Bolsa Mexicana de Valores SAB de CV

BMV:BOLSAA

Earnings Call Analysis

BMV Q3 2023: Lower Revenue and Earnings

In the third quarter of 2023, Bolsa Mexicana de Valores (BMV) faced several headwinds impacting its financials. Revenues declined by 5% to MXN 933 million, influenced by weaker equity trading, fewer cross-border transactions, and unfavorable currency exchange impacts, which led to MXN 110 million less in revenue. The net adverse effect on EBITDA due to these currency fluctuations was MXN 62 million. Despite lower expenses related to currency, total expenses rose by 3% to MXN 475 million, driven by increased personnel costs and investment in technology and infrastructure. Overall, this resulted in a 10% reduction in EBITDA to MXN 512 million and an 18% drop in net income to MXN 330 million compared to the same quarter in the previous year. When looking at the nine-month performance, revenue was down 7% while EBITDA fell by 15%, or 8% after adjusting for nonrecurring revenue, marking an EBITDA margin decrease from 60% to 57%.

Foreign Exchange Impact and Earnings Metrics

In 2023, the strength of the Mexican peso had a dual effect on BMV's financials, impacting both revenue and expenses due to a portion of BMV's business being dollar-linked. Revenue suffered a MXN 110 million decline over the first three quarters, primarily affecting information services and central securities depository operations due to this forex change. This was compounded by a decline in revenue by 7%, influenced by a lower equity trading volume, fewer cross-border transactions, and one-off revenues reported in the previous year. Quarterly EBITDA dipped by 10%, and net income fell 18% compared to the same period last year.

Revenue and Margin Performance

For the nine-month period, revenues were down, and expenses grew, resulting in a 15% decrease in EBITDA. However, after adjusting for nonrecurring revenues, the EBITDA decrease was 8%. Correspondingly, the EBITDA margin contracted from 60% to 57%.

Trading Activities and Revenue Composition

Capital formation contributed 13% to the revenue mix, with cash equity trading and clearing revenue down by 7%. BMV's market share remained stable, but a 45% drop in the global market, a decrease in open derivative contracts, and other macroeconomic factors negatively impacted trading volume and revenue.

Deposits and Derivatives

Asigna observed stable average margin deposits while MexDer experienced changes in contract types affecting revenue reflection. The over-the-counter segment through SIF ICAP showed promising growth with a revenue increase of 6%.

Debt Market Performance

Revenue increased by 24% in the debt markets. Sustainability-themed bonds accounted for 47% of the long-term debt issued in the first nine months of the year, indicating a positive trend towards environmentally friendly investment.

Operational Highlights and Future Outlook

BMV is enhancing its capital formation and information service offerings despite challenges in equity trading and depository services. Operating expenses increased marginally due to personnel, technology, and maintenance costs, but some reductions were seen because of savings from Indeval's new status as a qualified intermediary in U.S. tax administration. BMV plans to evolve its technology infrastructure to reinforce its platform's strength.

Competitive Landscape and Regulation

Despite competitive pressures from BIVA, and ongoing discussions around best execution practices, BMV continues to focus on volume recovery strategies and potentially expanding its offerings through new follow-ons and IPOs, pending the dynamics of interest rates and valuation levels. Amendments to the Mexico securities law are underway, with the group actively engaging in the legislative process.

Earnings Call Transcript 2023-Q3

[Operator]

Greetings, and welcome to the Bolsa Mexicana de Valores S.A.B. de C.V. Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ramón Güémez, Chief Financial Officer. Thank you. You may begin.

[Ramón Sarre, executive]

Thank you. Good morning, and welcome to Bolsa Mexicana de Valores Third Quarter 2023 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 the 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, 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 these forward-looking statements.

I would also like to remind participants that today's call is being recorded, and a replay of this call will be available online on October 19 at Bolsa's corporate website, www.bmv.com.mx. During this call, all figures are in Mexican pesos and compared to the third quarter of 2022, 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, CEO; Claudio Vivian, CIO; Hugo Contreras, Chief Compliance and Regulations Officer; Jose Manuel Allende, Chief Capital Formation Markets and Information Services Officer; Roberto González, Chief Post-Trade Officer; Alfredo Guillen, Managing Director of Equity Markets; Jose Miguel de Dios, Managing Director of Derivatives Markets; Rosa Crespo, Managing Director of Human Resources; Luis Rene Ramon, Director of Investor Relations; and myself, Ramón Güémez. I would now like to turn the call over to our CEO, Oriol Bosch.

[José-Oriol Par, executive]

Thank you, Ramón, and good morning, everyone, and thank you for joining us to [Audio Gap] the Mexican Stock Exchange Third Quarter 2023 Earnings Conference Call. I will go over a couple of points that are important to consider on comparing year-to-date 2023 versus 2022. Then I will walk you through the different divisions' results and finally open up to questions on the conference call line.

First, FX had a double impact in the quarter and 9-month update. About 30% of BMV's revenue and 25% of its expenses are linked to the U.S. dollar. On one hand, the strength for the Mexican peso had a MXN 110 million negative impact in revenue in the first 9 months of 2023, mainly in information services and the central securities depository, Indeval. On the other hand, the expenses were MXN 48 million lower than expected in the 9 months up to September, mainly in technology and [indiscernible] fees. The net negative impact on the EBITDA was MXN 62 million.

Second, in 2022, the total nonrecurring revenue ending the balance SIF ICAP amounted to MXN 134 million. With that in mind, let's review the quarterly financial highlights in Slide #3, please, to talk about the key financial highlights. The revenue was MXN 933 million, down 5% because of lower equity trading, fewer cross-border transactions and as mentioned before, an unfavorable exchange rate. Expenses were MXN 475 million, up 3%, mainly due to higher personnel costs, technology upgrades and regulatory projects as well as BMV's building renovations. EBITDA was registered at MXN 512 million, down 10%. Net income was reported at MXN 330 million, 18% below third quarter 2022.

On the next slide, we will go over the results for the first 9 months of the year. On Slide #4, you can see that the revenue was MXN 2.9 billion, down 7%, mainly due to lower equity trading, fewer cross-border transactions, nonrecurring revenue reported in 2022 as well as FX. Expenses were MXN 1.4 billion, up 5% explained by personnel and technology costs. EBITDA was registered at MXN 1.6 billion, down 15%, but after adjusting for nonrecurring revenue, the EBITDA decreased 8% with an EBITDA margin of 57% versus 60% last year.

Net income amounted to MXN 1.1 billion. It was a resilient result once you adjust for nonrecurring revenue. Please turn to the next slide to go over the different business lines. In Slide #5, you can see that capital formation or the listing of equity and debt as well as its annual maintenance contributed this quarter with 13% of BMV's group revenue.

Transactional businesses, which consist of equity trading and clearing, derivatives trading and clearing -- and OTC trading generated 38% of revenue. Information services, made up of data, analytics, indices, valuation and financial risk management services had a 19% weight. The central securities depository, Indeval, which is responsible for the custody settlement and global market services, mainly cross-border transactions, participated with 27% of revenue.

Once again, our diversified business model played a strong role. Lower equity trading and fewer cross-border transactions in Indeval had a negative impact, while information services and capital formation remained strong. The nature of our business includes highly recurring revenue and strong customer retention. About 50% of BMV's group revenues are subscription-based, and the other half are transactional.

Please turn to Slide 6 to go over equity trading and clearing. Revenue in cash equity trading and clearing was down 7%. In the third quarter, the average daily traded value, the ADTV, at BMV was registered at MXN 13.6 billion, with BMV's market share stable in the mid-80s. The local market was up 21%. However, the global market decreased 45% in light of [indiscernible] part because of FX.

The total Mexican market ADTV was MXN 16.4 billion. That's an 11% drop for the quarter and minus 12% for the month up to September. Although the figure is not good, it is consistent with the trading activity in other parts of the world, given the current monetary policies and macro financial conditions. CCV results were in line with last year's figure, even though ADTV was down. This is explained by a lower number of cross trades in the third quarter of 2023.

Let's go on the next slide to review derivatives. Revenue in derivatives trading and clearing was down 9% in the quarter due to lower trading of dollar futures. The total number of open derivative contracts of dollar futures or open interest dropped 44% compared to the third quarter of 2022 because clients closed hedging positions. On the other hand, the total value of interest rate swaps or notional value increased 106% because of monetary policy actions.

In Asigna, the average margin deposits were MXN 32.9 billion for the quarter and MXN 34.8 billion for the accumulated months of 2023. MexDer charges a different trading fee based on the type of contract. Therefore, changes in contract operations do not necessarily reflect revenue movements.

We continue attracting new clients to the Mexican derivatives market, including brokers, market makers and spot trading firms, as well as vendors mainly in the U.S. On Slide #8 on the OTC trading. In SIF ICAP, the OTC trading and value-added services made good progress, with the revenue reaching MXN 181 million, up 6%. SIF ICAP Mexico increased 11%, explained by higher trading of interest rate swaps and new clients in MexiCO2 a subsidiary firm specialized in promoting environmental markets and carbon credits.

SIF ICAP Chile was up 4% due to higher trading in FX and interest rate swaps. On Slide 9, we have the figure for our capital formation. Listings performed strong in both short-term and long-term debt markets, with revenue increasing 24%. Debt has been the largest driver in capital formation's top line. In short-term debt, 327 issuances were placed for a total amount of MXN 70 billion, while in long term, 24 issuances were reduced for a total amount of MXN 54 billion.

I would also like to mention that so far in 2023, 5 new companies have arrived to the BMV's debt market. Banca Mifel, Banco Internacional Inversiones, [ CMCP ], [ Ive and Fondo ] and [ Fila Trust ]. This reflects the trust that firms and investors have in BMV Group. Furthermore, it is worth noticing that 47% of the total long-term debt issued in BMV during the first 9 months of the year was sustainable through thematic bonds, green, social and sustainable and sustainability-linked bonds. We'll continue promoting this market to our digital platform and education programs. In the equity market, we had a follow-on for MXN 4.9 billion from Traxión.

Regarding maintenance, revenue was down 4% since the amount issued, it is not directly linked to the revenue due to cuts in our fees. The debt market is recovering, and we have been able [Audio Gap] a larger amount placed. However, more bonds have been reached maturity versus new issuances. At the end of September 2023, there are 480 long-term debt issuances compared to 521 in the first 9 months in 2022.

Moving on to the central securities depository on Slide #10. Indeval's revenue was down MXN 33 million in the third quarter, MXN 23 million due to FX, mainly in the global market services and global custody who [ fits ] are in dollar and MXN 10 million because of a lower number of cross-border transactions and trades settled in the global market. Assets under custody in the accumulated months up to September increased 10% in the local market to MXN 32.3 trillion and decreased 7% in the global market to MXN 1.5 trillion.

As announced previously, we are currently working to accelerate the settlement cycle to T+1 in May 2024, in line with the U.S.A. and Canada to better serve market participants by offering a more efficient transaction and litigation risk.

Finally, on Slide 11, Information Services, revenue reached MXN 178 million in the third quarter of 2023, a similar figure to that of last year despite the appreciation of the Mexican peso against the dollar. The strength of the Mexican peso represented a negative impact of MXN 14 million in the quarter. Under constant FX, we expect this business line to continue growing annually at a double-digit rate, given the demand for our [ Tata ] internationally. All in all, a good set of numbers in capital formation and information services.

On the other hand, equity trading and Indeval are facing a challenging period given the current interest rates, exchange rate and value trading. As mentioned at the beginning of the call, the strength of the Mexican peso had a negative impact of MXN 110 million in revenue in the first 9 months of 2023.

Now let's look at our operating expenses in Slide #12. Operating expenses in the third quarter and 9 months of 2023 were up 3% and 5%, respectively. I will go over the main items on a year-to-date basis. Personnel expenses, up 8% due to annual salary increments and value recurring revenue in SIF ICAP. Technology increased 14% because of upgrades to maintain evergreen platform by enhancing features and security as well as the segregation of post-trade infrastructure.

Rent and maintenance, up 18% due to higher maintenance cost and building renovation. The bulk of the expenses were down 43% since Indeval was authorized as a qualified intermediary by the U.S. Internal Revenue Service. And this, in turn, transformed into lower costs associated with the administration of tax forms and WA formats. Promotional activities or marketing was up 17% because of greater number of customer and corporate events.

It is important to note that foreign exchange fluctuations had a positive impact in expenses during the first 3 quarters that amounted to MXN 48 million, lower mostly in technology and sub-custody. We continue executing with cost discipline towards increased operational leverage while investing in technology to strengthen the resilience of our platform.

Please turn to Slide #13 for our conclusions. In summary, notably the first 9 months of 2022 makes for a tough period to compare with because of extraordinary revenue concept and foreign exchange fluctuations. Additionally, a lower average traded value in the global market and fewer cross-border transactions are negatively impacting our financial results. Nonetheless, BMV Group has a diversified range of revenues, which has strengthened our business model. We maintain our leadership position in Mexico for both capital formation and equity trading.

In derivatives, we continue looking for options to increase liquidity as well as other growth projects that require regulatory approval. Furthermore, we are committed to strengthening our data and analytics offering and increasing our footprint worldwide.

Regarding BMV's technology evolution, we have made good progress strengthening our platform with the aim of having an evergreen and seamless technology across all divisions. Additionally, we have finished the design study and currently reviewing viable options to enhance our post-trade product offering and simplify our operations. However, the segregation of post-trade infrastructure is reporting delays in the configuration of the new [ Hartford ] infrastructure. However, corrective actions are being put in place.

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

[Operator]

At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Ernesto Gabilondo with Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

Thank you. Good morning, Oriol, Ramón and Luis Rene. I have 3 questions from my side. The first one is related to competition. We have seen that BIVA has been approaching different brokers to offer additional discounts on the trading. On the other hand, you have mentioned in the past that you were discussing with the authorities, implementation of the best execution, arguing that there have been no benefit for the clients, and that volumes have been some kind of discretionary. So any comments or an update on this will be much appreciated.

My second question is on trading volumes. We continue to see they have been weak on a [ GOG ] basis. So I'd like to hear what will be Bolsa's strategy to reverse this trend. What could be some potential tailwinds? And also in terms of trading, we have seen some follow-ons from [indiscernible] -based Traxion this year. And now [ Fibra Uno ] announced the intention to do a follow-on. So how are you seeing the pipeline for new potential follow-ons or IPOs?

And then my last question is an update on the changes to the Mexico securities law. Can you please help us to hear which is the last update? And do you think it could be approved by year end? So far, what do you think have been the pushbacks? And what do you plan to solve them?

[José-Oriol Par, executive]

Thank you, Ernesto, for all your questions. We'll try to answer all of them. On the first one, regarding competition, I cannot speak for BIVA, but in my opinion, [ trade ] project is not going to become a successful project by changing the regulation or offering price discounts. I think that a successful project needs to deliver. So it's a different story. But I think that I would like to ask Alfredo Guillen to expand a bit on that.

[Alfredo R. Lara, executive]

Yes, good morning. Yes, as Oriol was saying, we believe that the tariffs at this point are not the reason for loan volumes, as you might already know. So we are confident that once interest rates reach peak next year and the appreciation of the peso reverts at the more reasonable levels, we'll start to see volumes coming back mainly in the arbitrage trading held by algorithmic participants. So at this point, tariffs are not in the equation. It's more the peso levels, the rate levels. So it's -- and it's not only happening in the Mexican market. It's a global phenomenon in the cash markets worldwide.

[José-Oriol Par, executive]

And by the way, all the -- Ernesto, all the prices from the Bolsa and from other companies of the group of Bolsa are regulated. So if any of the stock exchanges wants to offer a discount or change any price, it has to be approved by the financial regulators, by the CNBV.

[Unknown Executive]

So the second one regarding the pipeline, as you pointed, the debt market in the first 9 months have been good, increasing placements, over 70% over last year. For the rest of the year, we still have some companies willing to come to the market. Those placements will be in the range of the MXN 40 billion to MXN 50 billion from 10, 12 different companies, different sectors. So with that, we can see the fourth quarter, something similar to what we saw in the third quarter, we think.

Regarding -- as you pointed, we may have some listings on the Fibra instrument as well as maybe some follow-ons. We also have some service requests on the lease that we may go out of market before the 4Q. And of course, regarding the equity, which was the main point of your question, nothing is now on the radar. We're still doing promotion and contact efforts with potential companies. But I would say nothing is forthcoming in the market right now. I think the driver would be valuations, and now those are really far from the highs that we have some months ago.

[José-Oriol Par, executive]

And regarding the strategy or what we are doing, I would say that we are focused on -- and focusing on what -- it is in our hands. So we are having -- we continue trying to attract and maintain the best talent, investing in technology offering and working in new products and services to our clients, working together with our clients with the Casas de Bolsa, working also with the regulators if there is any change that we have to make or any kind of improvement.

But there are some aspects that are not in our hands, that depends on -- and I would say that this year, as mentioned in the -- previously in this call, we are having an important competitor, that is the interest rate market. Interest rates in Mexico, overnight rates at 11.25%. This is a big competitor for the equity market. The lower volatility and the appreciation of the Mexican peso also had an impact in the daily traded volume. So there are some things that are not in our hands, but we continue to work and trying to grow and develop the market.

And one of the things that we have been working on with the regulators, with the Casas de Bolsa, with Casas de Bolsa Association, if the expected change in the [ later ] Mercado Valores in order to attract new participants, new companies and different sizes and sectors that are not represented in the stock market today by this new later action, this new change in the later Mercado Valores in the -- that is going to -- it is in hands of the lower house, and it should be approved. We hope that it should be approved soon.

[Ernesto María Gabilondo Márquez, analyst]

So last one, you expect that this law could be approved by year-end? It has to be passed by Congress, right?

[José-Oriol Par, executive]

Yes, that's correct, Ernesto.

[Ernesto María Gabilondo Márquez, analyst]

Okay. Very good. Thank you very much.

[José-Oriol Par, executive]

And once it is approved, then it will be required, a secondary law. And there is a deadline of 1 year after it was approved by the Congress.

[Ernesto María Gabilondo Márquez, analyst]

Okay. Understood. Thank you very much.

[José-Oriol Par, executive]

The CNBV, the regulators should work on this secondary regulation. Okay. Thank you, Ernesto.

[Operator]

Our next question comes from the line of Juan Ponce with Bradesco BBI.

[Juan Ponce, analyst]

Thank you for taking my question. Most of them have been answered already, but just a follow-up on the Indeval revenues -- business. What are you expecting over the next coming quarters in terms of improving the weakness we have seen recently? Thank you so much.

[José-Oriol Par, executive]

Juan, we'll let Roberto González, our Indeval CEO, take that.

[Roberto González Barrera, executive]

I think that briefly, Oriol and Alfredo explained, but this is related to lower volumes. One of the things that we have talked a lot with the brokers. One of the issues that is related to the FX. In the past, we used to have a lot of the FX trading, our clients buying ETFs to have [indiscernible] within the composition. And normally, when the dollar went down, they buy, and then it went up, they sell, and there was a lot of trading activity on that. So we have seen a lot of clients that bought at 2019, '18, '17. And basically, they're keeping the positions. They're holding the asset. So we saw a lot of lower activity.

And we also have seen lower volatility in the FX. That is also related to what we normally see in the [ SIG ] market. So we've been working with some of them. We're looking at different alternatives also to approach the retail market and to see how we can help the arbitrage desk to be more efficient in their processes. But that's basically the explanation why we've seen such an impact.

In addition to that Indeval fees, about 55% of Indeval fees are in U.S. dollars. So the impact compared to last year is relevant on each month that we've seen a much lower FX rate. So that's why you see the -- the numbers in pesos lower than last year.

[Operator]

Thank you. Our next question comes from the line of Jorge Henderson with Santander Mexico.

[Jorge Henderson Cubillas, analyst]

Good morning, everyone. Thanks for the Q&A space, as always. I have 2 questions. First, I wanted to ask you about the capital formation results. You posted strong data on debt listings, right? But we wanted to understand why maintenance fees fell 4% sequentially and year-over-year despite the recovery on listings. When should we begin to see these new listings translating into higher maintenance fees? Any color here would be much appreciated.

I also wanted to ask you about this quarter's tax rate, which was 33% above the statutory tax rate. We noticed it was higher than last year. Is there any structural reason behind this, perhaps [ Ramón helps ] explaining this. And that would be all. Thank you for the space.

[Ramón Sarre, executive]

Thank you, Jorge. Maintenance fees fall year-over-year because -- the key driver there is the total number of outstanding issuances. And so if you have more payments that new listings -- the total number of outstanding bonds decreases, and that's what we eventually charge on. When could we expect to see a change in this trend? It's difficult to say. It really depends on the difference between new issuances and payments and pre-payments. From what we have this year, it seems to be flattish, but these are numbers that we report on our quarterly -- on our press release at the very end. If you like, we can go over those later.

[Unknown Executive]

Yes, the key -- a key number to follow in the maintenance data is the number of securities, as Ramón was pointed. And those have been going down from, let's say, from 2018, we were at 630. And now we should be something close to 480 or 90% -- or 90. So we have to follow the number of securities and the outstanding amount, which -- it has increased a little bit. But the problem -- not problem, the issue that we're facing there is the average amount on the -- on each placement has been increased. So that's the reason you see good activity on the placement amount, but with fewer number of placements.

[Ramón Sarre, executive]

And because of the caps -- because we have a cap on this, so it's better for us to have 2, let's say, MXN 50 billion listings than 1 for MXN 100 billion.

[Jorge Henderson Cubillas, analyst]

That's clear.

[Ramón Sarre, executive]

And on the tax rate, it has to do with inflation. And the way inflation is impacting us. The tax effect on the inflation income and expense.

[Jorge Henderson Cubillas, analyst]

Okay. So there's a reconnection between inflation and the tax rate. Okay. Thank you. Thank you very much.

[Operator]

Our next question comes from the line of Edson Murguia with Suma Cap.

[Edson Murguia, analyst]

I have a couple of them. The first one is regarding to MexiCO2. You mentioned in the press release that at some point, it contributed to part of the trading revenue or activity in SIF ICAP. So I was wondering if you could give us a little bit of color about -- specifically about MexiCO2. I know you mentioned that it's sustainability platform, so on, so on, so on. But what was the impact on the revenue?

And the second question is regarding on derivatives. And probably, [ Mac ] can give us a little bit more thought about -- because Mac mentioned in the past, [ Amit and Quentro ] that at the end of 2023, we have some type of -- I'm going to be careful about my remarks, but some type of listing instrument product that would be [ in neglect Swap PA. ] Could you give us a little color about this? Because it's almost penetrates almost [ all there. ] Thank you so much.

[Ramón Sarre, executive]

Thank you. We'll -- we'll let Mac take the -- the second question first.

[Unknown Executive]

Hello, Edson. We are in the process to list this new product, this [ Tijde Fondejo swaps. ] We are in a few weeks, we are going to send to the authorities the new specs to give the authorization. So we are working with the claim members and with Asigna to be ready with the systems, and the idea is to have this product on production in January.

[Unknown Executive]

Okay. As for the first question about MexiCO2. And this is a subsidiary company of SIF ICAP that promotes environmental markets and CO2 credits. And in Mexico, there are a couple of states that impose attacks on CO2 emissions. However, last year, one state started authorizing companies to offset their CO2 emissions through carbon credits, which was great news since MexiCO2 offers this type of products, carbon credits, offsets as well as educational services.

So we have seen this in one state. There is another state that is considering this. So we could see a trend going in that direction. Now having said that, this is a small division, but we believe that is in the right business. We believe it is in the right trend. We have been offering new services related to ESG that go from new products for capital formation, new indices. And this will be the third one in Mexico to a carbon credit platform. So as for revenues, this contributed only with MXN 3 million, but I'm sure we will see more from this in the coming years.

[Edson Murguia, analyst]

Okay. Just last but not least, what about [indiscernible] futures operation? Because it seems like no one -- probably, it's the elephant in the room. No one is operating regarding on the highlights on operational levels through September. Could you give us a little bit of thoughts? Because, again, during the [indiscernible], Gerardo mentioned that we should as market participant -- give the future date for their futures, but no one is operating. So can you give us a little bit of color, thoughts? Or even what about execution as a market participant?

[Unknown Executive]

Thank you, Edson. Yes, we have the [ Tijde Fondejo ] Futures listed. And as you mentioned, we don't have any trades or we have a very few trades. We think that the market needs to have more products to hedge with [ Tijde Fondejo. ] You know, as almost all the credits, almost all the products for fixed income are related to [ Tijde, to Tijde 28 ] days.

So in the moment that we can have more products that are related to the new [ Tijde Fondejo, ] we can see more volume in this product. And I believe that in the next year, we are going to see more volume in this product because we need to build a new curve of [ Tijde Fondejo ] not to make -- not to move all the products to the [ Tijde Fondejo ].

[Edson Murguia, analyst]

Okay. Well, thanks so much.

[Operator]

Thank you. Our next question comes from the line of Carlos Gomez with HSBC.

[Carlos Gomez-Lopez, analyst]

I have 3 brief ones. The first one, going back to the volumes. And as you said, this happens all around the world, we are seeing lower volumes. But in your case, you mentioned ForEx. You mentioned that the exchange rate, and you mentioned the rates. What is the main factor? I mean, do you have to wait until rates go down to see the volumes? Or is it foreign exchange going back to exchange rate of something like 20 that will play a bigger role in your revenues?

The second question refers to your cost, but not so much now. I mean, you continue to do a great job at maintaining cost growth. But my question is, in these years of inflation, have you accumulated cost that's perhaps you will have to incur in the coming years? I mean, are we going to see an inertia of this inflation to your cost base when eventually you have to invest them all or you have to catch up with what -- perhaps you have been able to delay at this point in time?

And the third is about your buyback program. We see that you have bought back another 1% of stock this year. What do you expect to do through the end of the year and into 2024 and '25. Thank you.

[Ramón Sarre, executive]

Okay. Thank you, Carlos. Alfredo will take the first question.

[Alfredo R. Lara, executive]

Good morning, Carlos, this is Alfredo Guillen. Yes, the factors are the ones you are mentioning, which is interest rates, exchange rate, peso-dollar. And we add up additional considerations which are volatility. And obviously, flight to quality of investors to the U.S., mainly. So basically, what we are seeing is that low volatility affects our trading, particularly when we see arbitrage trading being less active than in the past. And we see also as the dollar strengthens, we see capital is moving towards the U.S., mainly in these work conditions. So we have been seeing that during the year. We also have to remember that there's also winding the train.

So everything is moving towards giving premium to safe investments. As Oriol mentioned, 11.25% for an investor in Mexico is a very attractive rate, and we are seeing inflation going down. So real interest rates also are a major issue regarding competition of stock markets with other alternatives. So we expect next year to see more volatile markets, interest rates being stable and less strengthening for the peso, less strength of the peso so we can see volumes coming back. But once again, it is not a matter of tariffs. We don't believe that's the question and the way to go. But still, we are very open to what the market is expecting from us.

[Carlos Gomez-Lopez, analyst]

Okay. So if I understand -- no, I just wanted to say if I understand correctly, what you need is more volatility? You need the currency to move more or the markets to move more, and that would really improve your volumes?

[Alfredo R. Lara, executive]

Yes. volatility, we have discussed this with Indeval, we are in the same channel. When we see volatility going up, we see more trades. We see people where investors doing arbitrage between the U.S. market and Mexico. As you know, the [ SIC ] represents almost 50% of our trading activity. So basically, we are dealing with 2 same assets, 2 same stocks in different markets. And when volatility is there, we see more arbitrage activity between these 2 markets. So more -- around 90% of the trading activity in Mexico comes from the U.S. So we are very dependent on what's going on obviously, in other markets.

[Ramón Sarre, executive]

Regarding cost and inflation. Yes, at some point, it's going to impact us. It should impact the portion of our personnel expenses. SIF, its personnel expenses are more related to or are in line with its revenues. So there, the impact would be a little different. Technology costs are also impacted by the FX. So there, it's a combination of U.S. pricing plus the exchange rate. Depreciation is more stable. And below that line, yes, you could have -- you will eventually expect to see the impact of inflation, Carlos. And on the buyback program -- sorry.

[Carlos Gomez-Lopez, analyst]

No. So what does that mean going forward? I mean, do you expect perhaps to have a couple of years with expenses above inflation?

[Ramón Sarre, executive]

No. No. I think our -- well, if we have a sharp move in interest rates, yes. But -- we will do what we can to keep expenses below inflation or tops with inflation. And on the buyback program, as long as we don't have a better use for the cash, we will continue looking for ways to give it back to our shareholders through a dividend or through the buyback program.

[Carlos Gomez-Lopez, analyst]

Okay. So similar levels to what we have seen in the last 2 years?

[Ramón Sarre, executive]

Yes.

[Operator]

Thank you. [Operator Instructions] Our next question comes from the line of Yuri Fernandes with JPMorgan.

[Yuri Fernandes, analyst]

I had one regarding financial income. It was a little bit stronger than we expected this quarter. It seems FX played a role, I guess, on your hedges there. So just trying to understand here, like how to think about this line and these FX do matter for your financial income?

And also a follow-up on expenses. I guess it's clear, your goal is to keep expenses below inflation. And not easy, as you have inflation, you have FX, you have investments in technology. But if volumes remain lackluster, as we are seeing in Mexico, any chance you could do more on expenses lines? Any, I don't know, initiatives to cut more expenses? Maybe, I don't know, reduce some areas that are, I don't know, less efficient, less profitable? Could we see like an upside on expenses if volumes remain light? Thank you.

[Ramón Sarre, executive]

Yuri, on the financial income's a combination of interest rates and what we have on our cash balance and the FX -- and the FX impact. So while we continue to have higher interest rates -- and we saw a recovery of the peso depreciated in September versus August. So that had an impact on our -- on our FX gain. We're also impacted by our -- by the cash we have in Chile. So we have an FX -- U.S. dollar position, but we had a long Chilean peso position. And that's what impacts the FX gain loss. And the interest rate is directly related to -- to interest rates.

[Yuri Fernandes, analyst]

So basically, like the depreciation of the Chilean peso, assuming the Chilean peso remained weak for the quarter, maybe a headwind for you. We need to track how you use the cash, right? You should do more buybacks and reduce the cash position and how rates behave. It's many moving parts. I guess Mexican peso is a main variable year for us, right? I would assume.

[Ramón Sarre, executive]

Yes, I would say, of our total FX position, you could say on average, we -- 60% would be peso, and 40% would be Chilean peso.

[Yuri Fernandes, analyst]

No, that's helpful. Thank you for the color on the balance mix.

[Ramón Sarre, executive]

And on the [ cost ] initiatives, we're right in the middle of our budgeting process. So depending on how we expect to see revenues going forward, we will explore more cost optimization efforts. So definitely, we have a strong focus on cost and margin, and we're very conscious of the problem we have on revenues being flat or below last year.

[Operator]

Our next question is a follow-up from the line of Edson Murguia with Suma Cap.

[Edson Murguia, analyst]

Thank you for the following up. Just curious about the fractional shares. Because our thoughts, it's happening in Mexico. So I was wondering if fractional shares has a negative impact on [ MOSA ] global market shares or market share or if broker dealers have pass less decision-making process on how the trading volume is happening.

[Unknown Executive]

Edson, at this point, this type of [ fracking of waters ] of stocks is not allowed in Mexico. We don't believe that will make a significant change in the trading activity and trading volume. Probably at some point, participants -- retail participants might step in, but we don't believe that retail participants are inclined to invest just because there is a fraction of the company. So at this point, it's not legal. And we don't believe that the market will trade more just because of this fractioning of stocks.

[Edson Murguia, analyst]

So just curious about follow-up on this. But again, in the [indiscernible] -- I'm not going to say the name because I'm going to be professional, but I may mention that we have 6 million accounts. That broker dealers manage. So don't get me wrong, but why the volume is not increasing? Why the Mexican environment, asset securities is not improving? Because since Friday last week, JPMorgan, Wells Fargo, Goldman Sachs, Bank of America, even Citigroup improved their numbers in security and trading. So don't get me wrong. It's not about the FX.

[Unknown Executive]

Yes. The increase in number of accounts that we have seen in the market respond to another situation, which is the settlement of trades of retail purchases or the benefits that some brokers are giving to access the market with very low investments. So the MXN 100, there's some accounts that could be opened with very small amounts. So we understand that there are different strategies to give the market a service which is not particularly investing in the stock market.

There are other reasons, commercial reasons, strategic reasons to have a brand being known by the participants, by the retail participants, but not because we have seen -- I mean, there's no explanation or relation between number of accounts and volume traded. There is no direct relationship between those 2 variables.

So as I was saying, different participants have different strategies. And the great growth or the big growth that we have been seeing in the past is related to other strategies that are not related to the stock trading.

[Operator]

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to management for final comments.

[José-Oriol Par, executive]

Yes. Thanks a lot to all of you for participating in this quarterly conference call. Thanks a lot for your interesting questions. I hope that we have answered all of them. And if there is something else we can do for you, we can help you with, you already have our contact information. So thanks a lot, and have a great day.

[Operator]

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.