Customer Success Story – The Mexican Derivatives Exchange

The Mexican Derivatives Exchange

A Customer Success Story

The Mexican Derivatives Exchange maintains a triple-A credit rating with real-time, pre-trade compliance for all member firms and their brokers; FIX Flyer’s Formula 1 Risk Gateway is their solution.

Summary

The Mexican Derivatives Exchange (Mex Der) is the only futures and options trading venue in Mexico. Given the growing complexity of derivative contracts and the evolving regulatory requirements, Mex Der needs the capability to implement compliance rules across 100’s of broker/dealers and 1000’s of counterparties.

FIX Flyer’s FIX Suite enables this important market place in Mexico’s financial markets with:

  • FIX Flyer’s Formula 1 Risk Gateway which provides:
    • Robust capabilities for rules-based compliance checks across all market makers
    • Predefined rules-based routing strategies and rules of engagement
    • Multiple embedded FIX Engines to handle large volumes of orders
  • FIX Flyer’s Daytona monitoring tools that enables real-time monitoring via customizable dashboards of very large FIX-based trading infrastructure
  • Flyer’s Ignition Trade Workflow and FIX Certification Tool which allows rapid roll-out of new trading partners and continued testing of tens of thousands connections.

Background

The Mexican Derivatives Exchange is the national trading exchange and clearinghouse for futures and options traded in Mexico.  Futures markets include contracts on currencies, bonds, swaps, commodities as well as equities and equity indexes, and Mex Der provides options contracts on these underlying products.

As the national clearinghouse for these derivatives, it is imperative the exchange handle a huge volume of incoming orders from a growing number of market makers and broker dealers, and could be considered “Too Big to Fail.” It provides liquidity and transparency to more than 100 Broker/Dealers trading for 1000’s of institutional customers, all trading in more than 2,500 options and futures contracts.

The volume of orders along with the growing complexities of the derivatives markets has led to increased regulatory requirements for exchanges to ensure they manage risk across all trading counter parties.

The Mex Der exchange is a critical component of the Mexican financial markets, and would be considered “Too Big To Fail.”  Risk of default must be eliminated to ensure stability and reliability of Mexico’s financial markets.  The Exchange needs to manage risk across each broker dealer, each counterparty of the broker, as well as aggregate risk across the entire exchange.  And with the ever changing regulatory landscape, MexDer needed the capability to implement a wide variety of compliance rules and drill down into specific actions in the market place.

Solution

The Mexican Derivatives Exchange turned to FIX Flyer’s FIX Suite for all of their core exchange technology. Flyer’s Formula One Risk Gateway is the key component that allows Mex Der to ensure its marketplace remains solvent and infrastructure remains stable.

Real-Time Compliance Rules

Each member firm is required to meet liquidity regulations at all times as well as limit exposure to any single broker.  Flyer’s Formula One Gateway provides a rules engine that allows any number of pre-trade compliance checks to be implemented at different levels of the client structure on incoming FIX messages.

Mex Der’s requirements to implement risk controls at 3 distinct levels: Brokerage client, member firm, and the entire exchange is a core feature of Flyer’s F1 Risk Gateway, providing out-of-the-box flexibility on aggregating risk according to Mex Der’s structure.

These rules are FIX-enabled and can peek into any field needed within the FIX message and process rules at any level of aggregation.  Therefore, Mex Der is able to implement rules at the broker, clearing member or exchange wide level.

Currently, Mex Der aggregates risk across 7 clearing firms, and is evaluated across 8,000 messages per second at peak time.

Deterministic FIX Routing

The core of FIX Flyer’s solution is its cutting edge FIX Engine which has been engineered from the ground up to provide consistent low latency performance.  Flyers “Zero Garbage Collection” technology means that the performance or mission critical trade and order routing remains consistent.  There are no hiccups or frozen orders which ensures a fair and efficient marketplace.

Uniform Trade Reporting

FIX Execution Reports from Flyer’s FIX Engine allow consistent trade reporting and dissemination to the correct parties.  Clearing member firms receive a single consolidated feed of all trade executions and client broker dealers of each member firm receive a consolidated feed of only their corresponding activity.

A Complete Infrastructure

WIth large volumes of trade messaging both in and out of the exchange, it’s critical to ensure smooth uninterrupted operation of its infrastructure.

Firstly, it’s necessary to certify each and every FIX connection to the exchange with each and every counterparty.  To avoid the tedious but necessary workload of certifying the large number of connections, Flyer’s Ignition toolset for automated certification and testing of FIX connections allows the Mex Der to spend minimal time working with member firms to certify new FIX connections as well as proactively monitor and test existing connections.

Flyer’s Daytona Dashboard and Monitoring engine allows Mex Der to proactively ensure proper operation of the exchange as it is able to rapidly digest all details of FIX messages and create dashboard that allow operations to ensure the Derivative Exchange continues to provide liquidity to all participants.  Any support issues can be quickly resolved given the ease-of-use features of Daytona.

 

For More Information

FIX Flyer can be found at http://www.fixflyer.com

The Mexican Derivatives Exchange can be found at: http://www.mexder.com.mx

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