In 2024, financial coverage for investors will be crucial in managing their risks related to retail or institutional sectors such as Afores or investment funds. According to José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer), investors will use exchange rate and interest rate futures or options to cover their risks of shocks in the exchange rate, to pay for inputs, a loan or to protect an investment.
The volatility that will be generated by the elections in Mexico and the United States, as well as the start of the first decreases in the central banks’ reference rates, will lead to extreme volatility in the financial market. This raises the possibility of high fluctuations in assets of retirement workers and retail investors.
Meanwhile, Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group have reached a record average daily volume in 2023. The continued growth of the Mexican economy combined with current interest rate environment is leading more clients to trade currency futures at CME Group. Paul Houston, global head of foreign exchange products at CME Group explained that client participation continues to increase and they are focused on creating and maintaining continued liquidity that will support long-term development of electronic foreign exchange markets in Latin America.
In 2023, Mexican peso contracts reached a record $1.8 billion in average daily volume (ADV) equivalent reference value. Bernardo Gattass, head of volatility trading at Itaú stated that many large global institutional investors would do well to add CME Group to their lists of price providers for Latin American currencies so that they can take advantage of liquidity provided by both global and local market makers. He also gave an example of currency futures operations in Latin America where Brazilian real futures also reached an all-time high of $300 million equivalent benchmark ADV in 2023.