Mexico's Upstart Stock Exchange Is Betting on Private Equity Exits

(Bloomberg) -- Mexico’s upstart stock exchange needs private equity to go public.

The Bolsa Institucional de Valores, the bourse known as Biva that began operations in July, is trying to gain market share from the dominant Bolsa Mexicana de Valores by focusing on private equity managers ready to exit their investments and sell shares. The industry has grown 15 percent annually over the past decade, according to a report by El Financiero.

“The story of private equity is very recent in Mexico,” Biva Chief Executive Officer Maria Ariza said in an interview at Bloomberg’s offices in Mexico City. “Companies are starting to mature, they’re starting to leave, and they’re starting to look for an opportunity to exit their investments. Ideally, one of the ways to do that is through the capital markets.”

Companies controlled by private-equity firms tend to already have institutional funding and understand the transparency requirements they’ll have to meet, according to Ariza. She says the exchange is also trying to make it easier for smaller, family-owned companies to list themselves. Mexico’s public equity markets are dominated by large, often international firms.

The new exchange, which went live on July 25, has struggled to make headway against the BMV. Its share of trading volume in Mexico has ranged anywhere from 0.3 percent to 15 percent over the past month.

To lure companies to list on the exchange, Ariza said the smaller bourse can offer more individual service, lower costs and technology that it licenses from New York’s Nasdaq.

To attract traders, Biva plans to create a new platform that will make shorting stocks easier, though Ariza declined to provide a time frame. She said the exchange is also working with high-frequency and hedge funds in an attempt to attract their business.

Ariza is a former private-equity executive, having led an industry association in Mexico for five years before joining the stock exchange in April. Earlier this month, she scored a win by persuading Mexican lender Credito Real to switch a 700 million peso ($37 million) bond offering from the Bolsa Mexicana to Biva. Private equity manager LIV Capital also handed Biva a small win, with plans to move a recently issued development equity certificate fund -- known as a CKD -- to Biva from the Bolsa Mexicana effective Sept. 21.

Analysts at Banco Santander’s Mexican unit have said that Biva could eventually capture as much as 28 percent of the larger bourse’s revenue. Jose-Oriol Bosch, the CEO of the 120-year-old exchange, told Mexican news agency Notimex this month that his exchange would revise its prices and fees in response to the competition.

But to capture more market share, Biva needs more companies to list, and so far, the pipeline is uncertain. Ariza says that some initial public offerings can be expected over the coming months, but declined to offer specifics. The company seeks to increase the total trading volume in Mexico by as much as 30 percent over the next five years.

“The idea behind Biva is to deepen the market,” Ariza said. “Both in the number of companies that are participating today, as well as the number of individual investors that can participate.”

--With assistance from Eugenio Lobo.

To contact the reporter on this story: Justin Villamil in Mexico City at jvillamil18@bloomberg.net

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh

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