Citi has made a minority investment in Cicada Technologies in order to boost the electronification of the US$500 billion Mexican fixed income market. Citi will also act as a liquidity-provider for the trading platform.
The Bank of Mexico estimates at least 85% of local bonds are traded by voice and OTC via traditional non-electronic brokers. Cicada’s aim is to broaden technology adoption among market participants with the goal of migrating these volumes to e-trading.
The fintech enables the e-trading of 28 Mexican government bonds including: nominal fixed-rate notes (Mbonos) and inflation-linked securities (UDIBonos) that can settle in Indeval, Euroclear or Clearstream. The company is also looking to enable the trading of Cetes (Mexican T-bills), TIIE (Mexican interest rate swaps), Mexican corporate bonds and other emerging markets government securities.
Jose Luis Yepez, head of local markets rates trading at Citi, said, “As a leading liquidity provider in the Mexican government bond market, our participation in Cicada’s platform reflects our ambition to be at the forefront of electronic trading.”
Connecticut-based Cicada’s all-to-all electronic alternative trading system (ATS) helps global institutional buy-side and sell-side market participants trade Mexican Government fixed-income securities without the need of a pre-existing trading relationship. The ATS is registered with the Securities Exchange commission (SEC) and the broker-dealer activities of Cicada Securities LLC (a subsidiary of Cicada Technologies) are regulated by FINRA.
There are currently 15 “well-known” institutions active on Cicada’s platform, founder Ignacio Tovar said, and 10 are in the process of joining. “Since launching last year, the trading volume on the platform has grown 15 times.”
The investment was made by Citi’s Markets Strategic Investments unit, which is responsible for the sourcing and execution of strategic investments relevant to Citi’s Markets franchise.
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