Circular 3/2014 — Modifies Circular 7/2011

Friday, February 14, 2014 OFFICIAL GAZETTE (First Section) BANCO DE MEXICO CIRCULAR 3/2014 addressed to credit institutions and brokerage houses, regarding modifications to Circular 7/2011.

A logo appears at the margin, stating: Bank of Mexico.

CIRCULAR 3/2014 TO CREDIT INSTITUTIONS AND BROKERAGE HOUSES:

SUBJECT: MODIFICATIONS TO CIRCULAR 7/2011

The Bank of Mexico, in its capacity as the financial agent of the Federal Government, taking into account the letter from the Ministry of Finance and Public Credit number 305.-010/2014, made known through our Circular 2/2014, by which said Department informs these entities of modifications to the procedure to act as market makers for government securities, in order to continue fostering the development of the market for Development Bonds of the Federal Government of the United Mexican States denominated in national currency with a fixed interest rate coupon (BONOS) and Development Bonds of the Federal Government denominated in Investment Units (UDIBONOS), has resolved, for the purpose of uniformity, to make the corresponding adjustments to the procedure so that market makers exercise the right to purchase government securities and conduct loan operations on said securities with the Bank of Mexico in its capacity as the financial agent of the Federal Government.

The foregoing, based on what is provided in articles 28, paragraphs sixth and seventh of the Political Constitution of the United Mexican States; 3rd, fraction III; 7th, fraction I, and 10 of the Bank of Mexico Law; 22 of the Law for Transparency and Ordering of Financial Services, as well as 4th, first paragraph, 8th, paragraphs fourth and seventh, 10, first paragraph, 14 Bis in relation to 17 fraction I and 12 first paragraph in relation to 19 Bis fraction V, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Legal Directorate and the General Directorate of Central Bank Operations, respectively, as well as Second fractions VI and X of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, has resolved to modify sections 1, in the definition of “Auctions”, 2.1, 2.11 and 3.2, second paragraph, of the “Procedure for Market Makers and UDIBONOS Market Makers to Exercise the Right to Purchase BONOS, CETES and UDIBONOS, as applicable, and to Conduct Loan Operations on Such Securities with the Bank of Mexico in its Capacity as the Financial Agent of the Federal Government”, contained in Circular 7/2011, to read as follows:

“1. DEFINITIONS … Auctions: the auctions for the placement of CETES, BONOS and UDIBONOS, as applicable, which are carried out in accordance with the “Rules of the Auctions for the Placement of Government Securities and IPAB Securities” or those that replace them, issued by the Bank of Mexico.

(First Section) OFFICIAL GAZETTE Friday, February 14, 2014 …”

2. RIGHT OF MARKET MAKERS AND UDIBONOS MARKET MAKERS TO PURCHASE BONOS, CETES AND UDIBONOS, AS APPLICABLE, FROM THE BANK OF MEXICO IN ITS CAPACITY AS THE FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

“2.1 Market Makers shall have the right to purchase BONOS and CETES and UDIBONOS Market Makers shall have the right to purchase UDIBONOS, at a rate or price equal to the weighted average rate or assignment price, as applicable, resulting from the Auction of each of said government securities in all weeks in which these are held. The foregoing, except in the week in which any syndicated auction is held for the placement of BONOS or UDIBONOS, in which case, Market Makers and UDIBONOS Market Makers may not exercise the purchase option right for BONOS or UDIBONOS, as applicable, during the week in which the aforementioned syndicated auction is held, regardless of the maturity term of the instrument referenced therein.”

“2.11 Except as provided in article 145 of Circular 3/2012, in the event that any Market Maker or UDIBONOS Market Maker does not make full payment for the BONOS, CETES and UDIBONOS 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 Ministry, in terms of what is provided in section 8.5 of the Letter, may determine that the credit institution or brokerage house in question cease to act as a Market Maker or UDIBONOS Market Maker.”

3. LOAN OF SECURITIES BETWEEN MARKET MAKERS AND UDIBONOS MARKET MAKERS, AND THE BANK OF MEXICO IN ITS CAPACITY AS THE FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

“3.2 … For the purpose of what is provided in the preceding paragraph, at least ten Business Days prior to the date on which they intend to begin conducting such operations, Market Makers and UDIBONOS Market Makers must submit to the Sub-Management of Operations Instrumentation within the hours between 9:30 and 18:00, a simple copy and a certified copy for verification, of the public deed containing the power of attorney to exercise acts of dominion that have been granted to their representatives; a simple copy of an official identification of said persons, as well as a copy of the communication from Indeval in which it states that the credit institution or brokerage house in question is capable of operating VALPRE-E. In this case, the corresponding credit institution or brokerage house must sign the corresponding contract at least five Business Days prior to said date.”

TRANSITORY SINGLE. This Circular shall enter into force on the next banking business day following its publication in the Official Gazette of the Federation.

Mexico, D.F., February 12, 2014.- BANK OF MEXICO: The Director of Central Bank Regulations, Eduardo Aurelio Gómez Alcázar.- Signature.- The Manager of National Operations, Juan Rafael García Padilla.- Signature.

Friday, February 14, 2014 OFFICIAL GAZETTE (First Section) For any inquiries regarding the content of this Circular, please contact the Management of Authorizations, Consultations and Legal Control, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.