Small town, big hell, says the saying that can well be applied to the Mexican stock market and to the relationship between the Mexican Stock Exchange (BMV) and the Institutional Stock Exchange (BIVA), which is far from being smooth in a small market in which 35 companies account for 85% of the volume traded.
As a sign of this competition and rivalry, we saw for the first time in the country the change of one issuer from one Stock Exchange to another: Fideicomiso Hipotecario (FHipo) said goodbye this year to the BMV and moved its trust certificates with BIVA. Everything indicates that it will not be the only station to migrate.
Javier Perochena, BIVA’s director of relations with issuers, anticipates that there are up to a dozen issuers with one foot outside the BMV to connect to this Exchange, which has been in operation for 3 years. “We have several issuers that are close to announcing the change, both in shares, debt, and structured. I believe that these changes will be made public in the following weeks, ”says Perochena. “This dynamism is here to stay and we will be seeing it more and more.”
But what was it that fueled this interest in migration among the broadcasters? With the end of the monopoly in the Mexican stock market, the operating rules had to be rethought, and one of the last changes that was made was in the Single Issuers Circular.
The modification in this circular proposed that it was the general director of a company who decided to change the list of securities from one Stock Exchange to another, without it being the exclusive decision of a technical committee or a board of directors as was the case before. As easy as switching from one phone company to another; Or maybe a better analogy would be: as easy as switching streaming services.
Finally, this change was published in the Official Gazette of the Federation in November 2019. Although this was not the case of FHipo because it is a fiduciary vehicle and that necessarily requires the approval of a technical committee, the general directors of other Issuers in the equity or debt market may choose to switch from one exchange to another. Hence, BIVA sees greater interest from other issuers listed on the BMV.
“It takes a simple process, little bureaucratic and does not affect the holders of the securities,” says Perochena. In addition, added the BIVA executive, another attraction that issuers see when making a change in the stock market is that they refresh their image in the eyes of investors by being once again in the spotlight and there is greater marketability.
The voices against, from the BMV, criticized the proposal arguing that this change would damage the best good governance practices of the companies.
Jorge Martínez, director of the financial “think tank” of the EGADE Business School of the Tecnológico de Monterrey, empathizes with this concern of leaving the decision in the hands of a single person, and points out that companies have internal mechanisms to respect good governance. “I think the bet is good and the market itself will punish him if he doesn’t make a good decision,” says Martínez.
The truth is that, for the moment, the broadcasters benefit from these modifications and from the competition. An example of this is that maintenance and listing fees have decreased between 40% and 50% since BIVA began operations in 2018, according to calculations by the consulting firm Ernst & Young (EY).
Part of this reduction is due to the fact that BIVA started with rate schemes below what its competitor was offering. Currently, the difference in these rates is marginal and competition is “tighter”, so they focus on offering better service and technology, explains Perochena.
“Having monopolies is never going to be the most convenient thing to do,” says Luis Ortega, lead partner of EY North America’s accounting and financial advisory service. “It is a way of encouraging more operation in the stock market and that in some way there is some equity in the distribution of operations among the Stock Exchanges, which is part of the objective of this regulation.”
