Law of best execution is “forced distribution”: BMV

The best-executed law should be called “forced distribution”, since it has not benefited the market, but has reduced it and has harmed the investor, commented the general director of the Mexican Stock Exchange (BMV), José Oriol Bosch.

“We changed the name to forced distribution because we don’t think it’s a better execution,” said the manager.

He considered that better execution should be to benefit the client and that has not happened. “If it hurts the customer, the market shrinks, and if it benefits the customer, the market grows,” he added.

“Ask the brokerage houses if they are executing the client better since this rule is in force,” said the manager.

The average daily amount traded in the Mexican stock market was 19,546 million pesos between January and August of this year.

As of August 20 – when the rule came into force – and until November 30, the average dropped to 18,093 million pesos.

“From August to September the total amount of the market fell, the pay became small because many foreign investors said ‘I don’t like this rule, I don’t feel that my order is being executed properly'”, said Alfredo Guillén, Director of Capital Operations of the BMV.

The duty of best execution refers to the obligation that Brokerage Firms have to obtain the best possible result for their clients, according to market conditions, in the execution of variable income securities orders traded on the stock exchanges that enjoy concession in terms of law. Consequently, its objective is to protect the investor.

Alfredo Guillen said that given the difficulties that the new standard has brought, “the risk is that clients no longer operate on the Mexican Stock Exchange or on Biva and that they go to another, more liquid market.”

In a presentation on the year-end results of the BMV, the executive said that another of the effects that the best execution law has had is a drop in the participation of the BMV in the capital market.

As of August, the participation of the Mexican Stock Market fell to 82.54%, from the 93.88% it had in July, before the regulation came into force.

termometro.economico@eleconomista.mx