Bolsa Mexicana de Valores SAB de CV

BMV:BOLSAA

Earnings Call Transcript 2021-Q3

[Operator]

Greetings, and welcome to BMV's third quarter earnings conference call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Chief Financial Officer, Ramón Güémez. Thank you. You may begin.

[Ramón Sarre, executive]

Thank you. Good morning, and welcome to Bolsa Mexicana de Valores Third Quarter 2021 Earnings Conference Call. Before proceeding, I'd like to provide a brief safe harbor statement. This presentation contains forward-looking statements and information related to Bolsa that are based on the analysis and expectations of its management as well as assumptions made and information currently available at Bolsa. Such statements reflect the current views of Bolsa related to future events and are subject to risks, uncertainties and assumptions. Many factors could cause the current results, performance or achievements of Bolsa to be somewhat different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic, political, governmental and business conditions, both in a global scale and in the individual countries in which Bolsa does business, such as changes in monetary policies, in inflation rates, in prices, in business strategy and various other factors.

Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary considerably from those described herein as anticipated, believed, estimated, expected or targeted. Bolsa does not intend and does not assume any obligation to update this forward-looking statement. I would like to remind participants that today's call is being recorded and a replay of this call will be available online on October 22 at the Bolsa's corporate website, www.bmv.com.mx.

During this call, all figures are in Mexican pesos and compared to the third quarter of 2020, unless stated otherwise. This call is intended for the financial community only, and the floor will be open at the end to address any questions you may have.

Joining us for today's call are José-Oriol Bosch, our CEO; Roberto González, SVP Post Trade; Claudio Vivian, SVP Technology; Gabriel Rodríguez, SIF ICAP, CEO; Alfredo Guillén, Equity Markets COO; Jose Miguel de Dios, MexDer CEO; Luis Rene Ramon, Director of Investor Relations; and myself, Ramón Güémez.

I would now like to pass the call to our CEO, Oriol Bosch.

[José-Oriol Par, executive]

Thank you, Ramón, and good morning, everyone. Thank you for joining us for the third quarter 2021 earnings conference call. In terms of today's format, I will go first over the results of each business line and then open the line for Q&A, if you want to ask a question, you need to dial in, in the number that was provided in the press release yesterday. All in all, our diversified business model once again supported the financial performance this quarter as we continued to execute on our technological transformation strategy and focus on achieving our internal targets to deliver a stronger shareholder value over the next years.

If you can please go to Slide #3 to talk about the key financial highlights for the third quarter. As you can see, the revenue was MXN 926 million, down 4% compared to the third quarter of 2020, explained by the lower listings in 2020 that generated fewer maintenance fees in 2021. The reduction of listing and maintenance fees in capital formation and lower demand for global market services in Indeval because of the lower volatility in the peso-dollar exchange rate. On the other hand, the results showed a higher value traded in equity trading and derivatives as well as greater value of assets under custody.

Expenses were MXN 445 million, up only 1% and well under control. The difference is the result of BMV's transformation towards a hybrid infrastructure acquisition of new software and extension of hardware lease contract. We have been able to achieve this result by maintaining a cost discipline strategy. EBITDA was registered at MXN 541 million with an EBITDA margin of 58% and net income reached MXN 368 million, up 6% due to higher financial income and lower tax rate.

On the next slide, on Slide #4, the key financial results for the first 9 months of 2021, the revenue up to September 2021 was MXN 2.9 billion, down 3% compared to the first 9 months of 2020 due to the atypical volatility in financial markets during 2020. The reduction of the fee schedule in capital formation and a weaker dollar in 2021, which has a negative impact in information services and central securities depository. Despite the challenging conditions, our diversified business portfolio is delivering a resilient financial performance.

Expenses were MXN 1.3 billion, up 2%, maintaining cost discipline as BMV transformed toward hybrid infrastructure and seamless technological platform. EBITDA was recorded at MXN 1.7 billion with an EBITDA margin of 59%. Net income reached MXN 1.1 billion, down 6%. The dollars in BMV's treasuries in the first quarter of 2020 and the depreciation of the peso against the dollar generated a typical financial income last year.

On Slide #5, about the revenue by business line for the first 9 months of 2021. As mentioned before, BMV has a well-diversified business model with transactional business lines, equity, derivatives and OTC weighting 36% of the revenue; central securities depository, 32%; information services, 16%; capital formation, 13%; and others, which consist of colocation, infrastructure and BMV School 3%. As for the difference in revenue year-over-year, we are down 3%, but we are confident that in the short term, we will return to stronger results as we continue to deliver value to our clients and shareholders.

On the next slide, regarding the operational expenses for the first 9 months of 2021. The operating expenses were up only 1.8% in the first 9 months of 2021 compared to same month of 2020. Personnel expenses decreased by MXN 16 million due to the corporate restructuring to optimize processes in the second quarter of this year as well as the net result of lower variable compensation because of lower revenue in SIF ICAP and a nonrecurrent expense in the restructuring of that business line during the third quarter.

Technology increased MXN 22 million, up MXN 12 million explained by the extension of hardware leases to maximize the useful life of the equipment and switch to a hybrid infrastructure, hybrid meaning on-site and cloud, and MXN 10 million in software licenses. The future of market infrastructure is all about technology, and we will continue investing in it and analyzing disruptive innovations to implement products and services in Mexico.

Depreciation was up MXN 21 million, explained by the acquisition and renewal of the technological hardware for the disaster recovery plan, or DRP, the central equity and derivative platform, Monet, and communication infrastructure as well as the amortization of finished projects.

Rent and maintenance was down MXN 5 million because of lower maintenance and electricity consumption at BMV's building. Consulting fees were down MXN 5 million because of fewer legal and financial consulting services. Sub-custody was down MXN 1 million because of the net effect between more assets under custody [ abroad ] and better commercial terms and a stronger peso in 2021. In other, increased MXN 7 million, up MXN 10 million for the option to purchase the remaining shares of SIF ICAP Chile, partially offset by fewer provisions for promotional activities and events.

On Slide 7, equity trading and clearing. Cash equities trading revenue was 8% higher than the third quarter of 2020 due to higher traded volume. The average daily traded value, the ADTV, for the third quarter of 2021 was MXN 15.4 billion. That was an improvement of 8%. Local market increased 11%, represented 52% of total ADTV, and BMV had a 97% market share.

Global market increased 5%, amounted to 48% of total ADTV and BMV had an 89% market share. Investors in Mexico have the option of investing in almost 3,000 foreign securities that are already listed on the SIC. BMV's expertise and continuous high levels of service [ is showed ] by improving the total market share to 93% in the third quarter of 2021.

As for CCV, clearing revenues decreased MXN 10 million because of extraordinary revenues last year and a change in the criteria for cross trades.

In the next slide, in Slide #8, the operational highlights. In the third quarter of 2021, the average daily trading value was MXN 15.4 billion. And of September, the average daily trading value was MXN 17.3 billion, up 7% compared to the first 9 months of 2020. We're actively working together with final institutions and regulators to incentivize financial inclusion and increase retail participation in financial markets. Historically, financial awareness in Mexico has been low, but the landscape is changing.

As mentioned in the previous call, according to the National Banking and Securities Commission, there were less than 300,000 brokerage accounts in Mexico in 2019. And since then, that number has increased to almost 2 million accounts. It is a gradual process, but we are committed in working together with financial institutions, issuers and regulators through strategic alliances. This year, we ring the bell for financial literacy together with other [indiscernible] changes worldwide and once again participated in the National Financial Education Week with several digital conferences, podcasts and publications.

On Slide #9, regarding derivatives and trading clearing. The revenue in MexDer and Asigna was down MXN 4 million or 9%. Regarding trading, U.S. dollar futures increased 5% while TIIE Swaps and IPC Index futures were down 13% and 33%, respectively, and the futures of overnight TIIE funding rate started trading. Furthermore, MexDer continues working to launch options and futures of global technological companies such as Tesla, Netflix, Apple and Facebook, given the success of the global market platform of SIC. The average margin deposits were MXN 30 billion in the third quarter, down 29% because of lower market volatility in the dollar futures. The average margin deposits up to September were MXN 34.4 billion.

On Slide 10, on the OTC trading, SIF ICAP revenue was up MXN 13 million or 9% compared to the third quarter of 2020. SIF ICAP Mexico registered a similar figure to that of last year and SIF ICAP Chile increased MXN 14 million due to higher traded volume of interest rate swaps. Chile represents 65% and Mexico 35% of the total revenues in the OTC trading business line.

Regarding capital formation on Slide 11, listing revenue reached MXN 16 million, down MXN 1 million or 7% compared to the third quarter of 2020, which is explained by the new fee schedule released in January 2021. The highlights for the period include the placement of Fibra E, Mexico Infrastructure Partners for MXN 22.1 billion. The listing of Fortaleza Materiales as a result of the spinoff of Elementia and Oaktree placed its first CERPI for MXN 260 million.

Regarding the debt market, 305 short-term debt issues were placed for an amount of MXN 47 billion, 19% higher versus the third quarter of 2020, and 32 long-term issues for an amount of MXN 33 billion that was 16% higher versus the third quarter of 2020. We continue witnessing a gradual recovery to pre-pandemic levels. Furthermore, I'm glad to communicate that we had the issuance of the first Sustainable Linked Bond from Coca-Cola FEMSA for MXN 9.4 billion in the third quarter and last week, Volaris also issued a Sustainable Linked Bond for MXN 1.5 billion. Starting June 2021, companies in Mexico can issue this type of bonds as a financing alternative while contributing to achieve their ESG objectives and, as initially defined, sustainable KPIs over a period of time.

BMV, being a central point of contact for issuers, investors and market intermediaries, is a vital institution that serves as an engine in the Mexican economy's transition towards sustainable development.

In fact, in 2021, 35% of total debt listings are ESG related versus 3%, 4 years ago. Maintenance fees were down MXN 20 million, MXN 10 million due to the new fee schedule that we announced in January 2021 and MXN 10 million because of early debt amortization, which no longer generate maintenance fees and lower listings in 2020.

In the next slide, on the central securities depository, Indeval's revenue was down MXN 18 million compared to the third quarter of 2020, explained by lower demand for services related to the global market, mainly cross-border transactions because of lower volatility in the exchange rate peso-dollar. On a positive note, the value of the assets under custody increased 12% and 25% in the local and global market, respectively. Furthermore, we are analyzing different options to support and work together with Afores, even The Pension Reform. It is estimated that by 2030, Afores will double their assets under management from MXN 5 trillion to over MXN 10 trillion.

BMV could benefit from a rise in investment in Mexican equities, debt and [ securities ], to name a few.

Regarding information services on Slide 13. Information services reported revenues of MXN 155 million in the third quarter of 2021, which is in line with last year's results. Market data revenue was down 5% because of a stronger peso against the dollar and fewer assets under management in ETFs linked to indices and benchmarks. Valmer revenue increased 9% due to new valuation products for target-dated funds in Afores and licenses of portfolio management and so forth. In LED, we continue doing trials with major global vendors and potential clients.

On Slide #14, BMV is delivering resilient results despite challenging environment and is well positioned across the financial markets value chain. Our diversified business model contributed to a resilient organic revenue in equity, derivatives and OTC trading. Expenses were well under control as we continue to invest in resilience, efficiency, technology and new services. The technological transformation is at the center of BMV's strategy for 2025. Further technological integration of BMV's IT platform together with a hybrid infrastructure, on-site and cloud, will deliver increased value for our clients.

Regarding the growth projects that we have been pursuing, such as direct custody and clearing services for bonds, we continue working together with regulators to receive approval to offer these new services. As you may know, direct custody will enable access to the local market infrastructure, providing [ value ] services to foreign financial institutions from corporate actions to tax services.

Lastly, on March 1, BMV activated a share buyback program, considering the company's cash position and outlook. BMV's buyback fund currently has MXN 786 million after we bought back 3.3 million shares worth MXN 143 million, roughly 24,000 shares added every day.

And in the last slide, as a summary, the resilient financial results for the first 9 months of 2021, especially in equity and derivatives trading, higher average value of assets under custody in the central securities depository and new products in the price vendor. We are confident that in the short term, we will return to a stronger results as we continue to deliver value to our clients and shareholders, and in the medium term, continue working in BMV's technological transformation towards 2025, continued execution of our strategy, focus on technological transformation and capabilities to seize multiple growth opportunities and drive top line growth in all core businesses through constant improvement, operational excellence and project execution.

With that, I thank you for your time. And together with my colleagues, we will gladly answer any questions you might have. Thank you very much.

[Operator]

[Operator Instructions] Our first question has come from the line of Ernesto Gabilondo with Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

I have 3 questions from my side. The first one is on earnings and revenues. We saw that earnings inflected year-over-year and that posted strongest growth in the last 4 quarters. However, we continue to see limited revenue generation. So considering better economic activity and that we have passed the midterm elections, do you expect revenues to recover in the next quarters? And which do you think would be the revenue lines leading that recovery?

And then my second question is on the potential listings of new fintechs. We have been hearing that new fintechs are [ willing ] to list in the U.S. and not in Mexico, and I think that is because of the low multiples in the Mexican market and the recent listing of some companies. So I wanted to know if you are doing a strategy or something on your side to promote companies to list in the Mexican market.

And then my last question is on your EBITDA margin. We know it is contracted to 58%. However, when do you see it returning to the 60%?

[José-Oriol Par, executive]

Thank you very much, Ernesto, for your questions. Okay. On the first one, the drivers, as you mentioned in the question, I would say that one of them is recovery of the Mexican economy that we are seeing. But -- and we'll see if we have more or less volatility. This is hard to foresee. But regarding the different products we have, I would say that the trend that we have seen in the past quarter, maybe 2 quarters in the -- in government -- in debt -- in private debt, we have seen a very good recovery in both short-term and long-term bonds. And this is related to the economic recovery that we are talking about. So we are seeing more companies that need financing to go ahead with their plans to take advantage of opportunities, expansion, new clients, et cetera. So they are coming to the market, and they have been pretty active issuing debt. So in that, we are seeing, in these past 2 quarters, a recovery, a positive trend and better numbers that we did see last year in the second and third quarter.

We are also seeing new issuers coming to the market, not just new names, but at the beginning of the year, the most active features were, I don't know, development bank, quasi government. But now we have started to see in the past quarter other sectors like industrials coming back to the market and issuing debt. We are also seeing a recovery in FIBRAS. We have, but not on the public side yet, but we are working with some FIBRAS and MOVIL [indiscernible], the Mexican REIT as well as FIBRAS E that we have in the pipeline, and we hope that this is going to happen anytime soon.

And the other product that we are seeing a lot of interest and very good activity, as mentioned in the presentation, is the sustainable bonds. The sustainable bonds, as mentioned, this year are 35%, more than 1/3 of the total issuance that we have got. Four years ago, this number was 2%. We developed or tropicalized some of like green bonds, sustainable bonds, social bonds a couple of years ago. We have started with that. And as also already mentioned, we have started with a Sustainable Linked Bond a couple of weeks ago at the end of September being Coca-Cola FEMSA, the first issuer.

Right after that, we also had at the beginning of this month, Volaris. And we have a couple of companies that are looking to issue this Sustainable Linked Bonds. So it looks like in this -- in the short life that they have already had, it has been a pretty successful product. And I think that it's good to see that companies are willing to issue this bond with commitment and penalty if they do not reach the KPIs that are announced. And on the other side, we have a lot of interest from investors demanding this kind of product. So -- and what we are still missing, and I'm going to go to the second question.

I did not mention potential IPOs of new companies that we have in the pipeline at the moment, but we are working and we are doing all it is in our hands to attract the new fintechs. As we all know, there are a couple of very successful fintechs in Mexico, some Mexican unicorns. And we would like to see them here at Bolsa. Obviously, the final decision is in the hands of the companies. But I think that there is a lot of interest from the different participants in the local market from the broker dealers, even from the regulator, financial authorities from -- obviously, from Bolsa to have these names in our market.

So what we have to do is to be the best choice for our clients, to have a deeper market thing that this is something that is growing in Mexico, the retail base that is in other markets that is not in Mexico. But again, I think that the trend and the number of new investors, new accounts at the broker's dealers -- the broker dealers taking advantage of the technology to attract new clients, the new young clients to take advantage of the demography of Mexico.

So I think that this is also something that we're all very interested in working on. I think that if they come to the Mexican exchange market, there will be an advantage, a recognition, a much better treatment locally. It would not be one more unicorn of the list -- on the list as it could be the case in other markets. So we're working on that. And if the recent IPO of the fintechs, I would like to see them here.

And regarding the valuation, the low valuation that you mentioned, yes, it is true. But we have seen a recovery, a significant recovery from the lows that the Mexican Bolsa Index, the IPC reached at the end of March 2020. From those lows to today, the recovery has been like 60%. The Mexican IPC Index reached this year, I think that was at the end of August, a new historical record high, and it is currently trading very close to these historical record highs. So the valuations have been recovering.

And the other thing is if we have one of those fintechs technology companies listing in Mexico, I think that it would be a different valuation maybe than other sectors. It is something that we do not have listed in the Mexican exchange, and I think that will be very well welcome for the potential investors that we have in Mexico, again, talking about institutional investors, individual investors, et cetera. So we'll see and short answer, we are working on that. And hopefully, if they do something, we'll be here in Mexico.

And regarding the last question, I will pass that to Ramón Güémez.

[Ramón Sarre, executive]

Ernesto, you asked when do we see the EBITDA margin recovering or going back to 59% or 60%. I would say that, that depends on the first 2 questions on the recovery of revenues, especially on the listing and maintenance revenues. I think that's where we've suffered the most. But the margin -- this margin will recover along with revenues, I think.

[Operator]

Our next questions come from the line of Jorge Henderson with Santander.

[Jorge Henderson Cubillas, analyst]

I have 2 questions. First, my question would be, if you could provide us with more detail into the lower global demand for Indeval services revenue that you mentioned in the presentation. I mean I understand this is related to the cross-border transactions, and it was due to a lower exchange rate, market volatility in the third quarter. But could you give a little bit more detail on this?

And my second question would be on maintenance. As you said, you had some debt amortizations and lower listings in the last year, a couple of last years. So my question would be the next -- what is your base case for this line for the following quarters, more in the medium term because the drive has been -- since 2018, this has been decreasing. So I don't know what are your base case expectations.

[Roberto González Barrera, executive]

Look, regarding the Indeval and the SIC, what we saw in the last quarter is less activity in the global market. And there's a very strong linkage or correlation between the volatility of the peso-dollar and the activity -- arbitrage activity that we see sometimes in the global market. So this last quarter was especially slow or low regarding volumes.

In this month, we started seeing, again, the normal traditional volumes. So we believe that it was more related to this -- the summer and part of the -- there was a lot of people also in vacations, much lower volatility on the FX side, and we see that as something that was temporary. And again, during October, we are seeing normal or back to normal numbers regarding the -- particularly the global market for Indeval. So that's basically the short answer. And as Oriol mentioned, the correlation between the peso-dollar and activity of the arbitrage is very, very strong.

[Ramón Sarre, executive]

Jorge, thank you. And regarding your second question, what do we expect for maintenance fees for the future, I think we should expect them to see close to this, to where we are now. As you know, maintenance fees are built at the beginning of the year and amortized throughout the year. So as we -- usually -- if we have seen a lot of listings this year, you would expect an increase for next year. But since listings have been slow or, let me say, at the level of listings that we are having, what we see is that we will have a constant stream of maintenance fees.

[Operator]

Our next question comes from the line of Alonso Garcia with Crédit Suisse.

[Ricardo Garcia, analyst]

My first question is on the derivatives side, on derivatives trading. I wanted to ask when did the TIIE funding rate futures started trading? I mean was the contribution observed in the third quarter corresponding to 3 months or only a portion of the quarter? And on that same topic, I wanted to ask if there are more new products in the pipeline that you would expect to launch in the short term, which could give additional boost to trading revenues from derivatives.

And my second question is regarding -- I mean basically at the end of last month, the CNBV introduced a new regulation proposal applicable to brokerage house in Mexico, which relates mainly to the criteria for best execution. It seems more -- a more moderate approach by authorities compared to the proposal back in February, which basically granted a 30% market share on passive trades to one of the stock exchanges. But if you could please provide your thoughts on the new proposal and, if possible, provide a potential financial impact for Bolsa, that would be great. Thank you.

[Unknown Executive]

Alonso, thank you for your question. In the derivatives market, well, we listed in February the overnight TIIE [ funding rate ] futures, but we didn't see any volume until August and September. So in August and September, we saw some activity. Not every day, but some specific days, we had high volumes. And I think we -- the volume was related to the increment in the [ objective ] interest rate for the Central Bank. And now we don't have a lot of volume, but we expect that with the bond [ SD ], we can have more volume in the future.

And related to the new products that we have in the pipeline, we have been working to have a cross-currency swap, LIBOR versus TIIE. We have been talking with the authorities and with the market to have the product that the market needs. This is not a very easy contract. So we have been working a lot with all the counterparties to have a specific product.

And other products that we have in the pipeline are the -- as Oriol mentioned, we have been working to lease the SIC equity features and options. The first 4 that we won are Tesla, Apple, Facebook, Netflix. And we are in the process to have authorization from the authorities. We already sent them the request for the authorization. And the other one, we have forward-starting swaps in the pipeline. We are waiting for an authorization, too.

[José-Oriol Par, executive]

Thank you, Alonso. And regarding the best execution, well, this is something that we have been working for a long, long time. As you may recall, the first initiative coming from the regulator was talking about 70%-30% market distribution by mandate. And this was just a proposal. The regulator, I think that they were pretty open. They were hearing the market participants. They made some changes in -- some changes and maybe they finally come out with a different initiative that is in the process of final approval in the -- with the local authorities in CONAMER and that should be approved in the next stage. I would say that the good news first is that this is over.

I think that we always spend a lot of time in this initiative. And I hope that now we can focus on developing and growing our exchange market instead of how we share the existing and the current market. I think that was a much more reasonable regulation in terms of competition, which we like. We like the competition. And I think that there have been benefits in this local competition that we have had in the past already 3.5 years, I think. But as we mentioned since the first day that the local competitor was announced, we like the competition in a level playing field. So we hope that this continue, and we are very confident that in a level playing field scenario, we are and we will continue being the best choice for our clients as it has been the case until today. So honestly, I do not foresee a high impact because of this regulation.

[Operator]

Our next questions come from the line of Carlos Gomez with HSBC.

[Carlos Gomez-Lopez, analyst]

Two brief ones. The first one refers to the global market, and it's impressive how it is now bigger than the local listed shares. Can you remind us the difference of the economics for you in terms of trading local securities and international securities in terms of Indeval revenues and other sources? And second, can you give us an update about your data business initiative, the company that you set up in Florida?

[Ramón Sarre, executive]

Carlos, the economics for the trading of -- in the global market are exactly the same as the economics for trading in the local market. We could have some -- sometimes the global market generates more additional services in -- at Indeval. And there we could see a difference as we have in past quarters, but the trading economics are exactly the same.

[Carlos Gomez-Lopez, analyst]

Do you say for Indeval, it's actually better to have the foreign securities than the local securities?

[Ramón Sarre, executive]

For Indeval, sometimes I'll -- let Roberto elaborate here.

[Roberto González Barrera, executive]

Certainly, for Indeval, it's much better when there is activity between the markets. When there is registration or what used to be called conversion between the markets, there's -- there are additional fees and certainly transactions in the U.S. market and such. So that's where -- that's why when we see a lot of activity on the global market, it does impact Indeval revenues that are associated with those transactions done at the foreign exchanges and then what the other bring or they move out securities from Mexico to the other markets. So yes, for Indeval, particularly the impact on the foreign security is much larger than the local ones because on the local ones, we provide much less services as everything is done locally.

[Unknown Executive]

Regarding your second question, Carlos, about LED, yes, it was unfortunate with COVID in all the trial periods, it got delayed versus our time line. What we have seen is some pickup now that companies are no longer focusing on business continuity, they are focusing on how to achieve greater efficiency and connect to our product. So we continue working with them. We have seen some pickup of clients doing trials as we are working to have a larger global distribution. So on one side, we have the point of presence in New York, we have LED, the LatAm Exchanges Data in Miami, and we also have this alliance with Deutsche Börse to distribute data in Europe. So we continue focusing on expanding our global footprint and to distribute our data directly to customers. We are very close to having some deals by the end of the year. And we expect that by 2022, under normal conditions, we'll be -- we'll see some pickup in that business line.

[Operator]

[Operator Instructions] Our next question comes from the line of [ Edson Murguia ] with [ Suma Capital ].

[Unknown Analyst]

I have a couple of them. The first one is, maybe as a follow-up on equities, specifically, because I think there is a dislocation in the market because we can see that the number of accounts has been increasing since couple of years ago. But then we hear from other institutional, prime brokers that are closing their business in Mexico. Even we have been [ dislisting ] companies. So the question is, it's something regarding with the lack of liquidity or it's something that maybe the market participants, we need to do more or even the regulators in Mexico?

The second one is regarding the cash and investment that you have. And looking forward, I'm not saying for the rest of the year, but maybe for the next couple of quarters in 2022, are you planning to maintain the same level or maybe in the future, you're going to reduce the cash and investment in the balance sheet?

[José-Oriol Par, executive]

On the first one, I think that we're talking about different market needs. I think that is different, maybe some financial institutions that are focused on IV, wealth management and on the other side, the retail, I think that -- and I cannot talk about -- I do not have the information to talk about some particular situation. But on the retail side, I think that what we are all sure about it is that we do have the local potential. If we compare the number of accounts, the number of retail participants with other markets, not just the U.S., even with -- talking about the region, even with Brazil, clearly, we do have a lot of -- a big potential in the -- in our local market, with individuals, with young people.

So I think on this one, the potential is there. I think that also technology is helping. In the past, to open an account with Casas de Bolsa with a broker-dealer in Mexico, even the requirements, the economic requirements were pretty high. Now we are seeing a couple of Casas de Bolsa doing a good job. They have been lowering all the requirements. The minimum investment is pretty low. And I would say that they are pretty focused in young people. However, this is going to take some time. I think that this kind of accounts is mid-, long-term investment.

And -- but I think that is a good start. And we are complementing that we as Bolsa, with financial education, as mentioned in the presentation, we continue working with Bolsa School with our social network, with podcast, with [indiscernible], with everything, trying to be much closer to the potential clients that we have for our sector in Mexico and to take advantage of that. But -- but yes, I think that in all countries, we can see companies coming in and coming out with different views and focused in different markets and different opportunities and with different results on that.

[ Edson ], could you please repeat your second question?

[Unknown Analyst]

Yes. My second question is regarding cash and investments on the balance sheet. And the question is, would -- at what level would you be comfortable enough? Are you planning to maintain the MXN 3.4 billion that you have in this quarter for 2022? Or maybe are you planning to reduce cash and investments?

[Ramón Sarre, executive]

First, remember that we have a seasonality in the cash generation -- how we generate cash. We usually generate most of our cash in Q1 because of the maintenance fees we collect in advance. We see a large cash reduction in Q2 when we pay the dividend, and the cash is more or less stable and slight growth in Q3 and Q4. We're comfortable with the level we are. This year, instead of increasing the dividend, we decided to activate the buyback fund as another way to distribute cash to our shareholders. We're also always -- we understand we have a high level of [ luxury ], a very healthy balance sheet, both in terms of cash and no debt. So we like to keep it that way so that we could take advantage of any opportunity that we could see. So I would say we are comfortable with the level of cash we have. We plan to continue with the dividend or the combination of dividend and share buyback. And we're also open to any opportunity that we see to take advantage of our balance sheet.

[Unknown Analyst]

Okay. And last but not least, regarding hybrid mode working model that you have been doing since 2020, it's going to continue in the future? Or are you going to be fully back at the headquarters in coming months?

[Ramón Sarre, executive]

That's something we're analyzing. We're currently still on a hybrid model. The current plan is to bring most, if not all our employees back, but we're also working to see how we would implement a hybrid model. I don't know if Oriol wants to...

[José-Oriol Par, executive]

No, it's something that working on that. What we did in March last year, we implemented a contingency plan more than a home office. It was a contingency plan because the safety of our employees was our priority. So by this time, we sent most of our employees home to work from home without what it is required to -- for our come office folks without software, without some how to measure the results and the people. And this is something that if now we do that, we are going to do it having the best results and, I would say, looking for the best for the company and for the people.

So we are in this process. We are now having most of the people coming back. I think that they day-to-day have been working very well. I think that there was a huge commitment of all our employees doing a great job during this 1.5 years. However, there are some things that had the impact. I think it is not the same working from home or working from the premises in terms of networking, learning for the young people, and we do have a lot of young people here working at Bolsa. The learning process is not the same.

So we are in this process, and we have a team, a local team that is not just my opinion, but with some people participating in this decision, but -- and we're also, to be honest, looking at what other companies are doing and if there is something that we can take or we can learn from them.

[Operator]

Thank you. There are no further questions at this time. I would like to turn the call back over to Oriol Bosch for any closing remarks.

[José-Oriol Par, executive]

Yes. Thank you very much. Thanks to all of you for participating in our third quarter conference call. Thank you very much for the -- for your questions. And if there is something -- any other information, something we can do for you, we are going to feel very glad to do it. You all have our contact information. So as every quarter, thank you very much.

[Ramón Sarre, executive]

Thank you. Have a good day.

[Operator]

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.