrique Peña Nieto of Mexico has formally awarded an operating concession to a new stock market that aims to be up and running early next year and which would boost the number of companies listed in Latin America’s second-biggest economy by nearly 40 per cent in three years.
“There has been talk for decades about a new stock market,” said Mr Peña Nieto after handing the official concession to Santiago Urquiza, president of Central de Corretajes (Cencor), which is launching the venture, dubbed BIVA in Spanish. “I am sure this new stock market will be very instrumental in fostering savings and generating new investments and jobs.”
With just 144 listed companies — 41 per cent of the number in Latin America’s biggest economy, Brazil, and 48 per cent that of Chile, the region’s most established market economy — “we have wide potential” to boost stock market penetration, said José Antonio Meade, the finance minister. The 123-year-old Bolsa Mexicana de Valores, or BMV, is the second biggest in Latin America but stock market capitalisation last year represented only 37 per cent of gross domestic product, he added.
Mr Urquiza expects BIVA, which applied for an operating concession in 2015, to be in business early next year. It will kick off with all currently listed companies quoted on both BIVA and BMV, but issuers thereafter will be able to choose between them. Mr Urquiza hopes to grab 50 per cent of volume and issuers via an aggressive blend of Nasdaq technology and a streamlined listing process.
The US exchange operator will supply what is on course to become Latin America’s newest exchange with its X-stream trading platform, the most widely used such technology in the world, as well as Nasdaq’s Smarts surveillance system. That would ensure very high operating speeds and low lag times, Mr Urquiza said.
BIVA will seek to lure companies with sales of 500m-800m pesos ($28m-$45m), a pool of smaller groups that is currently an under-represented segment on the BMV. “We hope to get that up, and in three years for there to be 200 companies listed on the capital market and 300 debt issuers, an increase of some 30 per cent,” Mr Urquiza told the Financial Times in an interview.
He said BIVA was already in touch with potential issuers, which he did not name, and he expected those talks to advance now that the concession had been formalised. “Let’s hope we have [an initial public offering] very soon after launch,” he said.
BIVA will seek to distinguish itself not only by targeting slightly smaller companies but also by making the listing process easier. Once companies have listed, BIVA aims to provide them with more “hard data” and added value for companies’ financial analysis.
Among other differences with the BMV is the fact that BIVA will hold an auction to determine the closing price, rather than an average of the final minutes of trade, a method Mr Urquiza said gave “more robust” pricing.
The process of connecting brokerages to the new exchange will now begin. The beauty of having more than one market in Mexico is that if one crashes, the other continues operating. “We’re already feeling the dynamism of new competition,” Mr Urquiza said.
BIVA says financial reforms undertaken by Mr Peña Nieto’s government paved the way for a second market to become a reality. “This is very important. It detonates economic growth because more companies can finance themselves, leading to more investment and more development,” Mr Urquiza said.
Besides giving the green light to BIVA, the government was taking other steps to modernise capital markets by updating regulations, giving a role to state development banks to target companies that could seek listings and promoting long-term investment projects for pension funds, Mr Meade said, without giving details.
The BMV recognises that a rival will be a “wake-up call”. Three listings this year, including those by José Cuervo, the world’s biggest tequila maker, and Vista, a new oil and gas venture, have raised more than $2bn.