Greetings and welcome to Bolsa Mexicana de Valores second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ramón Güémez , Chief Financial Officer. Thank you, Mr. Güémez . You may begin.
Thank you. Good morning and welcome to Bolsa Mexicana de Valores second quarter 2024 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 risk, 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, prices, 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 like to remind participants that today's call is being recorded and a replay of this call will be available online on June 26th at Bolsa's corporate website, www.bmv.com.mx. During this call, we'll use figures in Mexican pesos and compare to the second quarter of 2023 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 our new CEO, Jorge Alegría, Claudio Vivian, Chief Information Officer, José Manuel Allende, Chief Capital Formation, Information Services, and Markets Officer, Roberto González, Chief Post-Trade Officer, José Miguel De Dios Gómez, Chief Executive Officer of MexDer, Luis René Ramón, Director of Investor Relations, and myself, Ramón Güémez. I would now like to turn the call over to our CEO, Jorge Alegría.
Thank you, Ramón, and good morning, everyone. I hope you are all doing well today. As you know, we released our earnings results and slide deck yesterday evening, which provides comprehensive details on the second quarter 2024 results, which we will be discussing during this call. As mentioned by Ramón, copies of our press release and slide decks are available at bmv.com.mx under the Investor Relations tab. To start, I am thrilled to be back at the BMV Group to lead the company in the coming years. As you may know, I have over 38 years of experience in financial markets, both in Mexico and internationally, including a decade with this extraordinary institution before that plays a crucial role in Mexico's development. In my most recent position at CME, I witnessed a highly competitive market that rapidly develops new services driven by cutting-edge technology.
I expect all these past experiences will accelerate BMV Group to the next level. I am glad to say that I found a very well-run company, financially sound, and I want to highlight the organization's efficient operations, cost control, and strategic foresight, which I am planning to maintain. This not only reflects past success but also sets us up to successfully land our growth projects pending regulatory authorization and paving the way for future growth and innovation. From what I have seen so far, my initial priorities will be to position ourselves as leaders in innovation and efficiency within financial markets. Basically, by continuing with our technology upgrades, introducing new services in Post-Trade, unify our efforts in market data, products, and services, broaden our customer base, enhance our communications with financial authorities, and analyze the convenience of strategic alliances.
In the coming months, my colleagues and I will develop our strategic plans going forward and present them to the board of directors and provide more details in our next call. As for today's call, I will first go over the financial results and provide brief comments about the quarter, half-year, and overall environment as well. After that, I will review the results of each division and finally open the door for questions on the conference call line. With that in mind, please turn to slide five and let's review the financial highlights. We have delivered a strong set of numbers driven by increased activity in financial markets. BMV Group generated MXN 1 billion in revenue, up 6%. EBITDA was registered at MXN 556 million, up 7%, as we have managed costs presently. Earnings per share was MXN 0.68, up 10% from the quarter when compared year-over-year.
On the next slide, we'll go over the results for the first half of the year, and after that, we will do a deep dive into each business line. The results for the first half of the year are partially offset by the first quarter performance, which was defined by persistent high interest rates and a strong peso. Revenue was flat year- over- year, generating nearly MXN 2 billion. EBITDA was registered at MXN 1.1 billion, down 3%, mainly due to FX and lower trading on the first quarter. EBITDA margin was registered at 56% for the first six months of the year, and earnings per share were MXN 1.35 per share, flat year- over- year. However, June has been the strongest month in 2024, and we are optimistic about the second half of the year.
Effects had a minor negative impact in EBITDA of just MXN 3 million in the second quarter. However, Q1, the variation was significantly larger and amounting to MXN 15 million. As you may recall, about 30% of BMV revenue and expenses are linked to the US dollar, so mainly in information services and the central securities depository, Indeval. All in all, the negative impact in EBITDA for the first half of the year was MXN 18 million. Now, please turn to the next slide on revenue by business line. Capital formation for the listing of equity, debt, and alternatives, as well as its annual maintenance, contributed this quarter with 13% of BMV Group's revenue. Transactional businesses, which consist of equity trading and clearing, derivatives trading and clearing, and OTC trading, generated 37% of revenue.
Information services, made up of data, analytics, indices, valuation, and financial risk management services, had an 18% weight. The central securities depository, Indeval, which is responsible for the custody, settlement, and global market services, mainly cross-border transactions, participated with 28% of revenues. The software performance in information services and OTC trading is, in large part, attributed to FX fluctuations. We have to keep in mind that FX movements not only affect our top line but also influence investor behavior, which is evident by the results in equity trading, clearing, and settlement in the global market, or SIC. Nonetheless, as mentioned before, we anticipate a more dynamic market in the second half of the year. Now, please turn to slide number eight to go over equity trading and clearing. Revenue in cash equities trading and clearing was up 15% when compared to the second quarter of last year.
The average daily traded value at BMV was registered at MXN 16 billion, up 12%. Local market was up 20%, while the global market decreased 3%. I would highlight that June was the best month so far, with average daily trading volume of over MXN 20 billion. As mentioned before, the investor behavior is influenced by the strength of the peso, leading to a shift in the mix between local and global markets. Furthermore, BMV's market share was registered at 81%, relatively stable versus the previous quarter. As for the CCV, revenue was up 19%, while the total average daily trading volume for both Mexican exchanges was up 50%. This is explained by the lower number of cross trades in the quarter. Let's go to the next slide to review derivatives.
Revenue in derivatives trading and clearing was up 11% in the quarter, mainly due to higher trading in swaps and IPC futures, partially offset by lower trading in dollar futures. The average daily notional value for our dollar futures contracts was $268 million daily, down 18%, while the open interest decreased 16%. During the March rollover, market participants preferred to trade longer-term positions, favoring September and December open interest expirations instead of the June 1. Moreover, we are still working approvals with the authorities to list the mini dollar futures. As for swaps, both the average notional value and open interest recorded at the end of June are now at historical highs at MXN 3.9 billion and MXN 18.5 billion total open contracts in the market. The increase in volatility and uncertainty about interest rate cuts by central banks benefited this market.
While in Asigna, the average margin deposits were MXN 43.8 billion for the quarter, showing an increase of 31% and MXN 42.9 billion up to June, and this is up 20%. This is attributed to a record high in the open interest of swaps and excess margin deposits. Let's move to slide 10 for OTC trading results. In SIF ICAP , OTC trading and value-added services revenues decreased MXN 10 million, or 5%. SIF ICAP Mexico dropped MXN 3 million, primarily due to lower CO2 emissions compensations via our carbon credits from MÉXICO2 . Meanwhile, revenue at SIF ICAP Chile was down MXN 7 million due to effects fluctuations. Let's go to slide 11, where we have the figures for capital formation. Listings performed strong in the short-term debt market, with revenue increasing 7%.
In short-term debt, 357 issuances were placed in the second quarter of 2024 when compared to 321 issuances in 2023, while in long-term debt, 16 issuances compared to 25 issuances last year. No equity listings or follow-ons during the second quarter, but it is relevant to mention that FIBRA Prologis and FIBRA MTY conducted primary public and private offerings of certificates during the first quarter of the year for MXN 17.5 billion. I would also like to mention that the secondary rules to the amendments of the Securities Market Law continue under review for simplified listings. BMV is carrying on a program called De Cero a Bolsa, which means from zero to the stock market, with the goal of explaining all participants, potential companies, the benefits of issuing debt or equity in the market and process to get there.
We will review the small print and work together with financial authorities and intermediaries to make this possible. Regarding maintenance, revenue was up 3%, given that the number of outstanding issuance in 2023, which generated revenues in 2024, was slightly above the 2022 year. Furthermore, as for June 2024, BMV has now 502 outstanding long-term debt issuance when compared to 485 in December 2023, so this could materialize in revenue growth for the upcoming years. Moving to the central securities depository on slide 12, we can see in Indeval revenue was up 12%, driven by an increase in assets under custody and a higher number of cross-border transactions in the global market. Total assets under custody increased 12% to MXN 38 trillion. The pension market reform continues to show its effects in the numbers, and we foresee a gradual but sustained benefit from this initiative over the next six years.
Furthermore, in May, we successfully accelerated the settlement cycles to T+1 in line with the USA and Canada to better serve market participants by offering a more efficient transaction and mitigating settlement risks. We are also progressing with the implementation of the new platform to modernize Indeval and CCV's infrastructure. This is a three-year period project that will replace our in-house development with Nasdaq technology and pave the way for future new services. Finally, on slide 14, moving to information services that are composed of market data and Valmer, reached MXN 186 million in the second quarter of 2024, up 6% or 3%. Sorry, up MXN 6 million or 3%. It is relevant to mention that the appreciation of the peso against the US dollar registered a negative impact of MXN 5 million in the second quarter and MXN 25 million year to date.
In Valmer, we have decided to stop commercializing OpenFinance, a software for portfolio management that, in annual terms, the sales from this software represented MXN 16.4 million in revenue, but MXN 15.7 million in expenses in 2023, so under consulting fees. As a result, we foresee no impact at all in operating revenues and bottom line. As mentioned in previous calls, our focus remains on expanding our presence in North America and strengthening our alliance with Deutsche Börse to distribute our data in Europe. We are also targeting new clients like digital banks and fintech companies, which, combined with our transition to the cloud and new distribution models, as mentioned initially, will drive future growth. All in all, our diversified business model has played, once again, an important role in the results.
Going forward, we anticipate a shift in monetary policy trend, as mentioned, a more stabilized foreign exchange landscape, and increased activity across all financial markets. Now, let's take a look at our operating expenses in slide 14. Operating expenses in the first six months of 2024 were MXN 984 million, up only 3%, or MXN 29 million, which are mainly explained by two concepts. MXN 13 million are explained by personal expenses or annual wage increases, and MXN 11 million in technology and depreciation expenses due to the segregation of our post-trade infrastructure and the evergreen projects aimed to ensuring all our platforms run smoothly and securely. Finally, to summarize, please turn to the next slide. Grupo BMV delivered positive recurring results in the second quarter of 2024, mainly due to higher trading in transactional businesses and an increment in the assets under custody.
EBITDA margin remained constant at 55%, and net income was recorded at MXN 385 million, up 8% compared to the second quarter of 2023. The effects impact in the second quarter was significantly less pronounced compared to the one in the first quarter. Our capital expenditures in technology during the first semester of 2024 were MXN 104 million, in line with our investment plans. The strategic steps we have taken to accelerate the technological evolution of Grupo BMV will enable us to better serve our customers in the future, and both Nasdaq for post-trade and evergreen projects, as mentioned, are well on track. Currently, our primary focus is in the rollout of the central counterparty services for fixed income, beginning with cash trading of Mexican government bonds. This project leverages on CCV's financial market infrastructure, which currently only supports equities.
It hasn't been authorized in the second quarter, as we anticipated, but we remain committed and in close collaboration with financial authorities to advance as fast as possible in the approval of these strategic projects. A key prerequisite for initiating operations is ensuring that trading platforms and clearing members are fully authorized and prepared to settle bonds through our CCV. We maintain our leadership position in capital formation and equity trading due to the trust that customers have in Grupo BMV. Thank you for connecting today and listening to my remarks. As mentioned, in the upcoming months, we will be developing our midterm strategy, focusing on new services and market data powered by cutting-edge technology, supported by strengthening communication with authorities and our customer base.
Again, I am delighted to be part of this remarkable institution, and I am looking forward to meeting and working with all of you in the future. I thank you for your time, and together with my colleagues, we are now gladly addressing any questions you may have. Thank you very much.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Ernesto Gabilondo with Bank of America. Please go ahead.
Thank you. Hi, good morning, Jorge. Welcome again to the Bolsa. Hi, Ramón, and hi, Luis René. Thanks for the opportunity. I have three questions from my side. The first question will be on Jorge's new vision for Bolsa. José-Oriol did a very good job in maintaining OpEx under control, although I think there were some questions on the revenue side. So I would like to hear your initial thoughts on your new strategy at Bolsa, and what will be your strategy to prevent future delistings in the Mexican exchange or to prevent more listings in the U.S. when compared to Mexico. For my second question will be to the earnings inflection point that we saw during the quarter. There were four quarters in a row with earnings contraction year-over-year, and we finally saw this inflection point.
Just wondering if this could be maintained and what you think could be the rationale behind it. For my last question will be on your new projects and the regulatory framework. If you can share with us any call or any update on the timeline of the counterparty for the bonds market and what is the last update on the broker's regulation, I think will be very helpful. Thank you.
Ernesto. Thank you, Ernesto, for your question. Let me address the first one, and then I'll pass the word to my colleagues here. I guess I've been five weeks in the job again, but so far, I have been quickly adapting, having a lot of meetings outside the Bolsa with customers, largest participants, and financial authorities. As mentioned during my call, I think we are going to be focusing a little bit more on getting closer to customers.
This is not only the broker-dealer community, which are our main sales force, to put it that way, but also going a little bit more aggressively internationally after customers, after the end users, as well as the Mexican investor base. I firmly believe that having more comprehensive market data product offering will be key, taking advantage not only from what we are doing today on market, but also eventually adding fixed income information as well. So I think we have a good product to create on the market data strategy going forward. And I think that that's initially, and maybe this will answer also part of your last question, which is I firmly believe that the fixed income market is moving to electronic platforms, and we will be working hard in delivering not only the clearing for fixed income products, which are, I would say, well underway.
I had meetings already, meetings with more relevant authorities to discuss plans. I'm optimistic about the timeframe on having the central counterparty for bonds as the key element to be able to offer electronic execution as well for fixed income products, both for Mexicans and international participants. This is initially the side on the strategic side. We will develop a more detailed plan as well to include derivatives as well. I will pass the word on the earnings inflection point. I will ask Luis Ramón to go over that. I don't know if with that, I already also answered your last point, but Ramón, please.
Yes, thank you. Thank you, Jorge, before going to Ramón. And I wish you the best on this new process. Just a follow-up in the last one in terms of the regulatory framework. I don't know if you have any update on the Mexico securities law because we thought it was coming, I think, during this next month. So any update on that will be helpful.
The last, well, I would say the first and last meeting I had with the authorities just was two weeks ago. It was very positive. They were, I mean, very, very close to move forward on publicizing and on publishing the secondary ruling that talks about the more easy access or more friendly access to the market for debt and equities. The simplified approach. I mean, they were talking about weeks. Hopefully, that will happen. And then they went to move forward after that to the hedge funds regulation. I don't have a timeframe. They didn't discuss that in more detail, but definitely, my impression is that they were very, very close among the three authorities to finalizing the details for the simplified approach for listings on debt and equities.
Perfect.
Okay. As for your second question, Ernesto, I think the second quarter means an inflection point. We are happy to be once again on our top line above MXN 1 billion. We are seeing volatility come back to the markets. And the second semester, we're going to have well, the U.S. is going to have elections. We're going to have one president that is very positive about infrastructure and knows that we have to take advantage of this nearshoring opportunity. So we expect a more dynamic market, and hopefully, this goes also into the value traded at Bolsa. So this is an inflection point. Last four quarters, we're below MXN 1 billion, and we're very positive about the second half of the year.
Excellent. Perfect. Thank you very much. Just a last question in terms of guidance. During the pandemic, Bolsa stopped providing guidance as well as other Mexican financials, but then all of them are already providing guidance. In the past, Bolsa was kind of guiding EBITDA margin and range on the net income growth. Is this something that you can evaluate now for the future to provide again guidance?
Ernesto, good morning. We'll definitely look at it. But right now, the directive we have is that we do not provide guidance. But we'll definitely bring updates.
Perfect. Thank you.
Thank you.
Thank you, Ramón.
Thank you. And next question comes from the line of Edson Munguía with Suma Capital. Please go ahead.
Hi, good morning. Thank you for taking my questions and happy to work with Jorge and all the team at Mexican Stock Exchange as a market participant. My first question is relating to the initial strategy priorities that Jorge mentioned, specifically about the retail market. When you analyze the number of accounts with the broker-dealers, it has been increasing since five years ago. So my question is, do you have a plan in order to achieve more market participants from the retail side of the business? And my second question is a follow-up regarding on what Jorge said about derivatives because I'm thinking about new products and what is happening around other markets. So my question is, looking ahead, is this a possibility in the midterm plan that we or you are considering zero-days to expiration options as a new product for the coming years? Thank you.
Well, thank you, Edson. Nice meeting you. Let me try to be as straight as possible. Yes, when I spoke about broadening our customer base, it definitely includes retail. We are working on a retail strategy, what we need to do in terms of our product offering to help local participants or international participants to provide access more efficiently to our markets for retail. We are aware of the huge growth of this segment in other emerging markets, even in Mexico, not necessarily in the Mexican market, but even Mexican retail customer base that we want to attract to our exchange.
We have several initiatives, no concrete conditions defined yet, but are based on liquidity providers on some names for Mexican stocks to enhance our market maker plans to have a better market and price formation on screen for liquidity development on both sections, on local and international section, but also looking for incentives for retail customer participants in terms of economic incentives of a new structure that will allow, let's say, a more efficient access in general for retail investors that are trading in very small amounts that may be facing, because of that, not so efficient costs of execution. We need to analyze that, and we are analyzing and working with the market on providing that as one of our plans to attract retail participants to our market. As for the zero-day options, if I understood correctly, here's José Miguel to address the question.
Yeah. Hello, Edson. Yes, we are analyzing the possibility to list zero-day options and or zero-day options or maybe weekly options. So we are analyzing the possibilities, but it's a very good option.
Okay. Thank you. And my last, if I may, regarding on Valmer, in the press release mentioned the revenue were MXN 111 million. But my question is, Valmer Costa Rica, how much represents for that revenue as overall from Valmer?
3%. It's about 3%.
3%?
3%, yes. 1%-3% of Valmer revenue. So it's really don't spill the coffee over it. Marginal.
Okay. Quick circle. Thank you so much.
Thank you. Next question comes from the line of Carlos Gómez López with HSBC. Please go ahead.
Hello. Good morning. Thank you for taking my questions. First, welcome to Mr. Alegría, and we look forward to meeting you and talking to you in the future, and wish you a lot of success. Our first question coming into the role, I mean, you were here at MexDer many years ago. How did you find the company coming in compared to when you left, and how do you think it has evolved over the years? That's very generic, I realize, but what's your first impression? And second, as you review your strategy, do you expect to make any changes to your capital management policy? Right now, you are paying out about 80% in earnings, buying back about 20% of the remaining earnings. Is that something that we should expect to continue, or it will be under review? Thank you so much.
Thank you, Carlos. Let me address the second one. So far, we are not expecting any change on our plans. What I can tell you on MexDer side is I think there are good changes, especially on the swap initiatives. I think we have a good opportunity as the Mexican market is moving to a new rate, kind of the LIBOR to SOFR transition in the U.S. markets. Mexico is moving from TIIE 28 days to Funding TIIE. We have an opportunity to position MexDer there and to help to develop more liquidity in the local market. And MexDer and Asigna, together with the clearing members, are working on some initiatives to improve collateral management. So I think what I found is a little bit more focus, which I think is the right thing to do on providing capital efficiencies to customers.
I think we have on the fixed income side the right mix of products, but we need to leverage our capital efficiencies provided by executing or trading in a regulated venue and clearing on Asigna as a CCP. That's a very general overview, but I found not only MexDer as a company, but also the local participants' interest in MexDer products as very to plan for exciting times coming ahead.
Thank you. And on the dividend?
There's no changes expected there for the time being, Carlos.
Thank you so much.
Thank you. Next question comes from the line of Marlon Medina with J.P. Morgan. Please go ahead.
Hello, everyone. Thanks for the opportunity of asking questions. And I have a very quick one on cash flow because we saw operating cash flow declining around 5% year-over-year in the quarter. This caught our attention because earnings actually grew around 8% year-over-year. So can you help us understand what drove the declining cash flow, please?
Marlon, how are you on cash flow generated in the quarter, you mean?
Yeah. I mean, operating cash flow, we get the cash flow in the quarter was like MXN 466 million, and this is like 6% below the second quarter of last year. So we just wanted to understand why the decline when earnings were growing.
We have a couple of things going on. One is the higher earnings were, especially in June. June was a very good month. So you have very good revenues for Indeval and the cash equity trading and TCV, which are billed in the last day of the quarter and are collected during the first week or first couple of days. So that's one portion of it. And the other one is you have more annual fees or, let's say, advanced fees collected for information services. So between those three effects explain this increase in our accounts receivable. We're not expecting or we're not seeing any decrease in the actual cash flow or, let's say, in the cash management of the company. But happy to go over more detail if you want after the call.
Perfect. Well, that's very clear. Thank you.
Thank you.
Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to turn the floor over to Jorge Alegría for closing comments.
Well, again, I would like to thank you all for attending this call. I think we delivered strong numbers, strong results, and this paved the way for an exciting start of my administration. I look forward again to see you all discussing plans and strategies moving forward. Above all, thank you very much, and hope to see you all in the near future.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.