Binary Options Trading Opportunities as Mexican Economy Gains Momentum
Mexico’s derivatives trading market, which includes binary options trading, is still in a nascent stage, albeit with bright prospects. Although political developments in the US have a meaningful influence on all markets (stock, currency, commodity and derivatives markets), the Mexican economy is gradually integrating into the global value chain. Markets in Mexico are also driven by crude prices, with the country being the world’s ninth-largest oil producer.
Good news for the binary options market is that transactions are now being regulated and the market is becoming increasingly diversified in the near future.
The global financial crisis of 2008 highlighted shortcomings of financial authorities in safeguarding risks in the derivatives market. Mexico’s over-the-counter binary trading is a case in point, where uncertainty and lack of information posed significant risks to traders. Binary trading in Mexico has benefited in recent years from initiatives undertaken by the G20. The Group of 20 is an international forum of governments and central bank governors from 20 countries, namely Mexico, Argentina, Brazil, the US, Canada, the EU, the UK, France, Germany, Italy, Turkey, Saudi Arabia, South Africa, Russia, China, India, Indonesia, Japan, South Korea and Australia.
The G20 urged all OTC derivative transactions to be reported to TRs (trade repositories), making ample data available for risk analysis and decision making by market participants.
“By 2014, Mexico’s banking and securities regulator published new rules to regulate the derivatives market, both to promote transparency and bring about order in the market.”
This has been critical in promoting Mexico’s binary options trading, the majority of which is still transacted over the counter, rather than through exchanges.
Currency Pairs and Spread
The asset base available for trading on Mexican binary options platforms is extremely limited, as is the volume traded. The vast majority of traders focus on the USD/MXN pair. The pair is known for its volatility. Both price and volume can fluctuate greatly even during the course of a 24-hour cycle. The spreads narrow significantly during active periods and widen meaningfully in quiet phases, which is why much of the trading takes place during active periods.
The Mexican peso has a high correlation with the release of economic data. Traders also look out for the weekly US oil inventory report, released every Wednesday morning, which has a significant impact on USD/MXN. Both US and Mexican catalysts impact the pair with equal intensity. The Mexican peso also responds to movements in commodity prices.
Brokerage firms in Mexico offer trading platforms based on MetaTrader 4 and 5 for binary options trading. However, the trading platform itself could be a proprietary one, specific to a brand or a brokerage. For instance, Murex offers a platform called MX.3 and MexTrade Capital offers Markets Trader. What is important is to check which exchanges these platform support, while also checking the type of data and analysis you can access.
Some binary brokers offer bonuses when opening a new account, usually in the form of a trading credit. It is important to first read the terms and conditions carefully, regardless of the what form the bonus takes. For instance, the bonus terms could tie-in your initial deposit. It is important to know how the bonus will impact you and your trading, which you can find out through the terms of the bonus. If you are not comfortable with the terms, check if they allow you to opt out of the bonus, if not, choose another broker.
Deposit & Withdrawal Options
Here’s a look at the most commonly available modes of deposit and withdrawal for binary options trading in Mexico:
- Electronic fund transfers: interbank and intrabank fund transfers in Mexico are processed by the SPEI and CCEN. While the country’s central bank owns and operates the former, the latter is operated by a private owner, CECOBAN.
- Payment gateways: Payment gateways such as PayPal are also accepted in Mexico. This is usually a safe method, since such accounts are linked to bank accounts, which makes it simpler to verify the broker and the trader. In fact, the Mexican government encourages the use of electronic means of monetary transactions, rather than cash or cheques, in an attempt to make the system more efficient and transparent.
- Online banking: Internet banking has emerged as a convenient way to make transactions, even on the go, without having to rely on payment gateways or plastic money. Direct transfer and deposit of funds can be done to an account online.
- Credit & debit cards: While the multinational Mastercard, Visa and American Express cards are popular in Mexico too, issued via the country’s banks, such as BanCoppel and Banco Azteca.
- Cheques: While this form is acceptable, it takes much longer to be processed than all the other forms mentioned above. Which is why most people prefer other means of deposit and withdrawal, rather than cheque-based transactions.
Legality & Regulations
The important thing to remember is that there is a difference between binary options trading being legal and being regulated. While such trading is legal in most countries, including Mexico, it is important to know that there is a regulatory body that oversees the financial markets in the country. In Mexico, the National Banking and Securities Commission or the Comisión Nacional Bancaria y de Valores (CNBV) is a decentralized body of the country’s Ministry of Finance and Public Credit.
“The CNBV has authority in matters of regulation, authorization, supervision and sanction associated with all sectors and entities (including individuals) within the Mexican financial system, such as banks, non-bank finance companies, stock & forex brokerage houses, mutual fund companies, etc.”
Following amendments to the rules of electronic trading platforms, which came into effect in September 2014, the CNBV recognizes foreign electronic trading platforms as well for the purpose of executing standardized contracts. In addition, the country’s central bank, Banco de Mexico, in coordination with the CNBV and the Ministry of Finance and Public Credit, has worked out rules for derivatives transactions, including binary options trading. These rules define and regulate standardized derivatives contracts in Mexico, including trading on the exchange or via electronic platforms. Recent amendments to these rules have allowed Banco de Mexico to recognize foreign CCPs and exchanges for the trading of standardized derivatives contracts and for central clearing, as well as foreign TRs for the purposes of reporting.
Before choosing a broker or a trading platform, it is useful to check if they are registered with the CNBV.
Here are answers to some of the most frequently asked questions that users have about binary options in Mexico.
- Are binary options legal in Mexico?
Yes, they are legal. They are beginning to be increasingly regulated, providing greater transparency into the transactions. It is not, however, an organized market yet.
- Is it safe to trade binary options in Mexico?
While it may be safe to trade binaries in Mexico, the fact that it is still at a nascent stage and unorganized could result in uncertainties. Best to research the broker you wish to trade with.
- Can I make money with binary options in Mexico?
The Mexican peso is highly volatile and offers opportunities to record profits. However, one needs to take highly informed decisions and trade knowing the risks involved. Of course there are hundreds of instruments you can trade, not just the peso!
Best Brokers in Mexico
While there is a plethora of choices for binary options brokerages in Mexico, the key is to choose one that is regulated. Here are some of the more popular brokers in the country:
The article aims to highlight the prospects in the Mexican binary market and the factors that offer potential for profits. It also describes the existing regulations related to binary options in Mexico, mentions some of the biggest brokers and provides information about various aspects of trading binary options in Mexico.