MEXICO Law and Practice Contributed by: Lizette Neme, Andrea López-Malo, Shannon Reilly, Rodolfo Flores and Dunia Salum, Áurea Partners
7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations In Mexico, there are specific regulations governing the creation and use of high-frequency trading (HFT) and algorithmic trading technologies, particularly for firms operating in regulated markets (eg, equities, fixed income, derivatives). Rules are found in the Banking Rules ( Circular Unica de Bancos ) issued by the CNBV, market infrastructure rules (BMV, BIVA and MexDer, each having its own rulebook), Banxico’s regulations, and IOSCO princi - ples. Different asset classes have tailored regulatory requirements, especially in derivatives and FX, due to risk exposure and market structure. • Equities (BMV/BIVA): strong focus on pre-trade risk checks, fair access, and trade reporting. • Fixed income: less algorithmic activity, but subject to price transparency rules and internal compli - ance. • Derivatives (MexDer): heavier risk controls due to leverage: margining, clearing, and position monitor - ing are stricter. • FX (via Banxico): algorithms in FX markets are regulated primarily by Banxico, especially for liquidity providers. Financial institutions functioning as market makers in a principal capacity are required to be authorised by the CNBV and/or Banxico as they must be licensed banks or brokerage firms and sign a market-making agreement with the exchange or relevant authority. They must maintain minimum quoting/bidding obliga - tions and submit monitoring and performance evalu - ations, including reporting and transparency duties. 7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
nels and onboarding processes, while enabling fintech players to develop scalable models that lower inter - mediation costs and broaden access to capital. However, from a regulatory perspective, a main chal - lenge is that the securities framework is highly cen - tralised and offers limited flexibility for platform-based or decentralised models, which makes it difficult for P2P platforms to operate beyond primary investment or exempt offerings. Additional challenges include ensuring effective AML/CFT, KYC compliance, main - taining consumer and investor protection standards, and addressing data protection and cybersecurity risks in digital environments. 6.7 Rules of Payment for Order Flow Payment for order flow is not explicitly permitted nor entirely prohibited in current Mexican regulation, but the practice is generally discouraged and constrained due to conflicts of interest concerns and best execu - tion obligations. 6.8 Market Integrity Principles Trading in Mexico is governed by principles of trans - parency, fair price formation, and investor protection. Issuers and intermediaries must disclose relevant and material information to ensure the market operates on equal information. The Securities Market Law prohib - its the distribution of false or misleading information and penalises market manipulation. Insider trading and the misuse of material non-public information are prohibited, and directors, officers, and intermediar - ies must have confidentiality and conflict-of-interest controls in place. In addition, exchanges and market operators must implement systems and procedures to ensure equal access as well as transparent, orderly, and integrity-based price formation and trading pro - cesses, subject to supervision and enforcement by the CNBV. Please see 6.4 Listing Standards .
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