Circular 47/2008 — U.S. Dollar Sale Auctions

"2008, Year of Physical Education and Sport"
CIRCULAR 47/2008
Mexico, D.F., October 8, 2008.
TO CREDIT INSTITUTIONS:
SUBJECT: U.S. DOLLAR SALE AUCTIONS.

The Bank of Mexico, based on Articles 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; 7th fraction X, 8th, 14th and 24th of the Bank of Mexico Law; 22nd of the Law for Transparency and Order of Financial Services; 8th paragraphs third and sixth, 19th fraction IX and 17th fraction I of the Internal Regulations of the Bank of Mexico, which provide for the attribution of the Central Bank, through the Directorate of Operations and the Directorate of Central Bank Dispositions, respectively, to issue provisions; Unique of the Agreement on the Attachment of the Administrative Units of the Bank of Mexico, fractions I and IV, and in compliance with the agreement of the Exchange Commission adopted today to implement various measures in light of prevailing conditions in the foreign exchange market, with the objective of promoting the healthy development of the financial system, has resolved to carry out U.S. dollar sales auctions, in accordance with the following:

1. CALL FOR AUCTIONS.
   The Bank of Mexico will call for up to three U.S. dollar sales auctions on each banking business day, whose combined amount shall not exceed four hundred million dollars. The calls will be made known through the Bank of Mexico Account Holder Attention System (SIAC-BANXICO) and will contain the type of auction to be held, as well as the other characteristics of the auction in question.

2. TYPES OF AUCTIONS.
   The auctions may be:
   a) Traditional, meaning institutions will submit their bids without having information about other bids submitted. Institutions will receive information about other participants only when the results of the auction are made public, or b) Interactive, meaning institutions will submit their bids knowing at all times the marginal assignment price of the auction.

Both types of auctions will be carried out based on a multiple-price allocation, meaning the offered amount of dollars will be allocated starting from the best bid for the Bank of Mexico, and the bids that result in an allocation will be served at the requested price.

3. BIDS.
   Bids will have a minimum price equivalent to the result of multiplying by 1.02 the exchange rate that the Bank of Mexico publishes in the Official Gazette of the Federation on the day of the auction, in accordance with the Applicable Provisions for the Determination of the Exchange Rate to Meet Obligations Denominated in Foreign Currency Payable in the Mexican Republic, published in the Official Gazette of the Federation on March 22, 1996.

When the auction or auctions held on the immediately preceding banking business day have resulted in dollar sales by the Bank of Mexico, the minimum price of the bids will be equivalent to the result of multiplying by 1.02 the weighted average price of the sales carried out in the auction or auctions of that immediately preceding banking business day.

4. SUBMISSION OF BIDS.
   Interested institutions may submit their bids through the Dollar Auction Module of the Bank of Mexico Account Holder Attention System or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico, in one or more of the following periods: from 9:30:00 to 9:35:00 hours for the first auction; from 11:30:00 to 11:35:00 hours for the second auction, and from 13:00:00 to 13:05:00 hours for the third auction, on the day they are held.

In the event that in the first auction a partial allocation of the amount of dollars auctioned is made, the quantity to be auctioned for the second will be equal to that resulting from subtracting from four hundred million dollars the quantity of dollars allocated in the first. If in the second auction a partial allocation of this amount is made, the quantity to be auctioned for the third will be equal to that resulting from subtracting from four hundred million dollars the quantities of dollars allocated in the first and second auctions.

Each bidder may present one or more bids for each auction, provided that the amount of each bid does not exceed the amount offered in the call.

The bidder must indicate the amount and the price in national currency at which they are willing to acquire the dollars subject to the auction, expressed in four decimal places. This amount must be for one million dollars or its multiples.

The access, identification, and, where applicable, operation keys established for the use of electronic, computing, or telecommunications media will substitute the autograph signature for an electronic one, so that documentary or technical records in which they appear will produce the same effects that the laws grant to documents signed by the parties and, consequently, will have equal probative value.

The Bank of Mexico reserves the right to reject bids that do not comply with the provisions of this Circular, are incomplete, or are in any way incorrect.

Likewise, the Bank of Mexico reserves the right to reject any bid or to declare the auction totally or partially void, if in its judgment such bids, due to their characteristics, could produce inconvenient effects in the foreign exchange market, in the healthy development of the financial market in general, or if it considers that they are not consistent with the conditions prevailing in the foreign exchange market.

The Bank of Mexico will not receive bids for the time it determines, from credit institutions that, in the judgment of the Bank itself, do not comply with any applicable provisions or do not conform to sound uses or practices of the foreign exchange market.

5. EFFECTS OF BIDS.
   Bids presented to the Bank of Mexico will produce the broadest effects corresponding in law and will imply the bidder's acceptance of all and each of these provisions.

Every bid will be mandatory for the bidder who presents it and will be irrevocable.

By the mere fact of presenting bids, institutions irrevocably authorize the Bank of Mexico to, in the event that such bids receive allocation, charge their Single National Currency Account at the opening of the second banking business day immediately following the date of the corresponding allocation, up to the amount corresponding to the respective price.

The allocated dollars will be deposited in the account that the institution has previously indicated to the Office for the Processing of Foreign Exchange and Metals Operations of the Bank of Mexico, on the second banking business day immediately following the date of the allocation.

For the exclusive purposes of this section, banking business days will be understood as days that are banking business days both in the United Mexican States and in the United States of America.

6. ALLOCATION.
   In each of the auctions, the allocation will be carried out in descending order of the prices corresponding to the bids in question, without exceeding the auctioned amount. In the event that the value of the total bids exceeds this auctioned amount, only bids with an accumulated value equal to this will be accepted.

If there are several bids tied in the place where the auctioned amount is reached, causing such amount to be exceeded, the allocation will be made pro rata of the amount requested in the tied bids when it concerns traditional auctions and according to the order in which the bids were received when the corresponding auction is interactive.

Likewise, in the event that during the period between the submission of bids and the moment the results of the auctions are made known, failures occur in the systems, the auction will be declared void and the Bank of Mexico will call for a new auction on the same day by the same means or by another that it makes known to the institutions.

7. RESULTS OF THE AUCTIONS.
   The results of the auctions will be available through the Module indicated in the first paragraph of section 4., within ten minutes following the expiration of the deadline for the submission of bids in each auction.

8. GENERAL PROVISIONS.
   In the event that due to force majeure or unforeseeable circumstances auctions cannot be carried out through the SIAC-BANXICO or the respective calls or the results of the auctions cannot be made known in accordance with this Circular, the Bank of Mexico will make known to the institutions the applicable procedure for carrying out such auctions or for making known such calls or the corresponding results, as the case may be.

TRANSITIONAL PROVISIONS
FIRST.- This Circular will enter into force on October 8, 2008.

SECOND.- The dollar sales auctions carried out by the Bank of Mexico in compliance with section 1. of the first Announcement of the Exchange Commission made known today will be for a total amount of 2,500 million dollars and the provisions in sections 3. and 4. first paragraph, regarding hours, of this Circular will not apply to them.

In compliance with what is provided in the second Announcement of the Exchange Commission of today, the call for the auction for 1,502 million dollars that the Bank of Mexico will carry out tomorrow in order to reach the aforementioned amount of 2,500 million dollars, will be made known to credit institutions at 8:30:00 hours on the day of the auction.

THIRD.- As an exception to what is provided in the first paragraph of section 4. regarding the hours of this Circular, the periods for the submission of bids for auctions up to a combined amount of 400 million dollars that will be held tomorrow in accordance with what is provided in point 2. of the second Announcement of the Exchange Commission of today, will be made known to credit institutions by the Bank of Mexico in the respective calls.

Bids for said auction will have a minimum price equivalent to the result of multiplying by 1.02 the exchange rate that the Bank of Mexico publishes in the Official Gazette of the Federation on the day of the auction, in accordance with the Applicable Provisions for the Determination of the Exchange Rate to Meet Obligations Denominated in Foreign Currency Payable in the Mexican Republic, published in the Official Gazette of the Federation on March 22, 1996.