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Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2020 Bolsa Mexicana de Valores S.A.B. de C.V. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, RamĂłn GĂĽĂ©mez. Thank you. Please go ahead, sir.
Thank you. Good morning, and welcome to Bolsa Mexicana de Valores Fourth Quarter 2020 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 and 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 February 18 at the Bolsa's corporate website at www.bmv.com.mx.
During this call, all figures are in Mexican pesos and compared to the fourth quarter of 2019, 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 JosĂ©-Oriol Bosch, our CEO; Catalina ClavĂ©, SVP, Clearinghouses; JosĂ© Manuel Allende, SVP, Issuers & Information; Roberto González, SVP, Central Securities Deposit; Claudio Vivian, Chief Information Officer; Hugo Contreras, SVP, Compliance and Regulations; Gabriel RodrĂguez, CEO of ICAP; Alfredo GuillĂ©n, Chief Operating Officer; Jose Miguel de Dios, MexDer CEO; Rosa Crespo, Director of Human Resources; Luis Rene Ramon, Director of IR; and myself, RamĂłn GĂĽĂ©mez.
I would now like to turn the call over to our CEO, Oriol Bosch. Oriol?
Yes. Sorry. Thank you, Ramon, and good morning, everyone. Thank you for joining our fourth quarter 2020 earnings conference call. I hope that you're all doing well and staying safe. I'm glad to announce that in spite of a very difficult year, BMV delivered a record high results in revenue, operating income, EBITDA and net income in 2020. And today, I would like to share with you our quarterly and annual financial results and present the different areas where we are focusing to transform BMV technologically and how it incorporates with our BMV's strategy.
So first, let me present the results of the fourth quarter. We delivered pretty good numbers. You all have the presentation that we hand you for this meeting. So I would appreciate if you can go to Slide 3. And in this slide, we have our key financial highlights for the fourth quarter. And revenue was MXN 954 million. That's up 4% compared to the fourth quarter of 2019 due to higher value traded and volume in transactional businesses as well as higher demand for the global market services, the SIC, settlement and custody and Information Services.
On expenses, our expenses were MXN 484 million, mainly explained by personnel expenses, technology costs and nonrecurring items. Not considering the nonrecurring concepts, expenses would have increased MXN 47 million or 12% during the fourth quarter of 2020. The EBITDA was registered at MXN 527 million, with an EBITDA margin of 55%. The net income reached MXN 325 million, that was up 5%.
On the next slide, regarding the key financial highlights for 2020. The annual result showed BMV's strong and well-diversified business model and highlights the need for continuing executing our medium-term strategy. The revenue for the year was MXN 3.9 billion, that was up 9% compared to 2019, driven by capital and derivative markets, continued demand for global market services, settlement and custody in Indeval and Information Services.
Expenses for the year were MXN 1.8 billion as a result of a dollar-denominated concept, mainly in technology and subcustody, personnel expenses and nonrecurring concepts which I will elaborate later on the call. Excluding nonrecurring items, the expenses increased by MXN 84 million or 5% compared to 2019. EBITDA was registered at MXN 2.3 billion, with an EBITDA margin of 59%. The net income reached MXN 1.5 billion, that was up 12%.
On the next slide, the revenue by each business line during 2020. The total revenue was up 9% in 2020, equity trading was 9% -- equity trading and clearing was 9% up, derivatives trading and clearing, 9%; OTC trading, 10%; capital formation, minus 6%; Central Securities Depository, 20%; Information Services, 8%; and in other revenues, we had an increase of 9% (sic) [ 3% ].
On the next slide, regarding the operating expenses for 2020. The operating expenses were up 8% compared to 2019. During 2020, nonrecurring items had an impact of MXN 53 million because of personnel long-term bonus program for MXN 18 million, consulting fees for MXN 13 million and an allowance for uncollectible accounts and reclassification of credit notes to expenses for MXN 22 million. Excluding nonrecurring items, the expenses increased by MXN 84 million or 5% compared to 2019.
Personnel was up MXN 51 million. MXN 18 million because of the long-term bonus program and MXN 33 million due to variable compensation in SIF ICAP and increases in annual salary. Technology was up MXN 32 million, explained by new soft software in projects such as electronic securities and a second payment provider to strengthen business continuity in the Central Securities Depository, increment of central bandwidth and purchase of data for the global market or SIC-related services.
Depreciation increased MXN 18 million due to the acquisition of hardware, mainly for the disaster recovery plan, server renovation with brokers and the electronic securities project. Consulting fees was up MXN 18 million, MXN 13 million in nonrecurring advice for the DRP project as well as legal service. Subcustody was up MXN 18 million due to the dollar-denominated concepts and a larger number of assets under custody abroad. This line is directly linked to revenues in Indeval. And others was up MXN 7 million. MXN 22 million because of an allowance for uncollectible accounts and an accounting reclassification of credit notes to expenses, partly offset by MXN 15 million because of the cancellation of promotional events and business trips due to the COVID-19 pandemic.
In a scenario without pandemic or under normal conditions, we estimate BMV would have spent MXN 20 million more from consultancy fees, rent and maintenance, as well as promotional activities. Going forward, we will maintain our cost control culture as we continue to invest in BMV's technological transformation. Capital expenditures will increase from MXN 40 million in 2020 to a range between MXN 80 million to MXN 120 million.
On the next slide regarding the equity trading and clearing. Cash equities trading revenue was 16% higher than the fourth quarter of 2019 due to higher operating value traded. The average daily traded value for the fourth quarter of 2020 was MXN 15.6 billion, up 26%. Domestic marketing decreased 10% and represented 49% of total average daily traded value. The global market increased 47% and amounted to 51% of total average daily traded value.
As for CCV, revenues increased MXN 10 million because of higher volatility in both local and international markets, which in turn increased total average daily traded value. As of December 31, 2020, 52% of the total value traded is coming from the global market. Since the inauguration of the SIC, it is the first time in annual terms that the global market has a higher average daily traded value weight than the local market.
On the next slide, on Slide 8, on our operational highlights. In the fourth quarter, the average daily traded value was MXN 15.6 billion daily. As you all know, the average daily traded value in March 2020 was mainly explained by the uncertainty and volatility in the local and global financial markets due to the COVID-19 pandemic and in November 2020 because of U.S. election and rebalancing of portfolios. So far this year, we have witnessed the same level of activity in the markets in January 2021. The average daily traded value registered at Bolsa was MXN 16.2 billion.
On next slide, the Slide #9, regarding derivatives trading and clearing. The revenue in MexDer and Asigna increased 12% and 22%, respectively, in the fourth quarter and 1% and 15% for the year. In TIIE swaps, there was higher volume, 29%, with a notional value of MXN 241 billion. However, U.S. dollar futures and IPC index contract decreased versus 2019. Today in Mexico, there are few institutional clients, and we are working with pension and mutual funds to help them in the process to get authorized. Average margin deposits were MXN 40 billion in the fourth quarter and MXN 40.2 billion for the year. That's up 22% and 24%, respectively. We continue working with financial authorities to list new products. And as this Friday, February 19, MexDer will leave the overnight TIIE futures.
On the next slide regarding the OTC trading. SIF ICAP revenue was down MXN 21 million or 14%. SIF ICAP Mexico was down MXN 3 million or 6%, and SIF ICAP Chile decreased MXN 18 million or 19%. This behavior is explained mainly by lower traded volumes of government bonds and interest rate swaps. SIF ICAP Chile tax benefit from operations with foreign counterparties, where the company was subject to a 19% VAT, amounted to MXN 8 million in the quarter. In annual terms, SIF ICAP reached MXN 641 million, up MXN 56 million or 10% more than 2019. That was 20% higher in Chile while 6% lower in Mexico.
On next slide, on our capital formation. The capital formation or listing and maintenance dropped MXN 14 million or 9% compared to the fourth quarter 2019. Listing revenue was down MXN 13 million, explained by lower number of listings and lower amount placed in the short and long-term debt markets. Additionally, there were no listings of equity and alternative securities in the fourth quarter. However, in annual terms, our CKDs/CERPIs were listed -- four CKDs/CERPIs were listed: Promecap for MXN 1.2 billion; MĂ©xico Infrastructure Partners for MXN 1.9 billion; Arago GestiĂłn for MXN 677 million, and Valores Bocel for MXN 375 million. We also had 1 Fibra E IDEAL for MXN 25.8 billion and 1 FIBRA -- one rate Fibra SITES for MXN 12 billion. We expect this business line to pick up in 2021 as the economy recovers from COVID-19.
Maintenance fees were in line with fourth quarter 2019, mainly due to the discount plan for government securities and warrants. It is important to mention that in January 2021, BMV published a new fee structure for several securities in both debt and equity markets. The Mexican Stock Exchange continue supporting the economic development of Mexico and encourage the growth of financial markets throughout the country. This, even more so as the economy recover from the pandemic. The new fee structure will have a MXN 10 million impact per quarter in 2021.
On next slide, #12, on the Central Securities Depository, Indeval revenue was up 15% compared to the fourth quarter of 2019, and its growth is mainly explained by the services related to the global market, the SIC settlement and average value of assets under custody. The main driver of growth in Indeval has been the global market. As you may recall, in July 2017, we implemented a new business model, which reduced 50% the cost for intermediaries, and consequently, foreign assets doubled between 3 years.
Global market include cross-border settlement, corporate actions and tax services. The average value of the assets under custody was up 4% and 19% in the local and global market, respectively. Regarding the direct custody project, we continue building ties with global custodians in order to start operations in the second semester of 2021.
On Slide 13, regarding Information Services. The Information Services was up MXN 19 million or 14% compared to the fourth quarter 2019. Market Data revenue was up 17% and as a result of sales, mostly in dollars, of data feeds, worldwide terminals, indices and benchmark and regularization of customers. Valmer revenue increased 10% due to the sales of databases and new products such as credit and debit value adjustment analysis. And LED, we continue doing trials with major global vendors and potential clients.
On Slide 14 a BMV strategy is delivering strong result despite challenging environment. BMV has a well-diversified business model which contributed to a solid organic revenue growth in several of BMV's core businesses. BMV continued to invest in resiliency, efficiency, technology and new services while keeping operating expenses well under control.
A strong cash generation, operating cash flow before taxes of MXN 2.6 billion, CapEx reached MXN 40 million mainly invested in technological upgrades and regulatory projects, not including hardware leases. And as mentioned before, we are planning to increase our capital expenditures in 2021, between MXN 80 million to MXN 120 million as we transform the business technologically. Furthermore, I am pleased to communicate that BMV's Board of Directors agreed to recommend to our shareholders assembly a dividend hike from MXN 1.07 billion to MXN 1.2 billion, which results in MXN 2.02 per share and an 80% payout ratio.
On Slide 15, in order to have a stronger Mexican exchange, we must focus on BMV's technological transformation. It has 4 main pillars. The first one, operational excellence. We are analyzing and building a multiyear road map establishing milestones and migration plans from our physical applications and infrastructure towards a cloud computing platform that will allow BMV to have a scalable secure and resilient environment with optimal cost and time.
Second, refocus on the role of IT. We are redesigning the organization with an accountability framework and clear ownership of a growing set of products and services. By developing an agile culture and lean processes, BMV will be ready to react faster to the market's need.
Third, technological platform. Analyzing and assuring that BMV has a robust integrated reliable and fully functional platform in order to provide value to our core businesses. And four, disruptive technologies, evaluating which technologies make sense in BMV's business model and implementing them with customer centricity mindset.
On the next slide, #16 we are committed to transform technologically and continue executing our strategy to generate new sources of revenue, especially in post-trade and Market Data businesses while strengthening traditional businesses, develop highly integrated platforms to minimize vulnerabilities and support business growth in an agile and efficient manner. Customer centricity in everything we do, strategic alliances and work closer with regulators and clients, scalability of services. And to sum up, we are developing the organizational capabilities and technology backbone to maintain and improve our current offerings and develop new opportunities to capitalize in the medium term.
On Slide 17, on the corporate sustainability, BMV is leading by example, in collaboration with our stakeholders, to enhance performance on ESG issues and encourage sustainable investment. The Mexican Stock Exchange is actively promoting sustainable finance and governance in Mexico. In 2020, there were 5 sustainable bonds listed with an amount issued of MXN 17 billion as well as 29 ESG-focused ETFs. As mentioned in the previous call, BMV released together with the Standard & Poor's and new and updated ESG Index, called the S&P BMV Total Mexico, and we are collaborating with investors and companies to build a standard ESG reporting format. Through MÉXICO2, Mexico CO2, there were 21,000 tons offset by voluntary carbon market. Secondly, we have enhanced our collaboration with issuers and clients and through technology platform continue strengthening financial awareness in Mexico.
To give you some example, BMV released a podcast, which is ranked in the top 10 financial podcast in Mexico. Has become more active in social media and continuous offering finance courses through webinars and conferences online. MUBO, our Bolsa's museum has received 15,000 virtual visitors during the pandemic. And third, we continue executing our BCP protocol and have taken further steps to make sure that none of our stakeholders are left behind in these times of uncertainty. And last but not least, I am very happy to communicate that BMV improved by 30% in the corporate sustainability assessment and will continue executing its ESG strategy to build a stronger and sustainable Mexican exchange.
And in the last slide on the summary, our continued execution and strategy. Positive result due to a strong demand for the global market and the services to support it as well as Information Services. The strong financial results, despite the challenging environment, BMV delivered record high figures in revenue, operating income, EBITDA and net income in 2020.
And as mentioned before, we are recommending to the shareholders assembly a dividend hike from MXN 1.07 billion to MXN 1.2 billion, given BMV's strong cash flow generation. While diversified and positioned to drive further growth, we focus on technological transformation and capabilities to size multiple growth opportunities and drive top line growth in all core businesses.
And with that, 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 Instructions] Our first question comes from the line of Ernesto Gabilondo from Bank of America.
My first question is on revenues. Which do you think will be the drivers for this year? Can you talk about your strategy on the discount plan for this year and the potential percentage of revenues that you can be ceding to competition? And also related to revenues, how are you seeing the evolution of individual accounts? And how can these be translated into higher revenues for Bolsa?
My second question is related to expenses. Considering nonrecurring expenses this quarter, how do you see the evolution of expenses this year, especially considering that you have been analyzing how to make more efficient your technology expenses? And finally, for my last question, how should we think about your net income guidance? Can we expect a similar growth when compared to last year?
Thank you for your questions. Let me start from the last one. The Board has recommended that we do not give guidance. So we will not be commenting on our net -- on net income expectations for this year. However, I would say that, while we do see a very uncertain year ahead, and we do certainly see some headwinds, but we're also -- we think with our initiatives and our diversified business model, we will be able to continue with the trends we have. But we will not be able -- we will not be giving a specific guidance number.
And regarding expenses, we are working on a technology transformation plan which will allow us to reduce our technology expenses. However, in the meantime, we do have several initiatives. And cybersecurity, disaster recovery plan increased the second provider for the Indeval, having electronic securities in Indeval. Many of these projects began or what -- had an impact on Q4. And this is -- as we implement our technology transformation, we should see sometime this year -- we should begin to see the impact sometime this year. But we will let -- I'll let Claudio elaborate a little more on that a little later, please.
And regarding revenues, on the impact on our drivers for this year, I think we see most upside basically in Indeval and Market Data. Other trading businesses are very dependent on volatility and on market activity. So since we cannot forecast that, what we see most -- more opportunity. I said it's Indeval and Market Data. And the impact on the discounts, as Oriol mentioned, is MXN 10 million per quarter. Claudio, could you talk about the -- our technology transformation initiative, please?
Sure. Thank you. Thank you, Ernesto, for your question. Well, as Oriol and Ramon mentioned, we are investing in improving our technology platform. And this has to do with, I would say, 2 major, let's say, objectives. One of them is to take advantage of new technologies in order to reduce cost and also increase effectiveness of our products and services to our customers.
And second has to do with improving the architecture in order to emphasize in offering the market data to the market in a better and continuous improvement rate for increasing the services. So this, of course, is impacting the cost during the last quarter, and we'll keep a little higher during the coming, let's say, a couple of quarters. Even though we are expecting that mainly related to the journey to the cloud initiative. The cost reduction -- the net cost reduction will impact by the end of this year, mainly related to infrastructure operations.
And well, also having this, the investment is focused on improving the strengthen and the architecture, as I mentioned. So this will be capitalized during the coming years. And well, this is pretty much the effect on the expenses related to the technology transformation.
RamĂłn and Claudio, let me make a quick follow-up on revenues. Can you talk about the evolution of individual accounts and how can this be translated into higher revenues for Bolsa in the future?
Individual brokerage accounts?
Yes.
Well, obviously, more participants would be better for us. So the more individual accounts grew we would have more trading activity than that would definitely be a good sign for the retail market and for improved activity.
Have you seen better -- have you seen more participants signing and having new accounts? Or this is something that continues to be very slow and very moderate?
Alfredo, would you comment something on that, on the market participants and new activity?
Yes. RamĂłn, thank you. Yes, in terms of what we're looking in the equity market in the cash markets, we are shifting our strategy to focus on our clients, clients, the retail sector, which has been unattended for the last years. So we are developing strategies in order to promote those accounts, those clients. We believe that there's a lot of potential there, and we are inviting those clients to participate in the global market which traditionally has been focused on the institutional sector. So we're basically making some strategies regarding the -- attending these type of clients. And we have been having a lot of [indiscernible] from the brokers that are targeting these clients.
Our next question comes from the line of Claudia Benavente from Santander.
So we just released a thematic report, where thanks to the pension reform, we are estimating the pension fund AUMs to duplicate in the next 7 years and to increase to 70% of GDP in the next 20 years. This is clearly an important catalyst for Bolsa. So I wondering -- I was wondering if you could share some thoughts here? How can both the benefit off the pension reform?
Thank you, Claudia. I think we would most benefit through AUMs in Indeval. So Roberto, could you please comment on this, please?
Sure. Good morning, and thanks for the question. Yes, we agree that it's a great news for the economy, for the market and certainly for the group. All the assets -- or most of the assets of the forests are already at Indeval. So an incremental in the growth certainly would make them maybe the most relevant segment for Indeval could be even bigger than the banks. And what we are working -- started working is to develop products and some of them ready access in the direct way.
Some of them also are very active on the SIC market, on the global market. So yes, we believe that it's a great opportunity to develop additional product services reports and help them in all the different type of assets that they are investing. So we do not have numbers right now of what would be the impact. But certainly, there are very good news for the group and particularly for Indeval in the future.
Our next question comes from the line of Kaio Prato from UBS.
So I have only 1 question, and it is regarding capital formation. Could you please provide us an update about your view on listing revenues? So what are you expecting in terms of debt to reach in 2021 if you are already seeing some recovery? And also the seeing on the equity side too, please.
Thank you. José Manuel, could you take this one, please?
Yes. Good morning. Well, as Oriol mentioned, in the last quarter of 2020, we have no listings of equity or alternative instruments, and revenues were 9% less than the previous year. So the health conditions and economic conditions, as you know, have set an important reduction in the financing and capital formation activities of the last year.
Even though we have some Fibra, Fibra SITES and CKDs. The overall number of the activity was less than what we have in 2019. Generally speaking, even the debt segment in the short term, we have a 25% decay and the long-term activity a 30%. So this year, I would say 2021 has started slow. In January, we have some CKDs and some debt -- short-term debt activity.
A positive thing is on the short-term placements I would say that activity has recovered fully. We are now doing renewals at the same amount that we were doing pre-pandemic last year. So the short term, I would say, it's doing okay. But the long-term activity, the debt -- long-term debt activity hasn't been the case. We have some big corporations and even some midsized companies coming in the market last year. But we're still below pre-pandemic numbers.
We think those corporates will be eventually coming to the market to prepay some credits -- bank credits that were provided during the pandemic. With respect to the equity pipeline beyond, we don't have nothing. We know about someone that are working on that, but we still don't have documents even though confidential ones. We see CKDs, CERPIs and Fibra Es in the next month as the most active products.
We think we can have some of them even in March. And we hope this line of business will be picking up as the economy picks up. So maybe we'll take time. And regarding the listing fees that we just mentioned, in January, we presented all the issuers new fee structure, which tends request and comments that we received in the last year from many of the issuers.
Due to the pandemic and the economic situation that most of them had, a lot of companies started to request the exchange some reductions on the fees and to extend the payment time line. So as it was the situation in which many companies were asking the same, we reviewed the topic with the Board.
And after doing the process with authority, they finally approved the reduction on the fee schedule that we just announced in order to keep us competitive. And in which we established lower prices as the issuer is much more active in the market and places much more volume on the security. So with this, it will have an impact, as we mentioned, but we think the change can continue supporting the economic development in Mexico and to encourage growth of financial markets.
And if I can add something, and linking this question that was already answered by José Manuel with the previous one regarding the pension reform, and a very interesting report by the way, Claudia. But I think that the pension reform will benefit the financial system and the economy and more money, more cash, more assets under management from the from the pores that are going to be invested in Mexico, more opportunities, more financing needs to take advantage of them and this is very good news for the Bolsa.
Our next question comes from the line of Carlos Gomez from HSBC New York.
And congratulations on the 2020 results couple of questions. One, in terms of reforms, do you expect any negative impact from the reform of the energy sector, which is currently being discussed in Congress? And second, on the regulatory front, is there any particular discussion that you're having right now with the regulators that could affect your business in the coming 1 or 2 years, something that you're expecting from there or something you're in discussion with them?
Carlos, sir, could you repeat the first question, please?
Yes. What I would like to know if there is any potential negative impact from the energy reform. The previous energy reform opened some other news for you to list new instruments, et cetera. Is the new reform going to reduce that? Or do you see any other impact of it on your business?
Thank you. Oriol, would you comment on this one, please?
I would say that the -- well, one of them would be the expectations on new listings. But I think that in the short term, the one that we were a bit concerned was on a project that we had -- that we already shared with you that was to list the -- a new contract for MexDer on the electricity side, that we don't know what is going to happen with that, but it could be delayed. But I think that this is the only one. I don't know if Jose Miguel or José Manuel, you have something to add?
Yes. We don't know what is going to happen with the electricity regulation. So -- and we continue in the process to receive the approval from the authorities so we think we have to wait until we know what's going to happen with the new regulation. And then we have to evaluate, if it's possible to continue with this product or not.
Our next question comes from the line of [indiscernible].
Sorry, one second, please. There was another question regarding the regulation, RamĂłn?
Yes, whether -- do we have any conversations with the authorities regarding potential regulations? Oriol?
And I don't know -- on this side, I don't know if something else would like to add a few words. But we are working, and we continue to work with the financial authorities with regulators. We all have in Mexico, the same main objective to continue to grow the exchange market. I think that the regulators also believe in the exchange market to continue to support the economic growth and recovery. So -- but no -- at least I have nothing else to add.
[Operator Instructions] Our next question comes from the line of [ Edson Murkya ] from Suma Capital.
Congrats for the results. If I heard correctly, you are expecting to launch officially the future of TIIE this weekend, I think. That will be my first question.
The second one is regarding to the LIBOR software transition. Despite of the fact that Clearinghouses did it last year, the expectation that we had, it was like for this first quarter, it will be in Mexico. So I was wondering if you could give us more color about. And if the process is going to be as soft as it was the larger in Clearinghouses in United States and London.
Well, about the -- the first question about the list of the TIIE from the overnight TIIE product, we are going to list this Friday, this product. We expect that we are going to have some banks ready to trade this product, this Friday. And for the second question, I think we have some problems with other participants from my side. I don't know if somebody else is here?
Yes. Catalina is here.
You want to explain the second question?
Yes. What was the second question?
Yes. The second question is regarding the process from LIBOR to software because last year, we got from you that the process from LIBOR or the transition would happen in Mexico base this first quarter of '21.
Yes. Okay. Yes, it's going to happen. We're going to do the transition at the same time with CME, and the transition is going to happen on March 26. We're going to start on March 26 with a closing price. We're going to use -- after the closing market, we're going to use the software in order to evaluate the swaps. And then on Monday, all positions were -- are going to be with the software curve, yield curve. So we are aligned with the other markets that are doing the transition on the same day in order for the market not have a delay with other -- if they have other positions in other markets.
And a follow-up on this particular matter. Because I think the concern is about the [indiscernible], and where are your talks about the market participants? Are they complying with all the procedures and with all the -- even the electronics or the systems that would happen softly on March 26?
If I understood correctly your question because it's not very clear, the sound, yes, we are talking with our participants. And we expect to have a soft landing or a soft transition because we're going to respect the difference of each of the swaps of the -- legs of the swaps on the valuation with the old curve. Once you have the new curve, we're going to maintain that difference. So they don't expect to have any change in the portfolio, in the gain and loss on their portfolios.
So -- and it's exactly the same as they're going to do in the U.S. The difference with the with last year, what they did is they issue some basic swaps based on the difference in valuation. And in this case, the solution is maintaining that difference and just start the valuation with the new yield curve.
Okay. Okay. It's really helpful.
And if you have any further question or any doubt if you have some swaps in the portfolio and the institution that you work, feel free to contact us, and we can show you directly the -- how we're going to do and we're going to send some files and some testing, which started this week already.
Our next question comes from the line of Mohammed Ahmad from FGP.
Just a question on the tech cost increase that we saw. And you said that in response to an earlier question that we will continue to see elevated levels for a couple of quarters before it tapers back down. Can you give me a sense of what kind of run rate or what kind of annual level and expenses should we be expecting? It obviously has been very steady in the past years, and there was a fairly large increase in Q4.
Mohammed, yes. Sure. This quarter, we had a large amount of nonrecurring expenses. We have, as mentioned in the press release, in consulting fees, MXN 13 million for legal advice and support for the development of the disaster recovery plan. We have another MXN 22 million, which is registered in others, is for a reserve for uncollectible accounts for a couple of people who have not paid the rent in building. It's basically one. They rented a largest space and haven't paid.
And we had a reclassification on the -- from credit notes, so we're showing MXN 10 million more in revenues and MXN 10 million more in expenses. We're reclassifying the credit notes from revenues to expenses. And also, we have around MXN 10 million registered for the long-term compensation plan. So the growth impact is -- we did not have a -- we were reversing that last year because we did not make the targets for that compensation plan. So the effect is doubled. So I would say you have to -- for a run rate MXN 845 million after the Q4 number.
Look, that's fair. I was thinking more just the technology side. It has been sort of running around technology expenses specifically. They've been running around MXN 65 million, and they sort of jumped up to MXN 85 million. So that was the sort of area that I wanted to -- the other explanation was very clear in the press release.
Okay. No, as far as technology, you should see a run rate close to the MXN 70 million.
Okay. All right. And with regards to the DRP expense, it's been -- while it's listed as exceptional or one-off, it has been going on for a little bit. It has actually escalated in the last couple of quarters. Is there like a time line where this expense would roll off and end? My understanding for some reason, and maybe I just had the wrong note, was that the original DRP consultancy was supposed to end Q2 last year. Clearly, it did not. So I'm just wondering is this one-off consultancy expenses, is there -- like what's the time line for the project?
Claudio, please correct me if I say something wrong. But the DRP consists mostly in equipment. But at some point, at some levels, we do have consultancies, one second...
Yes, but -- at some levels we do have consultancies.
Interval of the plan. So yes, we do think this is a one-off? It should not be -- we should not be repeating that. But the cost of the equipment will remain. And as far as how far along we are in the DRP implementation, Claudio?
Sure. Thank you, Mohammed, for the question. Well, the major cost of DRP investment is related to infrastructure that was introduced a couple of years. So this will last -- I mean, the amortization of this cost will last during this year. By the way, it ends by December. But I understand it was [indiscernible] your questions, how long will it impact for the coming year? And I would say that it is -- this is 95% of the cost of DRP and will last until December this year.
Okay. So that's great. Just final question. You did say that the Board had recommended that not to give guidance this year. I'm just wondering what caused the change of direction in that regard given that you've been historically fairly consistent on that?
I'm not sure, to be honest. It's -- there was always some debate in the quarter as to whether it was -- whether we should give guidance or not? And this time, they decided against it. I'm not -- I can't really tell you something.
Okay. And my understanding then would be that you still have the same targets because my understanding was that management was essentially given annual EBITDA margin targets. And that is still the case, you're just not disclosing them anymore?
Okay. We do have our internal targets, we're just not disclosing them. That's correct. And Mohammed -- sorry, on your first -- on the run rates for technology expenses, we did have some expenses on -- some licenses that we paid but it should not be repeated for the next quarters. So maybe go with MXN 65 million or something around that for a recurring technology expense -- around MXN 65 million.
So sorry. So that's from the Q1 onwards. So then basically, should I assume that the bump up in Q4 in technology expenses was largely one-off?
Yes, run rate from Q1 onwards, yes, take it from around MXN 65 million.
Okay. So it just seems like a one quarter event then.
Our next question comes from the line of Gilberto Garcia from Barclays.
Given your technology initiatives, can you comment on your expectations for capital expenditure this year? And what sort of benefit to the EBITDA margin you expect in the medium to long term?
We are expecting a capital expenditure of around $10 million for this year. And regarding expectations for EBITDA margins, so we're not disclosing any sort of guidance in that sense.
At this time, I'm showing no further questions. I would like to turn the call back over to RamĂłn GĂĽĂ©mez for closing remarks.
Thank you very much for participating in our call, and for following us and being our shareholders. And we look forward to updating you for our Q1 results in a couple of months. Stay safe. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.