Circular 25/2011 — Modifies Circular 4/2006

Wednesday, December 21, 2011 OFFICIAL GAZETTE (First Section) 105

CIRCULAR 25/2011, addressed to multiple banking institutions, brokerage houses, investment companies, and limited-purpose financial societies regarding modifications to Circular 4/2006.

At the margin a logo, which says: Bank of Mexico.

CIRCULAR 25/2011

TO MULTIPLE BANKING INSTITUTIONS, BROKERAGE HOUSES, INVESTMENT COMPANIES AND LIMITED-PURPOSE FINANCIAL SOCIETIES:

SUBJECT: MODIFICATIONS TO CIRCULAR 4/2006

With the objective of promoting the use of financial products to mitigate the risk caused by changes in the prices of agricultural and livestock products, the Bank of Mexico deems it appropriate to make modifications to the regulation regarding financial derivative operations, in order to include other commodities as underlying assets on which multiple banking institutions and brokerage houses may celebrate such operations.

Therefore, based on Article 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; Articles 24 and 26 of the Bank of Mexico Law; Article 46, fraction XXV of the Credit Institutions Law; Article 176 of the Securities Market Law; Article 22 of the Law for Transparency and Order of Financial Services; Articles 4, first paragraph, 8, fourth and seventh paragraphs, 10, first paragraph, 14 Bis 1 in relation with Article 25 Bis 1, fraction IV, as well as 17, fraction I and 19, fraction VII, of the Internal Regulations of the Bank of Mexico, which grant the authority to participate in the issuance of provisions through the General Directorate of Financial System Affairs; the Directorate of Central Banking Provisions; and the Directorate of Operations, respectively; Article Two of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, fractions III, VII and XI, as well as in the letter from the Secretariat of Finance and Public Credit No. UBVA/074/2010, has resolved to modify numerals 2.1 and the second paragraph of numeral 7, of Circular 4/2006, to read as follows:

RULES TO WHICH MULTIPLE BANKING INSTITUTIONS, BROKERAGE HOUSES, INVESTMENT COMPANIES AND LIMITED-PURPOSE FINANCIAL SOCIETIES MUST ADHERE IN THE CONDUCT OF DERIVATIVE OPERATIONS

2. UNDERLYING ASSETS

“2.1 Entities may only conduct Derivative Operations on the following Underlyings:

...

h) Corn, wheat, soy, and sugar;

...

k) Aluminum and copper;

l) Rice, sorghum, cotton, oats, coffee, orange juice, cocoa, barley, cattle, hogs, milk, canola, soybean oil, and soybean meal, and

m) Forward, Option, and Swap Operations on the Underlyings referred to in the preceding subsections.”

“7. FORMS OF SETTLEMENT

...

Entities that, on their own account, celebrate Derivative Operations on the Underlyings indicated in subsections h), i), j), k), and l) of numeral 2.1, are prohibited from physically settling such operations.”

TRANSITORY

SINGLE. This Circular shall enter into force on December 22, 2011.

Mexico, D.F., December 19, 2011.- BANK OF MEXICO: The General Director of Financial System Affairs, José Gerardo Quijano León.- Signature.- The Director of Central Banking Provisions, Fernando Luis Corvera Caraza.- Signature.- The Director of Operations, Jaime José Cortina Morfín.- Signature.

Wednesday, December 21, 2011 OFFICIAL GAZETTE (First Section) 106

For any inquiries regarding the content of this Circular, please contact the Department of Authorizations, Consultations and Legal Control, located at Avenida 5 de Mayo number 2, Colonia Centro, Mexico, Federal District, C.P. 06059, or by telephone at 5237.2308, 5237.2000 ext. 3200 or 5237.2317.