Interview With Jorge Alegria, CEO, Bolsa Mexicana de Valores

We interview Jorge Alegria, following his recent appointment to the role of CEO of Bolsa Mexicana de Valores 

What is your vision for the exchange?   

Bolsa Mexicana de Valores is at the heart of the Mexican financial system. We participate in equities, derivatives and fixed income markets, not only in listing and trading but also in the post-trade segments of these markets. While we are a small exchange by many metrics, it doesn’t have to be this way. I have a vision for a very different exchange. 

First, I see the BMV as the best alternative for intermediating savings to help finance investment projects in Mexico. This starts with internal savings from local institutional investors, including pension and mutual funds, but also a growing and healthy retail market. I see the younger generation’s appetite for financial markets by the rapid growth in retail accounts. I believe that investing through Bolsa Mexicana de Valores is, and will continue to be, their best option.  

Secondly, international investors. Mexico is facing a unique opportunity and is highly attractive for international investors. Near-shoring, demographics and a highly trained labour force with growing needs for infrastructure make us a natural target. Mexican companies, specifically the manufacturing, automotive and energy sectors, will be able to take advantage of these economic dynamics. The exchange should also benefit from all this. We should be a lot bigger in terms of listed companies and accordingly in market cap to GDP ratios. I believe we currently have a real possibility of achieving this. 

I also see Bolsa Mexicana de Valores playing a larger role internationally. The size of our economy, the depth of our fixed income and FX markets and Mexico’s high degree of integration with global capital markets should make us a global reference in international financial markets, including derivatives.  

It is an ambitious vision, but it’s one that I have been working on for a very long time. Now, I have a crucial role in making it happen. 

What is your vision for our industry? What do you see as the key themes and trends for our industry over the next two years?   

I think the main focus of exchanges will continue to be price discovery and the allocation of risk and capital.  However, there are many new trends around these. 

AI and Data Analytics solutions are key.  Incorporating new technologies which allow for better, faster data analysis and safer, seamless market integration. Being able to provide investors with more detailed and customised information as well as more cost-effective solutions, are key for the future development of financial markets. 

With new advances in technology comes a huge challenge - cyber security. We need to increase access to markets, have faster platforms and real-time on-demand data and all this with increased security. 

Another important trend is ESG awareness and the incorporation of proper corporate governance principles into markets. I believe this will continue to be an important trend. We have seen a lot of pressure from institutional investors regarding ESG investments. We need to incorporate these into the financial markets, both with products such as green and sustainable bonds as well as helping issuer companies understand their responsibilities and all their ESG metrics. The WFE is actually a great partner in these initiatives as well. 

Last of all, I also see a focus on regulations. The challenge will be managing and controlling systemic risks, while fostering innovation.  Also, regulatory arbitrage between different regions may increase and  hinder  growth of relatively smaller markets. This regulatory disparity can create additional fragmentation and global trends for liquidity concentration among larger markets.  Local regulatory frameworks need to expand at a faster pace to allow local participants to compete efficiently in the international arena and avoid domestic investors migrating to international markets with “better” solutions. 

 

What are BMV’s greatest opportunities and challenges?  

I believe we have many opportunities. Not just the ones I mentioned above in my vision for the exchange. I guess our main challenge is growing our market by attracting more companies and investors. We have a lot of room to grow, but it is a big challenge. Another challenge - and opportunity - is growing alongside the US, while it represents an enormous market and opportunity and source of funds, it is also increasingly attractive to local participants who many times prefer to migrate north. Companies prefer to list in markets with better valuations and investors also move their accounts to larger markets. Mexico is an open economy with free capital flows that makes access to our markets easier, but also for locals to invest abroad. We need to find the way to combine the advantages of being close to big markets, while staying local.

 We are currently working on several specific initiatives: 

 

• Upgrading our different technologies. We had always developed our technology and now, for the first time we are outsourcing some of it. This is a shift in our culture, but it should make us more efficient and further integrate us into international markets. 
• Electronification of Fixed Income Trading and a new central counterparty for Fixed Income Securities.  Increased trading in the cash market should have a significant impact on the associated derivatives market and data generation. 
• New and improved data solutions. This along with technology at international standards will attract the retail segment and international flows. 
• Efficient communication with local and international regulators to provide a levelled playing field. 

 

Last of all, but maybe one of the most important challenges, is increasing financial literacy in Mexico. Literacy is not just for the traditional bases of investments and risk-reward concepts but also for new and riskier asset classes needed to diversify portfolios and attract sophisticated players too. 

What was your journey to this role at the BMV?  

More than 35 years in the industry, my whole life has been in the capital markets world. Fifteen years as a trader in the fixed income, equities and derivatives markets, where I had the privilege of participating in the explosive innovation of the 1990s, from creating new instruments in cash and derivatives markets, to participating deeply in the transformation of market structures when moving from open outcry and voice platforms to fully electronic markets in Mexico. Then I moved to the exchanges and financial infrastructures world, joining the Mexican Derivatives Exchange (MexDer) in 2002, witnessing an explosive growth, but also the migration of liquidity and participants to foreign markets, due to unequal regulatory incentives. My experience also for seven years in a global exchange like CME, offered me a completely new view of opportunities to develop and adapt to now help transform the Mexican markets.  

What do you find most exciting about your new role?  

Work with my colleagues, new and old, inside the exchange and on the trading desks of the banks and brokers in transforming the Mexican exchange into a global player again. It is gratifying to feel the energy from the different market participants in supporting new initiatives to have a better market. It is encouraging to see the financial authorities offering their help and support in order to achieve this goal. We need however to execute the plans with the interaction of many stakeholders, this is not always easy.  

 

What are you reading now? And what podcast are you listening to?  

I love to combine what I read, usually between science, history or biographies with, usually, a Latin-American novelist. But currently I’m reading Carlo Rovelli Reality Is Not What It Seems and enjoying Paul Auster’s The New York Trilogy. 

I’m sort of new in the podcasts as a format, however I’m listening occasionally to a couple of them. One is related to the history of the Football World Cup, and the hidden stories happening in each tournament, and another one is on the recording of Peter Gabriel’s last record, called I/O. A masterpiece in my opinion.