Trading on the Mexican exchange Mercado Mexicano de Derivados has fallen 64% from 144.8m contracts in the first eight months of 2007 to 52.1m in the same period of 2008.
The big drop is in trading of Mexder’s most active contract, the Interbank Equilibrium (TIIE 28) future, which references a short term interbank interest rate in lots of Ps100,000 ($9,300).
However, part of the loss of interest in this contract may have been caused by Mexder’s introduction in September 2007 of a 10 Year Interest Rate Swap future.
This long term interest rate future is denominated at Ps1m, 10 times more than the TIIE 28. It may have eliminated some of the need for market participants to use the TIIE 28, if they were using the short term contract to hedge long term debts or other interest rate exposure.
A hedger would...