Circular 1/2015 — Modifies Circular 3/2012

(First Section) OFFICIAL GAZETTE Friday, January 9, 2015 BANK OF MEXICO CIRCULAR 1/2015, addressed to Credit Institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, regarding Modifications to Circular 3/2012 (Annex 7). At the margin a logo, which says: Bank of Mexico. CIRCULAR 1/2015 TO CREDIT INSTITUTIONS AND TO THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT:
SUBJECT: MODIFICATIONS TO
CIRCULAR 3/2012 (ANNEX 7)
The Bank of Mexico, with the objective of promoting the sound development of the financial system and to foster the good functioning of payment systems, has considered it convenient to make clarifications to the procedure used by the Bank of Mexico for the determination of the value of the securities subject to repo operations to provide liquidity to the payment systems and the repos to formalize the liquidity auctions that it holds with Institutions, in terms of these Provisions. For this reason, based on articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 24 of the Bank of Mexico Law, 4, paragraph first, 8, paragraphs fourth and seventh, 10, paragraph first, 15, paragraph first, in relation to 20, fraction XI, 14 Bis 1, paragraph first, in relation to 25 Bis 1, fraction IV, and 25 Bis 2, fraction II, 14 Bis, paragraph first, in relation to 17, fraction I, 30, paragraph first, in relation to 20 Bis, fraction IV, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Payment Systems and Corporate Services, the General Directorate of Financial System Affairs, the General Directorate of Legal Affairs, and the General Directorate of Internal Audit and Risk Management, respectively, as well as Second, fractions I, II, VIII and X, of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, has resolved to modify the index and Annex 7 of the "Provisions applicable to the operations of Credit Institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development", contained in Circular 3/2012, to remain in the following terms:
PROVISIONS APPLICABLE TO THE OPERATIONS OF CREDIT INSTITUTIONS AND OF THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT INDEX . . . ANNEXES . . .
Annex 7 Valuation of titles or securities
. . .
“ANNEX 7
Valuation of titles or securities

1. General valuation procedure.
   The Bank of Mexico will carry out the valuation of the instruments indicated in the catalog that the institution sends it daily for the deposit of securities using the valuation prices sent to it daily by the Price Providers (Providers) with which it has a respective agreement. With the purpose of determining the value of the instruments that will be used to celebrate repo operations to provide liquidity to the payment systems and the repos to formalize the Liquidity Auctions referred to in these Provisions, it may apply to each instrument a discount factor on the valuation price obtained in accordance with the procedure described in this Annex. In their case, the aforementioned factors will be made known to these institutions by the Central Bank itself.

Friday, January 9, 2015 OFFICIAL GAZETTE (First Section) The valuation of fixed-income marketable instruments will be carried out by calculating a weighted average of the prices of the Providers, using random weights. The weights are generated from a uniform distribution and subsequently normalized to ensure that the valuation price of the Bank of Mexico is between the lowest and highest prices calculated by the Providers. For each outstanding issue, its dirty and clean prices will be determined.
1.1 Set of instruments to be valued in accordance with the procedure provided in this
section (Price Vector).
The valuation will be carried out for the following instruments:

• CETES;
• BONOS;
• BONDES;
• UDIBONOS;
• IPAB Securities, and
• BREMS.
  1.2 Calculation of the Price Vector
  The valuation prices will be calculated as follows 1:
  a) If for instrument x on the valuation date t there are at least 2 valuations from the Providers, the Bank of Mexico will determine the clean valuation price of that instrument according to the following equation:
  Where:
  : is the clean price of the i-th Provider.
  : is the i-th random weight with values between 0 and 1, generated with a uniform distribution and Where:
  For each instrument, on each valuation date, new weights must be determined.
  The dirty prices in this case will be calculated using the same weights as for the clean prices. b) If for instrument x on the valuation date t there is information only from the i-th Provider, the clean valuation price that the Bank of Mexico will determine for that instrument will consider the clean price of that single Provider, modified according to the equation following:

1 The Bank of Mexico may use same-day, 24-hour or 48-hour prices.

(First Section) OFFICIAL GAZETTE Friday, January 9, 2015 c) If on the valuation date there is no information from any Provider for instrument x, the Bank of Mexico will determine the clean and dirty valuation prices of that instrument by repeating the value of the previous day.
2. Procedure to value Government Securities and monetary regulation bonds in their
first placement.
When there are no valuation prices from Providers, the Bank of Mexico will value Government Securities and monetary regulation bonds in their first placement using the unique prices or rates or the weighted average rates or prices resulting from the respective auction.” TRANSITORY UNIQUE. This Circular will enter into force on the next banking business day following its publication in the Official Gazette of the Federation. Mexico, D.F., January 7, 2015.- The General Director of Payment Systems and Corporate Services, Lorenza Martínez Trigueros.- Signature.- The General Legal Director, Luis Urrutia Corral.- Signature.- The General Director of Internal Audit and Risk Management, Samuel Alfaro Desentis.- Signature.- The Director General of Financial System Affairs, Jesús Alan Elizondo Flores.- Signature. For any queries regarding the content of this Circular, please contact the Department of Authorizations, Consultations and Legal Control, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.