Although in the world’s stock markets close to 65 percent of the volume operated is handled by robots or automated high frequency systems, according to data from Bloomberg, in Mexico that figure is between 15 and 25 percent.
The lack of interest or specialization of the investors, as well as the technology and infrastructure in which the brokerage firms must invest have been the main barrier to this type of operations, which tend to increase liquidity in the markets, said specialists.
At the level of systems, one of the reasons for the high volume in the market is the operation by means of algorithmic systems.
At the transaction level, of the total volume of orders generated in the Mexican market, “15 or 20 percent involve the use of High Frequency Trading (HFT) algorithms”, Luis Carballo, director of technology at CapitalStar System, said in an interview.
“The issue is that, in the Mexican market, there are brokerages whose business model does not go for high frequency transactions, but rather is a more traditional model. They look for larger packages or business blocks”, said Carballo.
According to information from Grupo Bolsa Mexicana de Valores, in 2012, a quarter of the volume was transacted by HFT operations.
Within the strategies that exist in the HFT, some are focused on market formation, arbitrage operations, volume or liquidity detection or price manipulation. Through algorithms, information from multiple markets is analyzed and translated at the optimum moment of negotiation between supply and demand on repeated occasions.
Sergio Sánchez Alarcón, Treasurer of Bank of Tokyo – Mitsubishi UFJ explained that in Mexico and in the world it is the big investment banks and some ‘hedge funds’ that have access to the HFT because of the necessary technology, the investment made and the software and hardware that supercomputers use.
“Although it has been operating for years with algorithms in different markets, few have implemented these types of strategies in Mexico. The HFT performs hundreds of operations in milliseconds and in the country very few assets have the necessary liquidity and depth”, he said in an interview.
Rodrigo Velasco, director of operations of BIVA, the new exchange that will operate the Mexican stock market, said that technology is a modular part in the operation of the markets and that the volume operated could grow by 50 percent in the following three years.