Mexican Stock Exchange Opens Trading Link For CME Derivatives

Mexico's stock exchange operator on Monday opened the routing of derivatives orders to the Chicago Mercantile Exchange from Mexico, giving local financial institutions, companies and agricultural producers more direct access to hedging instruments.

The "south-north" connection between the CME Globex and the local derivatives market MexDer is the fruit of a strategic alliance signed last year by stock-market operator Bolsa Mexicana de Valores SAB (BOLSA.MX), or BMV, and CME Group Inc. (CME).

Through the connection, Mexican banks and brokerages will have more direct access to futures contracts for instruments including U.S. interest rates, stock indexes and foreign currencies, as well as commodities such as gold, corn, wheat and crude oil.

"Up to this point in time, just to be clear, you can access the CME markets from here but not as directly, not as conveniently, and so therefore it is more encouraging to have this arrangement in place," CME President Phupinder Gill said at a press conference.

Prior to the link-up, Mexicans could only trade CME derivatives through intermediaries in both Mexico and the U.S., resulting in high transaction costs, MexDer Chief Executive Jorge Alegria said.

Officials said the arrangement is likely to benefit broad sectors of the real economy, including consumers, manufacturers and agricultural producers, by allowing them to hedge against volatility in commodities prices. Bank of Mexico Gov. Agustin Carstens said that could be reflected in less-volatile inflation readings and even in reduced inflationary pressures, something that's "very relevant" amid the current environment of price volatility.

"It gives options to participants in agricultural markets to reduce the uncertainty that they face in their transactions," Carstens said. "Really it's a step of great importance, and I hope all the intermediaries and producers in the country use this new instrument."

The second phase of the strategic alliance between the CME and MexDer--a "north-south" connection--is expected to take effect in August, Alegria said. On that platform, CME participants will have direct access to local derivatives for instruments such as Mexican interest rates and stock indexes.

-By Paul Kiernan, Dow Jones Newswires; (5255)5980-5178; paul.kiernan@dowjones.com

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