Currency risk and high rates are the main focus of hedging contracts

2024: A Year of Financial Market Volatility in Mexico, and the Rise of Futures Contracts to Protect Investor Risks

The year 2024 is predicted to be a year of extreme volatility in the financial market, according to José Miguel de Dios, general director of the Mexican Derivatives Market (MexDer). With the upcoming presidential elections in Mexico and the United States, as well as interest rate movements, investors will need to protect their risks by using exchange rate and interest rate futures or options. The volatility generated by these events is likely to affect investors’ portfolios.

Meanwhile, there has been a record average daily volume for Mexican peso futures contracts on the Chicago Mercantile Exchange (CME) Group in 2023. Paul Houston, global head of foreign exchange products at CME Group, attributed this growth to increased liquidity and broader client participation. He added that clients are focusing on maintaining continued liquidity to support long-term development in electronic foreign exchange markets in Latin America. The Mexican peso ended 2023 as one of the best-performing currencies in its history, with a gain of 13 percent against the US currency.

Bernardo Gattass, head of volatility trading at Itaú, advised large global institutional investors to consider adding CME Group to their list of price providers for Latin American currencies so they can take advantage of the liquidity offered by both global and local market makers. In 2023, Mexican peso contracts reached a record $1.8 billion in average daily volume (ADV), while Brazilian real futures also reached an all-time high of $300 million in equivalent benchmark ADV.

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