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Mexican F-TIIE interest rate futures trade

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Chicago-based CME Group on Wednesday (May 26) announced 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 Monday (May 24) the trades were transacted by BBVA México, Monex Casa de Bolsa and Banorte, and were executed via Altura Markets and CME Direct.

Mexican Overnight TIIE Funding Rate (F-TIIE) futures bring liquidity and enhanced risk management to Mexico’s short-term funding markets, while also supporting the objectives of the Central Bank of Mexico to develop a domestic funding curve on the F-TIIE rate – an IOSCO compliant, risk-free reference rate based on the highly developed and liquid Mexican repo market.

Complementing CME’s leading cleared OTC Mexican TIIE interest rate swaps market, F-TIIE futures will trade alongside CME SOFR futures and MXN/USD FX futures to offer a comprehensive hedging solution for the short-end of the Mexican curve. Spread trading and margin offset opportunities will also be available vs. SOFR, Eurodollar, and Fed Funds futures.

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.Mexican F-TIIE Rate futures are listed with and subject to the rules of CME.

“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.

“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.

“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, 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.

CME is the global leader in MXN TIIE swap clearing. In the fist quarter of this year, average daily volume reached $20.6 billion. 260 participants clearing to date, >40 liquidity providers, Cleared volumes out to 31 years.

CME is also the global leader in Latin American (LatAm) swap clearing. Since launching MXN TIIE and Brazilian CDI swaps, volume and participants have continued to grow in what is now a deeply liquid cleared swap market.