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The Mexican Derivatives Market (Mercado Mexicano de Derivados) known as MexDer was set up to create a standardized market to negotiate and quote futures and options. It was establishd in response to the need for financial tools that can protect against fluctuations mostly in currency prices and interest rates.

The entities involved in the creation of the MexDer were primarily the Mexican Stock Exchange Market (Bolsa Mexicana de Valores), the Mexican Association of Stockbrokers (Asociación Mexicana de Intermediarios Bursátiles) and the Mexican Depositary Institution (S D Indeval, Institución para el Depósito de Valores), with the support of the Mexican financial authorities such as the Ministry of Finance (Secretaría de Hacienda y Crédito Público), the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), and the Mexican Central Bank (Banco de México).

The current rules governing the operation of the MexDer were published on December 1996 (Reglas a las que habrán de sujetarse las Sociedades y Fideicomisos que intervengan en el establecimiento y operación de un Mercado de Futuros y Opciones cotizados en Bolsa). On May 1997, the Mexican National Banking and Securities Commission also published additional rules regarding "prudent measures" applicable to the futures and options markets (Disposiciones de carácter prudencial a las que se sujetan en sus operaciones los participantes en el Mercdo de Futuros y Opciones cotizados en Bolsa).

The trading in the futures and options market of the index of the Mexican Stock Exchange (Indice de Precios y Cotizaciones) was approved in April 1998. Trading of 91-days Mexican treasuries known as Cetes (Certificados de la Tesorería) and the 28-days commercial bankers lending rate known as TIIE was approved in May 1998. Trading of the stocks of Banacci O, Cemex CPO, Femsa UBD, Gcarso A1, GFB O and Telmex L was approved in July 1998, and trading of the US dollar was approved in December 1998.

Although the current market size is very limited, on October 2002 the Mexican authorities issued new rules that allow Mexican institutional investors (Afores and mutual funds) to participate in these markets. It is therefore expected that the size of these markets and the number of transactions may increase significantly over the next five years. In addition, Mexican institutional investors were also authorized to operate in the Chicago Mercantile Exchange and the Chicago Board Options Exchange by using International Swaps and Derivatives Association or International Securities Market Association forms of agreement.

Alberto J Morales

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