Circular 115/2002 — Brokerage House Operations

CIRCULAR 115/2002 Mexico, Federal District, October 31, 2002. Subject: Brokerage House Operations TO BROKERAGE HOUSES: The Bank of Mexico, based on Articles 24, 26, 28, 32, 33 and 36 of its Law, as well as on Articles 22, subsection IV, and 97 of the Securities Market Law, in accordance with what is stated in its Circular 114/2002 dated October 30, 2002, and with the objective of facilitating the consultation, application and compliance with the provisions it has issued to regulate the operations carried out by these brokerage houses, has resolved to issue this Circular, which compiles and updates said provisions. It should be noted that in matters of foreign exchange risk positions, in response to the request made by the Mexican Association of Stock Intermediaries, A.C., the regime is modified in order to adapt it, where appropriate, to that applicable to credit institutions.

2 INDEX CB. BROKERAGE HOUSES DEFINITIONS. 6 CB.1 CREDIT OPERATIONS. 8 CB.1.1 CREDITS TO FINANCE OWN SECURITIES POSITIONS. 8 CB.1.2 CREDITS TO SUPPORT PRICE VARIATIONS OF BONDS OR SECURITIES ARISING FROM REPO OPERATIONS. 9 CB.1.3 CREDITS TO SETTLE THE BALANCE OF THE CONTROL ACCOUNT THAT INDEVAL MAINTAINS FOR BROKERAGE HOUSES. 9 CB.1.4 CREDITS TO SETTLE OPERATIONS WITH SECURITIES THAT ARE CONCLUDED AT THE BOLSA MEXICANA DE VALORES, S.A. DE C.V. 11 CB.1.5 CREDITS TO FINANCE ACCOUNTS RECEIVABLE. 11 CB.1.6 COMMON PROVISIONS. 13 CB.2 REPO OPERATIONS. 14 CB.3 FOREIGN EXCHANGE OPERATIONS, FOREIGN EXCHANGE RISK POSITIONS AND POSITIONS FROM OPERATIONS WITH SECURITIES DENOMINATED IN FOREIGN CURRENCY. 18 CB.3.1 FOREIGN EXCHANGE OPERATIONS. 18 CB.3.2. FOREIGN EXCHANGE RISK POSITIONS. 19 CB.3.2.1 DEFINITIONS. 19 CB.3.2.2 COMPUTABLE ASSETS AND LIABILITIES. 19 CB.3.2.3 LIMITS. 21 CB.3.2.4 CALCULATION OF THE POSITION. 22 CB.3.2.5 CONVERSION OF FOREIGN CURRENCIES TO UNITED STATES DOLLARS. 23 CB.3.2.6 OTHER PROVISIONS. 23 CB.3.3 POSITIONS FROM OPERATIONS WITH SECURITIES DENOMINATED IN FOREIGN CURRENCY. 24 CB.3.3.1 DEFINITIONS. 24 CB.3.3.2 COMPUTABLE OPERATIONS. 25 CB.3.3.3 LIMIT. 26

3 CB.3.3.4 CALCULATION OF THE POSITION. 27 CB.3.3.5 VALUATION OF OPERATIONS WITH SECURITIES DENOMINATED IN FOREIGN CURRENCY. 28 CB.3.4 AUTHORIZED EXCESSES TO THE REGIMES CONTAINED IN SUBSECTIONS CB.3.2 AND CB.3.3. 28 CB.4 TRUSTS. 30 CB.5 PLACEMENT OF GOVERNMENT SECURITIES. 34 CB.5.1 BIDDERS. 34 CB.5.2 TYPES OF AUCTIONS. 34 CB.5.3 CALLS. 35 CB.5.4 BIDS. 35 CB.5.4.1 TYPES OF BIDS. 35 CB.5.4.2 BID LIMITS. 36 CB.5.4.3 SUBMISSION OF BIDS. 36 CB.5.4.4 EFFECTS OF BIDS. 37 CB.5.5 ALLOCATION. 38 CB.5.5.1 SINGLE RATE OR PRICE AUCTIONS. 38 CB.5.5.2 MULTIPLE RATE OR PRICE AUCTIONS. 39 CB.5.5.3 COMMON PROVISIONS FOR ALL AUCTIONS. 40 CB.5.6 RESULTS. 40 CB.5.7 DELIVERY OF SECURITIES AND PAYMENT OF THEIR PRICE. 41 CB.5.8 GENERAL PROVISIONS. 43 CB.6 PLACEMENT OF MONETARY REGULATION BONDS. 44 CB.6.1 BIDDERS. 44 CB.6.2 TYPES OF AUCTIONS. 45 CB.6.3 CALLS. 45 CB.6.4 BIDS. 45 CB.6.4.1 TYPES OF BIDS. 45 CB.6.4.2 BID LIMITS. 46 CB.6.4.3 SUBMISSION OF BIDS. 46 CB.6.4.4 EFFECTS OF BIDS. 46 CB.6.5 ALLOCATION. 47

4 CB.6.5.1 AT SINGLE PRICE. 47 CB.6.5.2 AT MULTIPLE PRICE. 47 CB.6.5.3 COMMON PROVISIONS FOR ALL AUCTIONS. 48 CB.6.6 RESULTS. 48 CB.6.7 DELIVERY OF THE BREMS AND PAYMENT OF THEIR PRICE. 48 CB.6.8 GENERAL PROVISIONS. 51 CB.7 MARKET MAKERS. 52 CB.7.1 DEFINITIONS. 52 CB.7.2 RIGHT OF MARKET MAKERS TO PURCHASE GOVERNMENT SECURITIES FROM THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT. 52 CB.7.3 LOAN OF SECURITIES BETWEEN MARKET MAKERS AND THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT. 54 CB.8 INFORMATION TO THE BANK OF MEXICO. 56 CB.9 GENERAL PROVISIONS. 57 TRANSITORY PROVISIONS. 58

5 ANNEXES ANNEX 1 VALUATION OF BONDS OR SECURITIES FOR GUARANTEE PURPOSES. ANNEX 2 FOREIGN CURRENCY OPERATIONS THAT UNDER SUBSECTION CB.3.2 DO NOT COUNT TOWARDS THE FOREIGN EXCHANGE RISK POSITION. ANNEX 3 Appendix 1 REQUEST MODELS. Appendix 2 MODEL LETTER OF INSTRUCTIONS TO CHARGE THE ACCOUNT OF BROKERAGE HOUSES. ANNEX 4 Appendix 1 MODEL MULTI-PAGE TITLE THAT COVERS THE BREMS. Appendix 2 MODEL LETTER OF INSTRUCTIONS TO CHARGE THE ACCOUNT OF CREDIT INSTITUTIONS OR BROKERAGE HOUSES. ANNEX 5 Appendix 1 OFFICE DOCUMENT 102-B-308 ISSUED BY THE MINISTRY OF PUBLIC CREDIT AND PUBLIC TREASURY ESTABLISHING THE PROCEDURE FOR BROKERAGE HOUSES TO ACT AS MARKET MAKERS AND ITS MODIFICATIONS. Appendix 2 MODEL APPLICATION TO EXERCISE THE RIGHT TO PURCHASE GOVERNMENT SECURITIES BY MARKET MAKERS.

6 DEFINITIONS For brevity in this Circular, the following terms shall be understood as: BONDES: Federal Government Development Bonds, denominated in national currency, including those issued at a fixed rate. BONOS UMS: Debt securities of the United Mexican States placed in international markets and registered in the National Securities Registry. Global Capital: That which the brokerage house has according to the dispositions of the National Banking and Securities Commission, calculated on the last day of the third month immediately preceding that in which the operations in question are concluded. CETES: Certificates of the Treasury of the Federation, denominated in national currency. Foreign Currency: United States dollars, as well as any other freely transferable foreign currency and immediately convertible to the aforementioned currency. Indeval: SD Indeval, S.A. de C.V., Institution for the Deposit of Securities. PIC-FARAC: Road indemnification promissory notes with guarantee of the Federal Government, issued by the National Bank of Public Works and Services S.N.C., in its capacity as trustee in the Trust for Support to Rescue Concessioned Highways. SIAC-BANXICO: System for attention to account holders of the Bank of Mexico. UDIBONOS: Federal Government Development Bonds denominated in investment units.

7 UDIS: The unit of constant real value account provided for in the Decree establishing the obligations that may be denominated in investment units and reforming and adding diverse provisions of the Fiscal Code of the Federation and of the Income Tax Law, published in the Official Journal of the Federation on April 1, 1995.

8 CB.1 CREDIT OPERATIONS. CB.1.1 CREDITS TO FINANCE OWN SECURITIES POSITIONS. CB.1.1.1 Except as provided in CB.1.1.4, brokerage houses may receive financing from domestic credit institutions and foreign financial entities destined for the acquisition of securities for their own account, including those they acquire through international arbitrage operations. Such credits must be in writing, and it shall be the responsibility of the brokerage houses that the operations they conclude strictly adhere to the provisions contained in this Circular and other applicable provisions. CB.1.1.2 The securities positions that brokerage houses acquire for their own account with financing shall not exceed one percent of the respective issue, unless it concerns the firm taking of positions in primary placements. CB.1.1.3 The securities acquired by brokerage houses for their own account with financing may or may not be listed on the exchange, in accordance with applicable provisions. In any case, the acquisitions referred to in the previous paragraph shall not exceed the following limits: a) Once the equivalent of the global capital of the corresponding brokerage house, in the case of equity securities; b) Once the equivalent of the global capital of the corresponding brokerage house, in the case of debt instruments, except those referred to in the following letter c), and c) Twelve times the equivalent of the global capital of the corresponding brokerage house, in the case of debt instruments on which brokerage houses can conclude repo operations.

9 The acquisitions referred to in this subsection that are made with foreign currency financing shall not exceed one-third of the limits indicated in letters a) to c). CB.1.1.4 Brokerage houses shall refrain from acquiring, with financing: a) Titles representing the capital of companies in which the brokerage houses control directly or indirectly ten percent or more of the social capital, or which, by virtue of said financing, control the percentages indicated; b) Titles representing the capital of companies that have direct or indirect control of ten percent or more of the social capital of such brokerage houses, and c) Titles representing the capital and subordinated obligations issued by financial entities, except those issued by investment companies in debt instruments. CB.1.2 CREDITS TO SUPPORT PRICE VARIATIONS OF BONDS OR SECURITIES ARISING FROM REPO OPERATIONS. Brokerage houses may receive financing from domestic credit institutions and foreign financial entities to support price variations of bonds or securities arising from repo operations in which they act as the party selling the security (reportadas). Such financing shall not have a maturity term greater than 180 days. CB.1.3 CREDITS TO SETTLE THE BALANCE OF THE CONTROL ACCOUNT THAT INDEVAL MAINTAINS FOR BROKERAGE HOUSES. Brokerage houses may receive credit lines from credit institutions so that they can settle the balance of the control account maintained for them by Indeval, derived from their operations with bonds and securities deposited in that Institution.

10 The total amount of credit lines that brokerage houses may receive from one or more credit institutions shall not exceed five times their Global Capital. Brokerage houses will exercise the aforementioned credit lines through the conclusion of automatic repo operations, which must have the following characteristics: a) Reporter: The accrediting credit institution; b) Reportado: The accredited brokerage house; c) Term: One business day; d) Price Amount: Except in the case of BONOS UMS, the guarantee value of bank bonds, securities issued or guaranteed by the Federal Government and ordinary participation certificates backed by Nacional Financiera, S.N.C., subject of the repo, which shall be determined using the valuation established for such purposes in Annex 1 of this Circular, and e) Premium Amount: Shall be freely agreed upon and paid outside of Indeval systems. Brokerage houses must grant an irrevocable mandate to Indeval so that, on behalf of the brokerage houses themselves, it carries out the corresponding automatic repo operations, making the necessary charges and credits in the securities and control accounts maintained for them, in accordance with their internal regulations. In the event that two or more institutions have granted credit lines to the same brokerage house, the latter must instruct Indeval to conclude the aforementioned automatic repo operations, in proportion to the credit each of them has granted to said brokerage house. Automatic repo operations must be carried out on the securities held by the brokerage house in its own holdings, in the securities deposit account maintained for it by Indeval, in the following order: a) securities issued or guaranteed by the Federal Government, -except when dealing with BONOS UMS-; b) titles issued by development banking institutions;

11 c) ordinary participation certificates backed by Nacional Financiera, S.N.C., and d) titles issued by multiple banking institutions. In such order, repo operations must be carried out on the securities or titles that have the closest maturity date to the date of conclusion of the repo. The automatic repo operations concluded by brokerage houses with credit institutions must be documented through master contracts; the brokerage houses themselves are responsible for ensuring that both the operations they conclude and the contracts they use strictly adhere to what is stated in this subsection, as well as to other applicable provisions. CB.1.4 CREDITS TO SETTLE OPERATIONS WITH SECURITIES THAT ARE CONCLUDED AT THE BOLSA MEXICANA DE VALORES, S.A. DE C.V. Brokerage houses may receive credits from credit institutions to settle operations with securities concluded on the trading floor of the Bolsa Mexicana de Valores, S.A. de C.V. CB.1.5 CREDITS TO FINANCE ACCOUNTS RECEIVABLE. CB.1.5.1 Except as provided in CB.1.5.3, unsettled operations by the ordering parties within the term established on the exchange for their settlement that are recorded in accounts receivable, derived from purchases made on the exchange by brokerage houses, of securities registered in the Securities or Special sections of the National Securities Registry or registered in the special list of securities known as the international quotation system, as well as by international arbitrage operations of securities, may be financed as follows: a) Charged to the capital of the brokerage houses themselves; b) Monthly averages of daily balances of total accounts receivable shall not exceed five percent of the Global Capital of the brokerage house itself;

12 c) The maximum term for payment of each of the amounts owed by the client to the accrediting brokerage house shall not be greater than seven business days counted from the date of settlement on the exchange of the respective securities, unless it concerns domestic financial entities, in which case the aforementioned maximum term shall not be greater than three business days, and d) They must be guaranteed with securities registered in the Securities or Special sections of the National Securities Registry or in the special list of securities known as the international quotation system, to the satisfaction of the brokerage houses themselves. The accounts receivable referred to in the first paragraph of this subsection may also be financed with credit from domestic credit institutions or foreign financial entities. CB.1.5.2 Brokerage houses shall refrain from financing accounts receivable from the same person, entity or group of persons who, due to their property or liability links, must be considered as a single debtor, for an amount greater than 12.5 percent of the Global Capital of the brokerage house in question, without exceeding in any case the limit provided in the previous subsection letter b). CB.1.5.3 Brokerage houses may not conclude operations to finance accounts receivable under which the following persons result or may result as debtors to them: a) Shareholders of the brokerage house who control directly or indirectly ten percent or more of the titles representing the paid-up social capital of the brokerage house itself, as well as its directors and officials; b) Legal entities in which the brokerage house controls directly or indirectly ten percent or more of the titles representing its paid-up social capital; c) Legal entities in which officials or directors of the brokerage house are officials or directors of the former;

13 d) Legal entities in which any of the persons referred to in the scenarios indicated in the previous letters control directly or indirectly ten percent or more of the titles representing their paid-up social capital, and e) Companies that form part of the same financial group to which the brokerage houses belong. CB.1.5.4 Brokerage houses shall refrain from granting their clients credits other than those referred to in subsection CB.1. CB.1.6 COMMON PROVISIONS. The financings referred to in subsections CB.1.1, CB.1.2 and CB.1.5, which brokerage houses receive from foreign financial entities, must be denominated exclusively in foreign currency payable abroad. Except for credits that brokerage houses receive from credit institutions in order to comply with the aggregate liquidity norm applicable to the set of their current outstanding optional title issuances, for brokerage houses to receive or grant credits under terms different from those provided in subsection CB.1, they will require prior written authorization from the Management of Authorizations, Consultations and Legal Control of the Bank of Mexico. CB.2 REPO OPERATIONS. CB.2.1 Brokerage houses may conclude repo operations on: a) Bank acceptances, time deposit certificates, bank promissory notes with yield liquidable at maturity and commercial paper with bank guarantee, all of these subscribed for a term no greater than one year, as well as bank bonds and ordinary participation certificates with bank guarantee;

14 b) Titles subject to international arbitrages, and c) Securities issued or guaranteed by the Federal Government, including BONOS UMS and PIC-FARAC. Repo operations on CETES, as well as on BONDES, will continue to be governed, insofar as not modified by this Circular, by what is provided in Circulares 10-79 and 10-99, respectively, jointly issued by the Bank of Mexico and the National Banking and Securities Commission. Only those brokerage houses that have authorization to conclude Future Operations, or Option or Swap operations, on real or nominal interest rates, may carry out repo operations in the capacity of reportadas on: i) bank bonds, ordinary participation certificates with bank guarantee and the securities referred to in letter c) above, denominated in national currency and in UDIS with fixed yield rate, whose maturity term is greater than 360 days, and ii) bank bonds, ordinary participation certificates with bank guarantee and the securities referred to in letter c) above, denominated in national currency and in UDIS with periodically adjustable rate whose term, between the dates on which the adjustment takes place, is greater than 360 days. Brokerage houses may under no circumstances carry out repo operations on titles different from or under conditions different from those expressly mentioned in subsection CB.2. CB.2.2 In repo operations, brokerage houses must always act for their own account. Brokerage houses may act as reportadas and reportadoras when the operations are concluded with other brokerage houses, credit institutions, or with the Bank of Mexico. In repo operations with persons other than those mentioned in the previous paragraph, brokerage houses may only act as reportadas.

15 CB.2.3 The term of repo operations may be freely agreed upon by the parties, not extending beyond 360 days. Operations may be extended through any of the forms indicated in this subsection, provided that each extension does not exceed 360 days. The term of the operation and its extensions may not exceed 360 days in repos on bank acceptances, time deposit certificates, bank promissory notes with yield liquidable at maturity and commercial paper with bank guarantee. Repos concluded by brokerage houses may not extend beyond the corresponding maturity date of the titles or securities subject of the operation in question. Repo operations may not be settled in advance, except in the case of: a) those referred to in subsection CB.2.5; b) those concluded with credit institutions or other brokerage houses, regarding titles issued, guaranteed or accepted by an institution other than the contracting party; c) those concluded with credit institutions and brokerage houses, in accordance with the Circulares indicated in the penultimate paragraph of subsection CB.2.1, and d) those concluded with the Bank of Mexico, credit institutions and other brokerage houses, concerning BONOS UMS and PIC-FARAC. CB.2.4 Except in the case of BONOS UMS, the transfer of the titles or securities subject of the repo, as well as the respective funds must take place on the same value date, which may not be later than the fourth business day immediately following the corresponding agreement. In the case of operations with BONOS UMS, the transfer of the titles subject of the repo, and of the respective funds must take place on the same value date, which may not be later than the third business day immediately following the corresponding agreement. At the expiration of the operations of

16 report, the aforementioned transfers must be made on the same day of maturity. Between the agreement date and the value date of a repo, brokerage houses may only perform the following operations with the securities or assets subject to the repo: a) When acting as lenders, with the securities or assets pending receipt, they may only enter into sale and repo operations, whose value date coincides with or is subsequent to the day on which they must receive the securities or assets subject to the repo, and b) When acting as borrowers, with the securities or assets pending delivery, they may only enter into repo operations, whose maturity term is prior to or coincides with the day on which they must deliver the securities or assets subject to the repo. CB.2.5 In repo contracts on securities subject to international securities arbitrages, brokerage houses must reserve the right to declare the respective operation prematurely mature. Brokerage houses must settle repos on such securities, no later than on the next business day following the day they receive from abroad the securities subject to the arbitrage operation in question. CB.2.6 Brokerage houses may freely denominate the price and premium of repos. CB.2.7 In repo operations, all calculations shall be made using the formula of a commercial year of three hundred sixty days and the number of days actually elapsed. CB.2.8 Brokerage houses must refrain from carrying out repo operations in which the agreed price or premium deviate from those prevailing in the market at the time of their agreement. Likewise, they must ensure that upon maturity they have sufficient liquidity to meet variations in the value of the securities subject to the repo.

17 CB.2.9 Repo operations must be carried out through master contracts in writing executed by brokerage houses; said intermediaries are responsible that both the operations they enter into and the contracts they use strictly adhere to the provisions established in this Circular, as well as to other applicable provisions. The price, premium, and term of the repo, as well as the class of securities subject to it, may be agreed upon through any of the forms established in the master contract itself, which may be written, verbal, telephone, or through any other electronic, computing, or telecommunication means expressly accepted by the parties, provided that on that same day the brokerage houses register these operations in their accounting. When it comes to repo operations that brokerage houses enter into with other brokerage houses or with any credit institution, such operations must invariably be formalized on the same day they are concluded, in writing, telex, telefax, or through any other means that leaves a written record of the conclusion of the corresponding operation. Regarding operations that brokerage houses enter into with other persons, it will not be necessary for such operations to be formalized on the same day they are concluded. However, in the aforementioned master contracts, it must be provided that the counterparty of the brokerage house in question may demand that the brokerage house itself formalize such operations on the same day they are concluded. In the event that the use of electronic, computing, or telecommunication means is agreed upon, the reciprocal identification keys and the responsibilities entailed by their use must be specified. CB.3 OPERATIONS WITH CURRENCIES, FOREIGN EXCHANGE RISK POSITIONS AND POSITIONS OF OPERATIONS WITH SECURITIES DENOMINATED IN CURRENCIES. CB.3.1 OPERATIONS WITH CURRENCIES. CB.3.1.1 In the operations that brokerage houses enter into with Currencies, said Currencies and their equivalent must be delivered on the same value date, no later than three business days after the agreement of the corresponding operation. Brokerage houses may only carry out Currency operations against national currency, with credit institutions or exchange houses. Likewise, brokerage houses may only carry out Currency operations against other Currencies, with credit institutions, exchange houses, or financial entities from abroad. CB.3.1.2 Brokerage houses must issue the receipts related to the Currency operations they enter into. Currency operations may be documented in master contracts, each of which may be agreed upon in the form expressly accepted by the parties in said contracts. This is always provided that brokerage houses register these operations in their accounting and invariably confirm them through any means that leaves a written record of the conclusion of the corresponding operation, on the same day they conclude it, assigning each of them a progressive number related to the number corresponding to the master contract. In the event that the use of electronic, computing, or telecommunication means is agreed upon for the conclusion of operations, the reciprocal identification keys and the responsibilities entailed by their use must be specified. CB.3.2 FOREIGN EXCHANGE RISK POSITIONS. CB.3.2.1 DEFINITIONS. For brevity, in CB.3.2, the following shall be understood: Basic Capital: That determined in accordance with the Rules for the Capitalization Requirements of Brokerage Houses, issued by the National Banking and Securities Commission, corresponding to the third month immediately preceding the month in question.

19 Long Position(s): The sum of brokerage houses' assets subject to foreign exchange risk that increase their value in national currency, and liabilities that decrease it, in the event of a depreciation of the Mexican peso exchange rate against Currencies. Short Position(s): The sum of brokerage houses' assets subject to foreign exchange risk that decrease their value in national currency, and liabilities that increase it, derived from a depreciation of the Mexican peso exchange rate against Currencies. Foreign Exchange Risk Position(s): The difference between the Long Position and the Short Position. CB.3.2.2 COMPUTABLE ASSETS AND LIABILITIES. Brokerage houses must consider for the calculation of their Foreign Exchange Risk Position the assets and liabilities referred to in the "Chart of Accounts" of the National Banking and Securities Commission, as well as other rights and obligations that, where applicable, the Bank of Mexico determines, except for the operations provided for in Annex 2. Without prejudice to the foregoing, the Bank of Mexico may determine that some of the Currency operations provided for in the aforementioned Annex 2 are not excluded from the calculation. To this effect, the Central Institute will consider their amount and the percentage they represent of the total Currency operations of the brokerage house in question.

20 Currency operations must be computed at book value, in terms of the provisions issued by the aforementioned Commission, net, where applicable, of the corresponding reserves or valuation effects. Option operations provided for in the provisions issued jointly by the Bank of Mexico and the National Banking and Securities Commission, will compute by the result of multiplying their notional amount by the delta resulting from using the valuation model applied by the brokerage house for the financial operation known as the derivative in question. Regarding financial products constituted by two or more operations, each of them will compute according to their particular characteristics forming part of the position of the Currency to which they correspond. In the case of financial products where some of their operations are denominated in or refer to Currencies and others are denominated in or refer to national currency, only those denominated in or referring to Currencies will compute. This without prejudice to what is stated in the last paragraph of CB.3.2.4. Also considered as assets and liabilities denominated in Currencies for the purposes of this section are those that brokerage houses register as obligations payable in national currency, referred to exchange rates of the national currency against Currencies. The Bank of Mexico may authorize the inclusion or exclusion of certain assets and liabilities, for the purpose of computing the Foreign Exchange Risk Position of brokerage houses. CB.3.2.3 LIMITS. At the close of operations each day, brokerage houses may maintain a Foreign Exchange Risk Position that, both as a whole and for each currency, does not exceed the equivalent to fifteen percent of their Basic Capital. Brokerage houses may request authorization from the Bank of Mexico, so that the limits referred to in the preceding paragraph, applicable to the long or short position, are calculated from a certain Long Position, up to the equivalent in United States dollars of their book capital, which will be established in the corresponding authorization, where applicable, issued by the Bank of Mexico, provided that in its judgment there are circumstances that warrant it. The Bank of Mexico may authorize the use of a Basic Capital relative to a date subsequent to that indicated in section CB.3.2.1. For the purposes of calculating the limits referred to in this section, the equivalence in United States dollars of the corresponding Basic Capital will be considered, using the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation in accordance with what is established in the "Applicable Provisions for the Determination of the Exchange Rate to Settle Obligations Denominated in Foreign Currency Payable in the Mexican Republic", on the next banking business day following the date to which the Basic Capital corresponds.

21 In the event that subsequent to the month in question, the amount of the Basic Capital of the brokerage house relative to the third month immediately preceding, is subject to modification for any reason, the Bank of Mexico will determine in each case whether new computations must or must not be made considering the modified Basic Capital. To this effect, said Central Institute will take into account: i) the causes of the determination of the new capital; ii) the effect on the computation results; iii) the time elapsed from the date of the original computation to the date of determination of the new basic capital, as well as iv) any other element it deems convenient regarding the matter. CB.3.2.4 CALCULATION OF THE POSITION. For the calculation of their Foreign Exchange Risk Position, brokerage houses must also include in the computation the Currency operations of their financial subsidiaries, both foreign and national, that are not credit institutions, exchange houses, surety institutions, insurance institutions, investment company operating societies, retirement fund administrators, nor investment companies. Subsidiaries are considered for these purposes to be those financial entities with respect to which the brokerage house or the holding company of the financial group to which the brokerage house belongs is the owner, directly or indirectly, of shares with voting rights representing at least fifty-one percent of the paid-up capital, have control of the general shareholders' meetings, or have the right to appoint the majority of the members of the board of directors, or their equivalents.

22 Brokerage houses may request from the Bank of Mexico, the exclusion in the computation of the Currency operations of the aforementioned subsidiaries. For this effect, the Bank will resolve taking into consideration, among others and if applicable, the following elements: i) the type of subsidiary in question, the regulations applicable to it, and the supervision to which it is subject; ii) whether the subsidiary is or is not located in a low-tax jurisdiction; iii) the existence of a deposit insurance regime in the country where the subsidiary is located, as well as the characteristics of said regime; iv) the existence of any financial authority empowered to act as a lender of last instance, of said subsidiary, in the country where it is located, and v) the volume and type of Currency operations carried out by the subsidiary. In the case of foreign financial subsidiaries, Long Positions and Short Positions computable for the purposes of what is provided in CB.3.2.2, will be those obtained in accordance with the following: a) The balances of the assets and liabilities of the subsidiary in question denominated in or referring to Mexican pesos will be determined, considering as such those that are not subject to foreign exchange risk. b) Said assets and liabilities will be converted to United States dollars using the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation in accordance with what is established in the "Applicable Provisions for the Determination of the Exchange Rate to Settle Obligations Denominated in Currencies Payable in the Mexican Republic", on the next banking business day following the date to which said balances correspond. c) Once converted: assets will compute as a Short Position and liabilities as a Long Position.

23 CB.3.2.5 CONVERSION OF CURRENCIES TO UNITED STATES DOLLARS. For the purposes of calculating Foreign Exchange Risk Positions, when the assets and liabilities in question are denominated in Currencies other than the United States dollar, brokerage houses must convert the respective Currency to such dollars. To carry out such conversion, they must consider the quotation that applies for the corresponding Currency against said dollar in international markets at the close of operations of the day in question. CB.3.2.6 OTHER PROVISIONS. CB.3.2.6.1 Authorization Requests. The authorization requests referred to in the last paragraph of CB.3.2.2., the second and third paragraphs of CB.3.2.3, and the second paragraph of CB.3.2.4., must be presented to the Bank of Mexico through the Department of Authorizations, Consultations, and Legal Control. CB.3.3 POSITIONS OF OPERATIONS WITH SECURITIES DENOMINATED IN CURRENCIES. CB.3.3.1 DEFINITIONS. For brevity, in section CB.3.3, the following shall be understood: Securities denominated in Currencies: Those issued, endorsed, or guaranteed by the Mexican Government or Foreign Governments, that do not reach the investment grade BBB- or Prime-3, by the Standard and Poors agency, or Baa3 or A-3, by the Moody's Investors Service agency. Basic Part of Global Capital: That corresponding to the brokerage house in question in accordance with what is provided in the Rules for the Capitalization Requirements of Brokerage Houses, calculated on the last day of the third month immediately preceding the month in which the assets and liabilities of the brokerage houses listed in section CB.3.3.2 are registered. Active Position by Issue: The sum of assets generated by operations carried out with Securities denominated in Currencies, belonging or referring to the same issue, that increase their value, and liabilities generated by operations with said securities, that decrease their value, in the event of an increase in the value of the securities. Passive Position by Issue: The sum of assets generated by operations carried out with Securities denominated in Currencies, belonging or referring to the same issue, that decrease their value, and liabilities generated by operations with said securities, that increase their value, in the event of an increase in the value of the securities. Long Position(s) by Issue: The maximum of: a) zero and b) the Active Position by Issue minus the Passive Position by Issue. Short Position(s) by Issue: The maximum of: a) zero and b) the Passive Position by Issue minus the Active Position by Issue. Total Long Position: The sum of the Long Positions by Issue. Total Short Position: The sum of the Short Positions by Issue.

25 Dollar(s): The legal tender in the United States of America. CB.3.3.2 COMPUTABLE OPERATIONS. Brokerage houses must consider for the calculation of their Long Position by Issue or Short Position by Issue, the revalued assets and liabilities at market value as follows: a) Own holdings of Securities denominated in Currencies; b) Purchases and sales of Securities denominated in Currencies already agreed upon but pending settlement; c) Securities denominated in Currencies to be received or delivered by repo operations; d) Securities denominated in Currencies to be received or delivered by securities lending operations, and e) Other assets and liabilities that by their nature resemble those already mentioned. In case of doubt, the Department of Authorizations, Consultations, and Legal Control of the Bank of Mexico will resolve on the matter. CB.3.3.3 LIMIT. At the close of operations each day, brokerage houses may maintain a Total Long Position and/or Total Short Position, in each case, for the amount that results from the lesser of: a) 40 million Dollars, or b) The equivalent to 100 percent of the Basic Part of Global Capital, converted to Dollars. The Bank of Mexico may determine, when circumstances so warrant, that brokerage houses limit their Total Long Position and/or Total Short Position, based on the Basic Part of Global Capital that they register on a date different from that indicated in the definition of Basic Part of Global Capital, provided for in section CB.3.3.1.

26 For the purposes of calculating the limit referred to in this section, the equivalence in Dollars of the corresponding Basic Part of Global Capital will be considered, using the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation, in accordance with what is established in the "Applicable Provisions for the Determination of the Exchange Rate to Settle Obligations Denominated in Foreign Currency Payable in the Mexican Republic", on the next banking business day prior to the date to which the Basic Part of Global Capital corresponds. In the event that subsequent to the month in question, the amount of the Basic Part of Global Capital of the brokerage house relative to the third month immediately preceding, is subject to modification for any reason, the Bank of Mexico will determine in each case whether new computations must or must not be made considering the modified Basic Part of Global Capital. To this effect, said Central Institute will take into account: i) the causes of the determination of the new capital; ii) the effect on the computation results; iii) the time elapsed from the date of the original computation to the date of determination of the new Basic Part of Global Capital, as well as iv) any other element it deems convenient regarding the matter. CB.3.3.4 CALCULATION OF THE POSITION. For the calculation of their Total Short Position and/or Total Long Position, brokerage houses must also include, in addition, all assets and liabilities referred to in section CB.3.3.2, of the societies with respect to which they are direct or indirect owners of shares with voting rights representing at least fifty-one percent of the paid-up capital or have control of the general shareholders' meetings or are in a position to appoint the majority of the members of the board of directors, including foreign financial entities. Regarding brokerage houses that are part of financial groups in which a credit institution does not participate, for the calculation of the Total Long Position and/or Total Short Position, they must also include all assets and

27 liabilities referred to in section CB.3.3.2, of the other members of the group. In the event that the same financial group is integrated by more than one brokerage house and a credit institution does not participate, the Total Short Positions and/or Total Long Positions of the other members of the group, must be computed to only one of the participating brokerage houses, communicating the corresponding choice to the Department of Authorizations and Regulation Follow-up of the Bank of Mexico, without the selected brokerage house being able to vary, unless authorization is obtained from the Department of Authorizations, Consultations, and Legal Control. In all cases, brokerage houses may request from the Bank of Mexico, through the Department of Authorizations, Consultations, and Legal Control, the exclusion of societies or of certain operations carried out by them, from those that may derive the assets and liabilities referred to in section CB.3.3.2. CB.3.3.5 VALUATION OF OPERATIONS WITH SECURITIES DENOMINATED IN CURRENCIES. CB.3.3.5.1 SECURITIES DENOMINATED IN CURRENCIES OTHER THAN THE DOLLAR. For the purposes of calculating the limit of operations with Securities denominated in Currencies, when the assets and liabilities in question are denominated in foreign currencies other than the Dollar, brokerage houses must convert the respective currency to such Dollars. To carry out such conversion, they must consider the quotation that applies for the corresponding foreign currency against said Dollar in international markets at the close of operations of the brokerage houses themselves. CB.3.3.5.2 MARKET VALUATION OF SECURITIES DENOMINATED IN CURRENCIES. For the purposes of calculating the limit of operations with Securities denominated in Currencies, brokerage houses must value such operations at market prices, using the quotation that applies for the security of

28

that the matter is in international markets, at the close of operations of the brokerage houses themselves.

CB.3.4 EXCESSES AUTHORIZED UNDER THE REGIMES CONTAINED IN PARAGRAPHS CB.3.2 AND CB.3.3.

The Bank of Mexico may authorize excesses to the limits referred to in paragraphs CB.3.2.3 and CB.3.3.3 of this Circular, for up to five calendar days in a twelve-month period, provided that, to the satisfaction of said Bank, they have resulted from administrative errors and, within a period not exceeding five banking business days counted from the date on which the excess in question is verified, a communication duly signed by officials with authority to perform administrative acts is submitted to the Management of Authorizations and Follow-up of Regulation, in which:

a) The act or omission that caused the excess or excesses is detailed, exhibiting, where applicable, the records that certify it, as well as the arguments that the brokerage house in question considers pertinent to demonstrate that the excesses indeed resulted from administrative errors;

b) The actions adopted to correct said errors and to prevent identical or similar errors from occurring in the future are reported, and

c) The necessary information is provided to certify that, once the error is corrected, the brokerage house is within the respective limit.

In the event that ten banking business days have elapsed after said Management has received the aforementioned communication, and the Bank of Mexico refrains from expressing its decision regarding the authorization in question, or from requesting additional information, it shall be understood that the excesses in question are included within the general authorization referred to in this paragraph.

CB.4 TRUSTS.

CB.4.1 Brokerage houses may exclusively act as trustees in investment, administration, and guarantee trusts on securities, and must strictly adhere to applicable legislation and what is provided in this Circular in their performance.

In trusts where brokerage houses act as trustees, only securities registered in the National Securities Registry maintained by the National Banking and Securities Commission may be affected, or cash destined for the acquisition of such securities.

Without prejudice to the foregoing, in no case may brokerage houses participate in trusts whose object is the granting of credits.

CB.4.2 The resources received by brokerage houses must be invested in the securities provided for in the trust contract on the same day of their receipt. When for any circumstance such investment cannot be made, brokerage houses must, no later than the next business day, deposit said funds in a credit institution, or acquire with them government securities or shares representing the capital of an investment company in debt instruments. If the deposit is made in a credit institution that is part of the financial group to which the trustee belongs, said deposit must accrue the highest rate that the credit institution pays for operations at the same term and similar amount, on the same dates that the deposit is constituted.

CB.4.3 Brokerage houses may only act as trustees in trusts whose object is the investment in securities, or the administration thereof, when the assets and rights that make up the trust estate are received exclusively from fully identified persons at the time of concluding the operation, and the adherence of third parties is not permitted once constituted.

CB.4.4 In the trusts referred to in the preceding paragraph, it may be agreed that the investment is made at the discretion of the trustee or under the terms expressly specified by the settlor. This is without prejudice to what is established in articles 91, 93, and 96 of the Securities Market Law.

Brokerage houses, in the performance of trusts in which they are authorized to invest at their discretion, may not invest in securities issued by: a) the trustee brokerage house; b) the holding company of the financial group to which the trustee belongs, and c) by the companies that, directly or indirectly, control said holding company, or the trustee company itself.

CB.4.5 In the investment trusts referred to in paragraph CB.4.3, trustee brokerage houses shall refrain from:

a) Obtaining yield differentials in their favor;

b) Performing acts that do not comply with prior instructions received from the settlors, in accordance with what is stipulated in the respective contract;

c) Charging the trust estate prices different from those paid by the trustee brokerage house itself when acquiring the respective securities, without prejudice to the fact that they may charge commissions freely agreed upon in writing with the settlors prior to said acquisition;

d) Guaranteeing the perception of yields on the funds whose investment is entrusted to them, as would be the case of receiving resources at a determined or determinable rate;

e) Performing operations with securities, at prices or yields different from those being offered in the general market;

f) Offering by any means the adherence to the respective trusts, and

g) Concluding securities purchase and sale operations with themselves, acting on their own account, when it comes to trusts in which the cited operations are carried out at the discretion of the trustee.

CB.4.6 Brokerage houses shall refrain from acting as trustees in trusts that imply the performance of operations that contravene legal norms, particularly in trusts, by virtue of which shares representing the social capital of settlor or trustee companies are acquired in the trust itself, when the performance of such trusts contravenes what is provided in article 14 BIS 3 of the Securities Market Law.

CB.4.7 Brokerage houses may act as trustees in trusts constituted with the object of guaranteeing the compliance of operations concluded by the brokerage houses themselves with or on behalf of their clients.

In such trusts, brokerage houses must ensure, at all times, the existence of the securities that make up the trust estate and that the agreed proportion exists and is preserved between the value of these and the outstanding balance of the guaranteed obligations. Likewise, they must ensure that the prospectus or offer notice specifies in full detail the terms and conditions of the corresponding guarantees and the characteristics of the securities that make up the trust estate.

Brokerage houses acting as trustees in guarantee trusts whose object is to guarantee the payment of securities subject to public offering and intermediation in the country or abroad, must send to the Management of Authorizations and Follow-up of Regulation of the Bank of Mexico, within 15 banking business days following the constitution of this type of trust, a simple copy of the respective contract, as well as the prospectus or offer notice, as applicable, by which investors are informed of the characteristics of the corresponding operation.

CB.4.8 Brokerage houses may not act as trustees in trusts other than those provided for in this Circular; however, in exceptional cases, the Bank of Mexico may authorize the constitution of trusts whose characteristics do not strictly adjust to those mentioned for the trusts referred to in this Circular, provided that they have as their object securities or cash destined for their acquisition.

CB.4.9 Regardless of the sanctions applicable to brokerage houses acting as trustees in trusts constituted in contravention of paragraph CB.4, brokerage houses must adjust said fiduciary operations so that they strictly adhere to what is provided in the aforementioned paragraph or terminate the fiduciary mandate. Until such brokerage houses comply with the foregoing, they must deposit in cash and without interest fifty percent of the funds received in said trusts, in a special account kept for this purpose by the Bank of Mexico. In the event that the trust estate is constituted partially or totally by securities, such brokerage houses must liquidate said securities and constitute with the resources resulting from the liquidation the deposit referred to in this paragraph.

The value date of constitution of said deposit will be the date or dates on which the resources or the respective securities are received.

CB.4.10 Brokerage houses must register the operations they conclude acting as trustees in accordance with the general provisions issued for this purpose by the National Banking and Securities Commission.

CB.4.11 The appointment of fiduciary delegates must be made by the board of directors of the brokerage house acting as trustee in the respective trust. Brokerage houses must inform said appointments to the National Banking and Securities Commission, as well as their resignation or removal, no later than the next business day after the date on which it occurs.

Brokerage houses must inform the public in their offices of the names of the persons who have been appointed as fiduciary delegates.

CB.5 PLACEMENT OF GOVERNMENT SECURITIES.

For brevity, in this paragraph, CETES, BONDES, and UDIBONOS may be designated jointly or separately as SECURITIES.

CB.5.1 BIDDERS.

CB.5.1.1 Only the following persons may present bids and, therefore, acquire SECURITIES in primary placement in accordance with the auction procedure provided for in paragraph CB.5:

a) Brokerage houses in the country;

b) Credit institutions in the country;

c) Investment companies in the country, and

d) Other persons expressly authorized for such effect by the Bank of Mexico. The corresponding authorization may be limited or revoked, at any time, by the Central Bank itself.

CB.5.1.2 Except for investment companies regulated by the Investment Companies Law, who will present their bids through the investment company operator that provides them with asset administration services, the aforementioned persons must always act on their own account.

The Bank of Mexico will not receive bids, for the time it determines for this purpose, from the aforementioned persons who, in the judgment of the Bank itself, do not comply with applicable provisions or do not adhere to sound uses or practices of the securities market.

CB.5.2 TYPES OF AUCTIONS.

Auctions may be:

a) At a single rate or price: which are those in which the SECURITIES are assigned starting from the best bid for the issuer and in which all bids that result in assignment are attended to at the same rate, or price, as applicable, and

b) At a multiple rate or price: which are those in which the SECURITIES are assigned starting from the best bid for the issuer and said SECURITIES are assigned at the rate or price requested.

CB.5.3 CALLS.

The Bank of Mexico will make available to the persons mentioned in paragraph CB.5.1.1 the calls for auctions, starting from 12:00 hours on the last business day of the week immediately preceding that in which the auction in question will take place, through its electronic page on the worldwide network (Internet) identified with the domain name: www.banxico.org.mx, or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico, unless the Bank itself announces another date or time for a particular call.

Such calls will disclose the characteristics of the auctions and the SECURITIES, and must refer to securities of the same class, indicating: the placement date; the call number; the issuance key; the type of auction in question; the maximum amount offered in each call, as well as the other characteristics of the respective auctions.

CB.5.4 BIDS.

CB.5.4.1 TYPES OF BIDS.

CB.5.4.1.1 Bids for auctions at a single rate or price.

Regarding CETES, the bidder must indicate the amount and the lowest discount rate at which they are willing to acquire the SECURITIES subject to the auction. Said rate will be expressed in percentage form, rounded to hundredths, in annual terms and based on 360-day years.

Regarding BONDES and UDIBONOS, the bidder must indicate the amount and the highest unit price at which they are willing to acquire the SECURITIES subject to the auction. Said price will be expressed rounded to ten-thousandths. In the case of BONDES and UDIBONOS issued prior to the placement date, said price must not include accrued but unpaid interest during the current interest period.

CB.5.4.1.2 Bids for auctions at a multiple rate or price.

Bids may only be competitive.

CB.5.4.1.2.1 Regarding CETES, the bidder must indicate an amount and the discount rate at which they wish to acquire the SECURITIES subject to the auction. Said rate will be expressed in percentage form, rounded to hundredths, in annual terms and based on 360-day years.

Regarding BONDES and UDIBONOS, the bidder must indicate the amount of BONDES or UDIBONOS and the unit price at which they wish to acquire them.

In the case of BONDES and UDIBONOS issued prior to the placement date, said price must not include accrued but unpaid interest during the current interest period.

CB.5.4.2 LIMITS OF BIDS.

The bids presented in the auctions will be subject to the following limits:

CB.5.4.2.1 The sum of the amounts of the bids presented by each bidder, for the auction defined in each call, must not exceed sixty percent of the maximum amount offered for said auction.

CB.5.4.2.2 The bidders indicated in paragraph d) of paragraph CB.5.1.1 must comply with the limits and other general requirements that, where applicable, the Bank of Mexico determines.

CB.5.4.3. PRESENTATION OF BIDS.

CB.5.4.3.1 Interested parties must present their bids through SIAC-BANXICO, through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico, or in requests they prepare in accordance with one of the models attached in Appendix 1 of Annex 3 of this Circular, as applicable to each of the SECURITIES in question. The access, identification, and, where applicable, operation keys established for the use of electronic, computing, or telecommunications media will substitute the autograph signature with an electronic one, so that documentary or technical records where they appear will produce the same effects that laws grant to documents signed by the parties and, consequently, will have equal probative value.

CB.5.4.3.2 Each bidder may present one or more bids in the same auction. The bids presented in the same request must refer exclusively to the same issuance.

The bids must be presented specifying the amount, at nominal value of the SECURITIES requested, in amounts rounded to five thousand pesos or multiples of that amount, if it is CETES or BONDES.

Bids regarding UDIBONOS must be presented specifying the amount, at nominal value, in amounts rounded to five thousand UDIS or multiples of that amount.

CB.5.4.3.3 Bids must be presented on the second banking business day immediately preceding the placement date of the SECURITIES to be auctioned, no later than 13:00 hours. The Bank of Mexico may announce another date or time for a particular auction.

This is understood to be the case that bids presented in accordance with the models attached in Appendix 1 of Annex 3 of this Circular must be delivered to the National Operations Management of the Bank of Mexico in a closed envelope accompanied by a cover letter. Both documents must be signed by the same representatives, duly authorized by the bidder, and the letter must show the knowledge of signatures granted by the Cash Account Operations Office of the Bank of Mexico, so that said signatures must be registered in the cited Office.

CB.5.4.4 EFFECTS OF BIDS.

CB.5.4.4.1 Bids presented to the Bank of Mexico through SIAC-BANXICO, through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself, or in accordance with the models of Appendix 1 of Annex 3, will produce the widest effects corresponding in law, and will imply the bidder's acceptance of all and each of the provisions contained in paragraph CB.5 and the terms and conditions established in the call in which the Bank of Mexico communicates the particular characteristics of each auction.

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

CB.5.4.4.2 The Bank of Mexico may cancel the request or bids it receives if they do not adjust to paragraph CB.5 or what is indicated in the corresponding call, are not clearly legible, have erasures or corrections, or are incomplete or incorrect in any way.

Likewise, the Bank of Mexico may reject bids regarding one or more issuances if, in the judgment of the Bank itself, their participation, due to their characteristics, could produce inconvenient effects on the objectives of credit regulation, financing of the Federal Government, or sound development of the securities market in particular or the financial market in general.

The Bank of Mexico will inform the Ministry of Finance and Public Credit about the bids that, under the terms of the preceding paragraph, do not participate in the auctions.

CB.5.5 ASSIGNMENT.

CB.5.5.1 AUCTIONS AT A SINGLE RATE OR PRICE.

CB.5.5.1.1 At single rate.

CB.5.5.1.1.1 In the case of CETES, bids will be assigned in ascending order of the corresponding discount rates, without exceeding the maximum amount indicated in the call.

The single rate of the auction, at which the SECURITIES in question will be assigned, will be that corresponding to the last bid that receives assignment, notwithstanding that it has not been fully attended to in its amount.

CB.5.5.1.2 At single price.

In auctions at single price, of BONDES or UDIBONOS, bids will be assigned in descending order of the corresponding unit prices, without exceeding the maximum amount indicated in the call.

The single price of the auction at which the SECURITIES in question will be assigned, will be that corresponding to the last bid that receives assignment, notwithstanding that it has not been fully attended to in its amount.

CB.5.5.2 AUCTIONS AT A MULTIPLE RATE OR PRICE.

CB.5.5.2.1 At multiple rate.

Regarding CETES, bids will be assigned in ascending order of the corresponding discount rates, without exceeding the maximum amount indicated in the call. The SECURITIES of each bid will be assigned precisely at the rate indicated in the bid itself.

CB.5.5.2.2 At multiple price.

Regarding BONDES and UDIBONOS, the maximum amount indicated in the call will be distributed by assigning bids in descending order of the corresponding unit prices, without exceeding the maximum amount indicated in the call. The SECURITIES of each bid will be assigned precisely at the unit price indicated in the bid itself.

CB.5.5.2.3 Common Provisions.

CB.5.5.2.3.1 Based on the bids that have received assignment, the weighted average rate or the weighted average price of the auction will be determined, as applicable.

CB.5.5.3 COMMON PROVISIONS FOR ALL AUCTIONS.

CB.5.5.3.1 In the event of tied bids at any level and the amount to be assigned is not sufficient to attend to such bids, they will be attended to pro rata of their amount.

CB.5.5.3.2 The Federal Government may declare any auction completely void, in which case no bid will receive assignment of SECURITIES.

CB.5.5.3.3 Assignments of CETES and BONDES will be made in amounts, at nominal value, rounded to thousands of pesos.

Assignments of UDIBONOS will be made in amounts, at nominal value, rounded to thousands of UDIS.

CB.5.6 RESULTS.

The Bank of Mexico will inform each bidder individually, through SIAC-BANXICO, no later than one hour after the deadline for the presentation of bids of the auction in question, of the quantity of SECURITIES, if any, that have been assigned to them and the total prices they must cover for said SECURITIES.

Likewise, it will make available to all bidders through its electronic page on the worldwide network (Internet) identified with the domain name: www.banxico.org.mx or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself, no later than thirty minutes after the deadline for the presentation of bids, the general results of such auction. The information corresponding to the general results of an auction will remain available to bidders through the mentioned medium, until the results of a new auction are incorporated under the terms previously stated.

Starting from the placement date of the SECURITIES in question, the Library Services Office of the Bank of Mexico will make available to interested parties information on the bids received in each auction and the amount of SECURITIES assigned to each of them, without indicating the name of the bidder. The historical information corresponding to all auctions carried out by the Bank of Mexico will remain available to interested parties in the mentioned office.

CB.5.7 DELIVERY OF THE SECURITIES AND PAYMENT OF THEIR PRICE.

CB.5.7.1 The Bank of Mexico, acting as financial agent of the Federal Government, based on article 2312 of the Federal Civil Code, will reserve ownership of the SECURITIES subject to sale and purchase, until the moment that

40 the bidder shall make the payment of the corresponding price in accordance with what is provided in this section. CB.5.7.2 The delivery of the ASSIGNED SECURITIES shall be through Indeval, on the day that the placement of such SECURITIES takes place, through the corresponding deposit in the account that Indeval maintains for each bidder. With respect to the bidders referred to in paragraphs c) and d) of section CB.5.1.1, they shall receive and settle their securities in terms of CB.5.7.4.2. To determine the amount in national currency of the UDIBONOS assigned, the applicable equivalence on the date of placement of such SECURITIES shall be used, in terms of what is provided in the Decree establishing the obligations to be called Units of Investment and reforming and adding various provisions to the Federal Tax Code and the Income Tax Law, published in the Official Gazette of the Federation on April 1, 1995. With respect to auctions of UDIBONOS and BONDES issued prior to their placement date, the settlement thereof shall be carried out by adding to the unit price requested or assigned, the accrued unpaid interest, from the date of their issuance or last interest payment, as applicable, up to the settlement date, according to the following formula:

Idev = Accrued interest in UDIS for the case of UDIBONOS, or in national currency for BONDES. VN = Nominal value of the title in UDIS in the case of UDIBONOS, or in national currency for BONDES.

d = days elapsed between the date of issuance or last interest payment, as applicable, and the placement date. c = annual interest rate of the UDIBONO expressed in percentage terms. For the case of BONDES, this shall correspond to that of the CETES that had been set at the beginning of the interest period or to the fixed rate that had been determined on the date of issuance, as applicable.

CB.5.7.3 Except for what is provided in section M.43.3 of Circular 2019/95, in the event that a bidder does not make the total payment of the SECURITIES assigned to them, the Bank of Mexico may, without the need for a judicial declaration, rescind the sale for the uncovered amount. Without prejudice to the foregoing, the Bank of Mexico may disqualify said bidder from participating in auctions for the primary placement of SECURITIES.

CB.5.7.4 Payment shall be made in the following manner: CB.5.7.4.1 Brokerage houses and credit institutions referred to in paragraphs a) and b) of section CB.5.1.1 shall make the payment of the SECURITIES in terms of what is provided in the internal regulations of Indeval. CB.5.7.4.2 The persons referred to in paragraphs c) and d) of section CB.5.1.1 shall make the payment and receipt of the SECURITIES through a credit institution or brokerage house. To this effect, the credit institution or brokerage house shall send to the National Operations Management of the Bank of Mexico, a communication in terms of Appendix 2 of Annex 3.

CB.5.8 GENERAL PROVISIONS. CB.5.8.1 For market information, the Bank of Mexico shall make known to the general public the characteristics of the auctions, through its electronic page on the worldwide network (Internet) identified with the domain name: www.banxico.org.mx or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself.

42 CB.5.8.2 In the event that due to force majeure or fortuitous event the calls or results of the auctions cannot be made known, in accordance with what is stated in sections CB.5.3 and CB.5.6, the Bank of Mexico shall timely communicate the applicable procedure to make known such calls or the results of the corresponding auctions.

CB.6 PLACEMENT OF MONETARY REGULATION BONDS. For brevity, in this section, Monetary Regulation Bonds may be designated as BREMS, whose Multiple Title model is attached to this Circular in Appendix 1 of Annex 4.

CB.6.1 BIDDERS. CB.6.1.1 Only the following persons may present bids and, therefore, acquire BREMS in primary placement in accordance with the auction procedure provided in section CB.6: a) Domestic brokerage houses; b) Domestic credit institutions; c) Domestic investment companies, and d) Other persons expressly authorized for such effect by the Bank of Mexico. The corresponding authorization may be limited or revoked, at any time, by the Central Bank itself.

CB.6.1.2 Except for investment companies regulated by the Investment Companies Law, who shall present their bids through the investment company operator that provides them with asset administration services, the aforementioned persons shall always act on their own account. The Bank of Mexico will not receive bids, for the time it determines for this effect, from the aforementioned persons who, in the judgment of the Bank itself, do not comply with applicable provisions or do not conform to sound uses or practices of the securities market.

43 CB.6.2 TYPES OF AUCTIONS. The auctions may be: CB.6.2.1 Traditional: those in which bidders present their bids without having information about the behavior of other bidders. Bidders receive information from other participants until the results of the auction are made public. CB.6.2.2 Interactive: those in which bidders present their bids knowing at all times the marginal assignment price of the auction.

CB.6.3 CALLS. The Bank of Mexico shall make known the calls for auctions, starting from 12:00 hours on the last business day of the week immediately preceding that in which the auction in question will take place, through its electronic page on the worldwide network (Internet) identified with the domain name: www.banxico.org.mx or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico, unless the Bank itself makes known another date or time for a particular call. Such calls shall make known the characteristics of the auctions and of the BREMS and shall refer to values of the same class, indicating: the dates and times when the auction will be held; the date on which the respective values will be delivered; the number of the call; the issuance code; the type of auction in question; the method of assigning values; the amount in real value offered in each call, as well as the other characteristics of the respective auctions.

CB.6.4 BIDS. CB.6.4.1 TYPES OF BIDS. CB.6.4.1.1 Bids may only be competitive. The bidder shall indicate the amount and the unit price at which they are willing to acquire the BREMS subject to the auction. Said price shall be expressed rounded to one hundred-thousandth. In the case of BREMS issued prior to the placement date, said price shall not include accrued unpaid interest during the current interest period.

CB.6.4.2 LIMITS OF BIDS. Each bid shall not exceed the maximum amount of the call. The bidders referred to in paragraph d) of section CB.6.1.1 shall comply with the limits and other general requirements that, if applicable, the Bank of Mexico determines.

CB.6.4.3 SUBMISSION OF BIDS. CB.6.4.3.1 Interested parties shall present their bids through SIAC-BANXICO, or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico. The access, identification, and, if applicable, operation keys established for the use of electronic computing or telecommunications media shall substitute the autograph signature with an electronic one, so that documentary or technical records in which they appear shall produce the same effects that the laws grant to documents signed by the parties and, consequently, shall have equal probative value. CB.6.4.3.2 Bids shall be presented specifying the amount in real value of the BREMS, in quantities rounded to one million pesos or multiples thereof. CB.6.4.3.3 The dates and times for presenting bids shall be made known in the respective call.

CB.6.4.4 EFFECTS OF BIDS. CB.6.4.4.1 Bids presented to the Bank of Mexico through SIAC-BANXICO or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself, shall produce the broadest effects that correspond in law, and shall imply the bidder's acceptance of all and each of the provisions contained in section CB.6 of this Circular and of the terms and conditions established in the call in which the Bank of Mexico communicates the particular characteristics of each auction. Every bid shall be binding for the bidder who presents it and shall be irrevocable. CB.6.4.4.2. The Bank of Mexico may invalidate the bids it receives if they do not conform to these rules, to what is stated in the corresponding call, or if they are incomplete or in some way incorrect. Likewise, the Bank of Mexico may reject bids regarding one or more issuances if, in the judgment of the Bank itself, their participation, due to their characteristics, could produce inconvenient effects for the objectives of credit regulation; of a sound development of the securities market in particular or of the financial market in general, or if it considers that they are not consistent with the conditions prevailing in the market.

45 CB.6.5 ASSIGNMENT. CB.6.5.1 AT A SINGLE PRICE. Bids shall be assigned in descending order of the corresponding unit prices, without exceeding the amount indicated in the call. The single price of the auction at which the BREMS in question shall be assigned shall be that corresponding to the last bid that receives assignment, even if it has not been fully attended in its amount.

CB.6.5.2 AT MULTIPLE PRICES.

46 The amount indicated in the call shall be distributed by assigning bids in descending order of the corresponding unit prices without exceeding the amount indicated in the call. The BREMS of each bid shall be assigned precisely at the unit price indicated in the bid itself. Based on the bids that have received assignment, the weighted average price of the auction shall be determined, as applicable.

CB.6.5.3 PROVISIONS COMMON TO ALL AUCTIONS. CB.6.5.3.1 In the event of tied bids at any level and the amount to be assigned is not sufficient to attend to such bids, they shall be attended pro rata of their amount, except when they are bids presented in interactive auctions, which shall be attended in the order in which they were received. CB.6.5.3.2 The Bank of Mexico may determine in any auction the minimum unit price at which it is willing to place the BREMS subject to the own auction. In these cases, bids with lower prices shall not be attended. CB.6.5.3.3 Assignments shall be made in amounts, at their real value, rounded to millions of pesos. The number of values to be received shall be determined by dividing the amount assigned to each of the bids by the assignment price including, if applicable, the accrued interest. When the number of values to be received is not an integer, it shall be adjusted to the immediate lower integer.

CB.6.6 RESULTS. The results of the auctions shall be available through SIAC-BANXICO, within ten minutes following the expiration of the deadline for the presentation of bids in each auction.

CB.6.7 DELIVERY OF THE BREMS AND PAYMENT OF THEIR PRICE. CB.6.7.1 The Bank of Mexico, based on article 2312 of the Federal Civil Code, reserves ownership of the BREMS subject to sale until the moment the bidder makes the payment of the corresponding price in accordance with what is provided in this section.

47 CB.6.7.2 The delivery of the assigned BREMS shall be through INDEVAL, on the date fixed in the corresponding call, through the respective deposit in the account that INDEVAL maintains for each bidder. With respect to the bidders referred to in paragraph c) of section CB.6.1.1, they shall receive and settle their securities in terms of CB.6.7.4.2. In auctions of BREMS issued prior to their placement date, the settlement thereof shall be carried out by adding to the unit price requested or assigned, the accrued unpaid interest, from the date of their issuance or last interest payment as applicable, up to the settlement date, according to the following formula:

Idev = Accrued unpaid interest in pesos. VN = Nominal value of the title. N = Number of natural days elapsed between the date of issuance of the title or the last interest payment and the settlement date. R = Annual accrued interest rate, which is calculated according to the following formula, expressed in percent with rounding to two decimals:

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Where, i = Refers to each of the natural days between the date of issuance of the title or the last interest payment and the settlement date. The aforementioned variable may take values from 1 to N. = Operator meaning to perform the multiplication of the N factors in parentheses. ri = Rate at which credit institutions and brokerage houses carry out operations of sale and repurchase for a one-business-day term with bank titles, known in the market as "Banked Weighted Funding Rate", calculated and made known on day i by the Bank of Mexico, through its electronic page www.banxico.org.mx, in terms of the publication in the Official Gazette of the Federation of date July 31, 2000, or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself. In the latter case, the means by which said rate will be disseminated shall be timely informed. In the event of a non-business day, the rate that was made known on the immediate preceding business day shall be used. In the event that this rate cannot be determined or ceases to be made known, the Bank shall request in writing to two "brokerage houses" that the Money Market Committee of the Association of Bankers of Mexico, A.C. (ABM) selects, the average of the operations of sale and repurchase for a one-day term with bank titles. The Bank of Mexico shall calculate the average of the two rates obtained for its determination and shall make known the result in the form and means mentioned, as a substitute rate for the aforementioned one.

49 CB.6.7.3 Except for what is provided in section M.43.3 of Circular 2019/95, in the event that a bidder does not make the total payment of the BREMS assigned to them, the Bank of Mexico may, without the need for a judicial declaration, rescind the sale for the uncovered amount. Without prejudice to the foregoing, the Bank of Mexico may disqualify said bidder from participating in auctions for the primary placement of BREMS.

CB.6.7.4 Payment shall be made in the following manner: CB.6.7.4.1 Brokerage houses and credit institutions shall make the payment of the BREMS in terms of what is provided in the internal regulations of INDEVAL. CB.6.7.4.2 The bidders referred to in paragraph c) of section CB.6.1.1 shall make the payment and receipt of the BREMS through a credit institution or brokerage house. To this effect, the credit institution or brokerage house shall send to the National Operations Management of the Bank of Mexico a communication in terms of Appendix 2 of Annex 4 of this Circular.

CB.6.8 GENERAL PROVISIONS. CB.6.8.1 For market information, the Bank of Mexico shall make known to the general public the call for auctions and the general results thereof, through its electronic page on the worldwide network (Internet) identified with the domain name: www.banxico.org.mx or through any other electronic computing or telecommunications medium authorized for this purpose by the Bank of Mexico itself. CB.6.8.2 In the event that due to force majeure or fortuitous event the calls or results of the auctions cannot be made known, in accordance with what is stated in sections CB.6.3 and CB.6.6, the Bank shall timely communicate the applicable procedure to make known such calls or the results of the corresponding auctions.

CB.7 MARKET MAKERS.

50 CB.7.1 DEFINITIONS. For brevity, in CB.7, Fixed-Rate Federal Government Development Bonds, BONOS, and said BONOS and CETES jointly or separately, may be designated as VALUE(S); auctions for the placement of government securities that are carried out in terms of section CB.5, as AUCTION(S); OFFICE, to Office 102-B-308, issued by the Secretariat of Finance and Public Credit, dated September 28, 2000, which with its modifications is attached as Appendix 1 of Annex 5; and MARKET MAKER(S), to brokerage houses that operate with such character in terms of what is provided in the aforementioned office.

CB.7.2 RIGHT OF MARKET MAKERS TO PURCHASE GOVERNMENT VALUES FROM THE BANK OF MEXICO IN ITS CHARACTER AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT. CB.7.2.1 The right to purchase CETES at the weighted discount rate and BONOS at the assignment or weighted price, as applicable, resulting from the AUCTION of each of said VALUES, provided in the OFFICE, may be exercised by Market Makers in all those weeks in which AUCTIONS of the aforementioned VALUES are carried out. CB.7.2.2 Requests to exercise the aforementioned purchase right shall be presented to the National Operations Management of the Bank of Mexico, no later than thirty minutes after the results of the AUCTIONS in question are made public. The Bank of Mexico may make known a different time for the exercise of such right in case of force majeure. Brokerage houses may present a request for each type of VALUES offered in the AUCTION. Such requests shall specify the nominal value of the VALUES requested, in multiples of 10 for CETES and in multiples of 100 for BONOS. CB.7.2.3 Requests shall be presented through SIAC-BANXICO, or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico. The access, identification, and, if applicable, operation keys established for the use of electronic, computing, or telecommunications media shall substitute the autograph signature with an electronic one, so that documentary or technical records in which they appear shall produce the same effects that the laws grant to documents signed by the parties and, consequently, shall have equal probative value.

51 CB.7.2.4 In the event of failures of the electronic, computing, or telecommunications media referred to in section CB.7.2.3, requests may be presented by fax in the time referred to in section CB.7.2.2, and must be confirmed in writing at the aforementioned National Operations Management located at Avenida Cinco de Mayo number 6, ground floor, Centro Colony, in this city, no later than 19:00 hours on the same day, according to the model attached as Appendix 2 of Annex 5, in a closed envelope, accompanied by a cover letter. Both documents shall be duly signed by the same authorized representatives of the participating MARKET MAKERS and the letter shall show the signature knowledge granted by the Cash Account Operations Office of the Bank of Mexico, so that the signatures shall be registered in the aforementioned Office. CB.7.2.5 Requests presented to the Bank of Mexico shall produce the broadest effects that correspond in law and shall imply the acceptance of the MARKET MAKERS to all and each of the provisions provided in section CB.7, the OFFICE, and the other provisions that apply for this effect. Such requests shall be binding for the MARKET MAKERS who present them and shall be irrevocable. CB.7.2.6 The Bank of Mexico shall invalidate requests that do not conform to section CB.7, to the OFFICE, are not clearly legible, have erasures or corrections, or are in some way incorrect. CB.7.2.7 The Bank of Mexico, through SIAC-BANXICO, shall inform all MARKET MAKERS who have presented the request to exercise the right to purchase VALUES in accordance with this Circular, the quantity of VALUES that will be sold to them and the total prices that they shall pay for each type of VALUE, no later than 2 hours after the

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deadline hour by which they could have submitted the corresponding applications in accordance with what is provided in section CB.7.2.2.

CB.7.2.8 The Bank of Mexico, acting as the financial agent of the Federal Government, based on Article 2312 of the Federal Civil Code, shall retain ownership of the SECURITIES subject to the sale, until the moment the corresponding price is paid.

CB.7.2.9 The delivery of the SECURITIES shall be through Indeval, on the same business banking day that the placement of the SECURITIES takes place in terms of the respective AUCTION, through the corresponding deposit in the account that Indeval maintains for each MARKET MAKER.

CB.7.2.10. MARKET MAKERS must make payment for the SECURITIES in accordance with what is provided in the Internal Regulations of Indeval.

CB.7.2.11. In the event that any MARKET MAKER does not make the total payment for the SECURITIES sold to them, the Bank of Mexico may, without the need for a judicial declaration, rescind the sale for the uncovered amount. Without prejudice to the foregoing, the Secretariat of Finance and Public Credit may determine that the brokerage house in question cease to act as a MARKET MAKER in accordance with what is provided in section 5.3 of the OFFICIAL GAZETTE.

CB.7.3 LOAN OF SECURITIES BETWEEN MARKET MAKERS AND THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT.

CB.7.3.1 The securities lending operations referred to in the OFFICIAL GAZETTE shall be carried out through Indeval in accordance with what is provided in its Internal Regulations, for which purpose, MARKET MAKERS must carry out the necessary procedures before said Institution, in order to be able to operate the electronic procedure for the celebration of specialized securities lending operations, called VALPRE-E.

CB.7.3.2 In order for MARKET MAKERS to be able to carry out the aforementioned securities lending operations, they must previously celebrate a contract with the Bank of Mexico which will establish the characteristics of said operations, the rights and obligations of the

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parties, as well as the procedure to constitute, substitute and cancel the corresponding guarantees. To this effect, they must present to the Sub-gerencia of Instrumentation of National Operations located at Avenida 5 de Mayo, number 1 (Guardiola Annex), third floor, Colonia Centro, Mexico D.F., C.P. 06059, within the hours between 9:00 and 19:00, a certified copy and a simple copy of the public deed in which the power to exercise acts of domain that brokerage houses have granted to their representatives is contained, a simple copy of an official identification of said representatives, as well as a copy of the communication from Indeval in which it states that the brokerage house in question is able to operate the VALPRE-E, with at least two business banking days in advance of the date on which they intend to start the celebration of such operations. In this case, the MARKET MAKER in question must sign the corresponding contract at least one business banking day in advance of said date.

CB.8 INFORMATION TO THE BANK OF MEXICO.

Brokerage houses must provide the Bank of Mexico with the periodic information that the Bank itself requests from them, in the form and terms that the areas of said Bank authorized for such effects previously make known to them.

CB.9 GENERAL PROVISIONS.

CB.9.1 The expenses incurred by the Bank of Mexico, due to the reprocessing of information and the preparation of new computations, due to errors attributable to brokerage houses, will be charged to them. This without prejudice to the sanctions that may be deemed appropriate.

Brokerage houses authorize the Bank of Mexico, by the mere fact of carrying out the operations provided for in this Circular, to make the charges that, if applicable, correspond in accordance with the preceding paragraph, in the cash account that the Bank of Mexico maintains for them.

CB.9.2 All the timeframes set forth in this Circular are referred to the time zone of Mexico City, Federal District.

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CB.9.3 Brokerage houses may in no case carry out operations in which terms and conditions are agreed upon that deviate from those prevailing in the market at the time of their celebration, from the general policies of the brokerage houses, from the policies dictated by the competent authorities or from sound financial practices and market usages.

CB.9.4 Brokerage houses that fail to comply with the provisions contained in this Circular will be sanctioned in accordance with Articles 27 and 33 of the Bank of Mexico Law. This, without prejudice to what is provided in the last paragraph of fraction IV of Article 22 of the Securities Market Law and the other sanctions that are applicable.

CB.9.5 All terms referred to the timeframes of the operations indicated in this Circular will be computed in natural days, except in cases where the contrary is expressly stated.

TRANSITORY PROVISIONS.

FIRST.- This Circular will enter into force on November 11, 2002. This, except for section CB.3.2 which will enter into force on December 9, 2002.

SECOND.- From the date of entry into force of this Circular, the following Circulars of the Bank of Mexico are repealed: 6/81, 28/86, 54/90, 60/92, 65/94, 69/94, 70/94, 85/96, 87/97, 88/97, 90/97, 95/99, 98/2000, 100/2000, 101/2000, 102/2001, 103/2001, 104/2001, 108/2001, 109/2001, 110/2002, 111/2002, 113/2002 and their modifications.

Likewise, from December 9, 2002, Circular 83/95 of the Bank of Mexico and its respective modifications are repealed.

THIRD.- Brokerage houses that, due to the entry into force of section CB.3.2, estimate that they will present excesses in their Foreign Exchange Risk Position, may request from the Bank of Mexico the necessary facilities to adapt to what is provided therein. The corresponding request, if applicable, must be submitted in writing to the Management of Authorizations, Consultations and Legal Control before December 9, 2002.

FOURTH.- Section CB.3.4. will be in force until March 28, 2003.