First trades of CME’s Mexican F-TIIE interest rate futures

Dan Barnes

Market operator the CME Group has processed the first trades of the new interest rate futures based on the Central Bank of Mexico’s Overnight TIIE funding rate (F-TIIE). Launched on 24 May 2021, the trades were transacted by BBVA México, Monex Casa de Bolsa and Banorte, and were executed via Altura Markets and CME Direct.

“We are pleased to have received industry support for our first Mexican F-TIIE interest rate futures contract,” said Agha Mirza, global head of rates and OTC products at CME Group. “Our futures contract aligns with the Central Bank of Mexico’s objectives to develop robust risk-free rates (RFR) and establish a domestic funding curve, while complementing our OTC Mexican interest rate swaps clearing business, dollar-peso FX futures contracts and SOFR futures.”

“Mexico fully embraces the global trend for new market-based reference rates, and today an optimal instrument for trading and hedging the overnight reference rate of the Central Bank of Mexico has arrived,” said Alejandro Faesi, head of global markets and institutional sales for Banorte. “Banorte is proud to join CME Group in this effort.”

“The development of an active and liquid derivatives market for Funding TIIE is one of the key elements to allow this rate to become the benchmark for the Mexican market,” said Manuel Meza, head of global markets at BBVA Mexico. “Corporate issuers and bank loans in MXN will soon follow in having F-TIIE as the reference rate.”

“Funding TIIE futures at CME Group, along with other contracts like SOFR and USD/MXN currency futures, are instrumental for transitioning to the new and modern market structure for Mexico and its financial markets participants. This is a game changer,” said Javier Alvarado, CEO, Monex Casa de Bolsa.

The Mexican peso-denominated contract will be cash-settled against the compounded F-TIIE rate over monthly contract periods. F-TIIE is published daily by the Central Bank of Mexico and is based on the highly developed and liquid Mexican repo market. Mexican F-TIIE Rate futures are listed with and subject to the rules of CME.

©Markets Media Europe, 2021