Circular 39/2008 — Modifies Circular 3/2006

“2008, Year of Physical Education and Sport” CIRCULAR 39/2008 Mexico, D.F. on September 1, 2008. TO CREDIT INSTITUTIONS: SUBJECT: MODIFICATIONS TO THE PROCEDURE FOR MARKET MAKERS TO EXERCISE THE RIGHT TO PURCHASE GOVERNMENT SECURITIES AND CONCLUDE LOAN OPERATIONS ON SAID SECURITIES WITH THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

The Bank of Mexico, in its capacity as financial agent of the Federal Government, based on the provisions of Article 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States; Article 3, fraction III, Article 7, fraction I, and Article 10 of the Bank of Mexico Law; Article 22 of the Law for Transparency and Order of Financial Services; Articles 8, paragraphs third and sixth, 10, 12 in relation to Article 19, fractions I, II, VI and IX, and Article 17, fraction I, which provide for the attributes of the Bank of Mexico, through the General Directorate of Central Banking Operations and the Directorate of Central Banking Dispositions, to negotiate and formalize, among others, operations with securities; to carry out the necessary acts for the issuance, placement, purchase and sale, and redemption of government securities; to operate mandates or commissions entrusted to the Bank of Mexico related to the aforementioned attributes, as well as to issue provisions, respectively, all of the Internal Regulations of the Bank of Mexico; the Sole Provision of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, fractions I and IV; and considering that through Official Letter No. 305.-065/2008 of April 30, 2008, made known through our Circular 20/2008 of May 7, 2008, the Secretariat of Finance and Public Credit (SHCP) nullifies Official Letters 305.-038/2006, 305.-088/2007 and 305.-110/2007 of dates February 27, 2006, July 26, 2007 and August 28, 2007, made known through our Circular-Telefax 2/2006, 7/2007 and 9/2007, respectively, and instructs this Central Bank to, in its capacity as financial agent of the Federal Government, carry out the necessary acts to instrument the procedure to which credit institutions, acting or intending to act as market makers of government securities, must be subject, and with the objective of promoting the healthy development of the financial system, has resolved to add to numeral 1 the definitions “BUSINESS DAYS”, “SECRETARIAT” and “SIAC-BANXICO”, as well as to modify numerales 1 the definition “OFFICIAL LETTER”; 2.1, 2.2 first paragraph, 2.4, 2.6, 2.9, 2.11 and 3.1 second paragraph, of the “Procedure for Market Makers to Exercise the Right to Purchase Government Securities and Conclude Loan Operations on Said Securities with the Bank of Mexico in its Capacity as Financial Agent of the Federal Government”, made known through our Circular-Telefax 3/2006 and modified through our Circular 12/2007, of dates March 1, 2006 and October 3, 2007, respectively, to remain in the following terms:

PROCEDURE FOR MARKET MAKERS TO EXERCISE THE RIGHT TO PURCHASE GOVERNMENT SECURITIES AND CONCLUDE LOAN OPERATIONS ON SAID SECURITIES WITH THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

“1. DEFINITIONS ... BUSINESS DAYS: the days of the week, excluding Saturdays, Sundays and those on which credit institutions are obliged to close their offices and branches, in terms of the general provisions issued for such effect by the National Banking and Securities Commission (CNBV). OFFICIAL LETTER: the one issued by the SECRETARIAT No. 305.-065/2008 made known through Circular 20/2008 of the Bank of Mexico, as well as its modifications. SECRETARIAT: the Secretariat of Finance and Public Credit. SIAC-BANXICO: the Bank of Mexico Account Holder Attention System. ...”

2. RIGHT OF MARKET MAKERS TO PURCHASE SECURITIES FROM THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

“2.1 MARKET MAKERS shall have the right to purchase SECURITIES at a rate or price equal to the weighted rate or allocation price, as applicable, resulting from the AUCTION of each of said SECURITIES, in all weeks in which they are held.”

“2.2 Requests to exercise the aforementioned purchase right must be presented to the National Operations Management of the Bank of Mexico, between 8:45:00 and 9:00:00 hours on the BUSINESS DAY following the publication of the results of the AUCTIONS. ...”

“2.4 In the event that for any circumstance the electronic, computing or telecommunications means referred to in numeral 2.3 cannot be used, requests may be submitted via fax during the time period referred to in numeral 2.2, and must be confirmed in writing no later than 13:00:00 hours on the same BUSINESS DAY using the models attached as Annexes, accompanied by a cover letter at the aforementioned National Operations Management, located at 5 de Mayo Avenue No. 6, first floor, Centro Neighborhood, in this city. Both documents must be duly signed by the same authorized representatives of the MARKET MAKERS and the letter must show the signature knowledge granted by the Bank of Mexico’s Cash Account Operations Office, so that the signatures must be registered in the aforementioned Office.”

“2.6 The Bank of Mexico may nullify the requests it receives when they do not comply with what is stipulated in the PROCEDURE or the OFFICIAL LETTER, are not clearly legible, have erasures or corrections, or are incomplete or incorrect in any way.”

“2.9 The delivery of the SECURITIES will be through INDEVAL, on the same BUSINESS DAY that the placement of the SECURITIES takes place in terms of the respective AUCTION, by deposit into the account that INDEVAL holds for each MARKET MAKER.”

“2.11 Except for what is provided in numerales M.44. of Circular 2019/95 and BD.38. of Circular 1/2006, in the event that any MARKET MAKER does not make the total payment of the SECURITIES sold to it, the Bank of Mexico may, without the need for a judicial declaration, rescind the purchase and sale for the uncovered amount. Without prejudice to the foregoing, the SECRETARIAT, in terms of what is provided in numeral 6.5 of the OFFICIAL LETTER, may determine that the credit institution in question cease to function as a MARKET MAKER.

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

“3.1 ... Upon maturity of the SECURITIES loan operations referred to in the preceding paragraph, MARKET MAKERS must pay the Bank of Mexico the premium corresponding to each of said operations, in accordance with what is provided in numerales 4.2.6 and 5.7.2, subsection v), as well as in Annex 2, of the OFFICIAL LETTER.”

TRANSITORY SINGLE. This Circular shall enter into force on September 1, 2008.