The Challenges of the Mexican Intermediated Securities Holding System and Opportunities for Modernization

Abstract

This article examines the legal institutions and doctrines underlying the current intermediated system for the holding of securities in Mexico. Rather than revamping the legal framework governing intermediated securities, Mexico’s legislature enacted several incremental changes in an attempt to align the framework with the practices and norms of the 21st century. These modifications were introduced without any coherent and consistent policy justifications, resulting in a framework inhospitable to transactions with intermediated securities, and especially secured loans. This framework also has many gaps, such as in the area of conflict of laws, which make it unsuitable for foreign investors. Given the recent successful efforts to modernize Mexico’s secured transactions law and the filing system, as well as the on-going digitization of the warehouse receipts system, using distributed ledger technologies (Blockchain), it is surprising that very little attention has been paid to modernizing the intermediated securities system. In its future modernization efforts, Mexico should seriously consider the recommendations of the UNIDROIT Legislative Guide on Intermediated Securities, adopted in May 2017, to align with the best international standards. The Legislative Guide is based on the principles underlying the U.S. Uniform Commercial Code Article 8, which would make the Mexican securities market more attractive for U.S. investors and lenders.

Keywords: Securities, Intermediated Securities, UNIDROIT, Blockchain, Legislative Guide on Intermediated Securities, Distributed Ledger Technology, Mexico, Securities Exchange