Circular 4/2017 — Modifications to the Procedure for Acting as Market Makers for Government Securities

Monday, March 6, 2017 OFFICIAL GAZETTE (First Section) BANCO DE MEXICO CIRCULAR 4/2017 addressed to credit institutions and brokerage houses, regarding Modifications to the procedure for acting as market makers for government securities. A logo appears at the margin, stating: Banco de México. CIRCULAR 4/2017 TO CREDIT INSTITUTIONS AND BROKERAGE HOUSES: SUBJECT: MODIFICATIONS TO THE PROCEDURE FOR ACTING AS MARKET MAKERS FOR GOVERNMENT SECURITIES

The Bank of Mexico, in its capacity as the financial agent of the Federal Government –and in response to the modifications that the Ministry of Finance and Public Credit, through letter number 305.-033/2017, dated February 28, 2017, has resolved to carry out on the procedure to which credit institutions and brokerage houses acting as market makers regarding the government securities referred to in letter number 305.-027/2011 from said Ministry must adhere, which was made known by this Central Bank through its Circular 5/2011, dated February 14, 2011, as well as the modifications to said procedure issued subsequently– attaches to this document a copy of the aforementioned letter number 305.-033/2017/2017, in order to make its content known to these entities, for the effects indicated therein.

The foregoing, based on what is provided in articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States; 3, fraction III, 7, fraction I, and 10, of the Bank of Mexico Law; 22 of the Law for Transparency and Order of Financial Services; 8, paragraphs fourth and seventh, 10, first paragraph, 14 Bis, first paragraph, in relation to 17, fraction I, and 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 National Operations Directorate, respectively; as well as Second, fractions VI and X, of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico.

Mexico City, March 2, 2017.- The General Legal Director, Luis Urrutia Corral.- Signature.- The Director of National Operations, Juan Rafael García Padilla.- Signature.

For any inquiries regarding the content of this Circular, please contact the Management of Authorizations, Consultations and Legal Control, at phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000, extension 3200.

Letter No. 305.-033/2017 LIC. JAIME JOSÉ CORTINA MORFÍN General Director of Central Banking Operations Bank of Mexico Present.

The Ministry of Finance and Public Credit, through the Public Credit Unit, based on articles 4th, fractions I and V of the Federal Public Debt Law; 3rd, fraction III, 7th, fraction I, 8th and 10 of the Bank of Mexico Law; 17 fractions VIII, X and XXI of the Internal Regulations of the Ministry of Finance and Public Credit; Sole, fractions V and VII of the Decree authorizing the Federal Executive to issue Certificates of the Treasury of the Federation, published in the Official Gazette of the Federation (DOF) on July 8, 1993; 1st, fraction VI, 2nd and 3rd of the Decree authorizing the Ministry of Finance and Public Credit to issue Development Bonds of the Federal Government, published in the DOF on September 22, 1987, modified by Decree published in the DOF on September 9, 1998; the Decree establishing the obligations that may be denominated in Investment Units

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017 and reforming and adding various provisions of the Federal Tax Code and the Income Tax Law, published in the DOF on April 1, 1995, modified by Decree published in the DOF on December 7, 2009 and article 20 Ter of the Federal Tax Code, considers it convenient to continue fostering the development of the market for Development Bonds of the Federal Government with Fixed Interest Rate (BONOS) and those denominated in Investment Units (UDIBONOS).

For the above, it has decided to modify Letter 305.-027/2011 dated January 27, 2011, modified by Letters 305.-105/2011 dated July 26, 2011, 305.-178/2011 dated November 18, 2011, 305.-023/2012 dated February 9, 2012, 305.-085/2012 dated July 3, 2012, 305.-010/2014 dated February 7, 2014 and Letter 305.-035/2014 dated May 14, 2014, in its sections 1, 2.1, 3, 3.3, 4, 4.2.1, 4.2.2, 4.2.3, 4.2.5, 4.2.6, 4.2.7, 4.2.8, 4.2.8.1, 4.2.8.2, 4.2.9, 4.2.10, 7.2, 7.2.1, 7.2.2, 7.2.4, 7.2.5, 7.2.6, 7.2.7, 7.2.7.1, 7.2.7.2, 7.2.8, 7.2.9, 8.2, 8.3, 8.5, 8.6 and its Annexes 4 and 5, in order to: (i) be able to carry out securities lending operations for up to 60 days with the Bank of Mexico, and (ii) have the right to participate on its own account in swap operations with the purpose of fully liquidating one or several securities lending operations entered into with the Bank of Mexico; to remain under the following terms:

1. DEFINITIONS. "... I. to VI. ... VII. CETE: to the Certificates of the Treasury of the Federation issued by the Federal Government of the United Mexican States, excluding those issued under programs for the restructuring of credits denominated in UDIS (Special Cetes). VIII. to XII. ... XIII. UDIBONOS Activity Index (IAU): to the measurement of the activity of UDIBONOS Market Makers determined by the Bank of Mexico based on the methodology provided in Annex 2 of this Letter. XIV. to XXI. ... XXII. Net Long Position: the result of adding to the own position the securities granted as collateral to the Bank of Mexico for securities lending operations carried out by Market Makers or UDIBONOS Market Makers, as well as securities to be received by direct purchases, repo or securities lending, minus securities to be delivered by direct sales, repo or securities lending, defined for each specific issuance of BONOS and UDIBONOS. XXIII. Proportional Net Long Position: the Percentage of the Outstanding Balance from Primary Operations that the Net Long Position of a Market Maker or UDIBONOS Market Maker represents of any issuance of BONOS or UDIBONOS. XXIV. to XXX. ... XXX Bis. UDI: to the unit of account, whose value in national currency is published by the Bank of Mexico in the Official Gazette of the Federation, in accordance with articles Third of the "Decree establishing obligations that may be denominated in investment units and reforming and adding various provisions of the Federal Tax Code and the Income Tax Law" and 20 Ter of the Federal Tax Code. XXXI. UDIBONO: to the Development Bonds issued by the Federal Government of the United Mexican States, denominated in UDIS."

2. FINANCIAL INTERMEDIARIES THAT MAY ACT AS MARKET MAKERS "2.1 Financial Intermediaries intending to act as Market Makers must submit a written application to the UCP, located at Insurgentes Sur 1971, Tower 3, Floor 7, Colonia Guadalupe Inn, C.P. 01020, Mexico City. ... ... The Ministry may require Applicants, at any time, to confirm their interest in acting as Market Makers. Those Financial Intermediaries that do not confirm such interest, by submitting a written document to the UCP within a period of ten Business Days from when the notification of the aforementioned Ministry's request takes effect, at the address referred to in section 2.1, will cease to be considered as Applicants.

The Ministry will notify, through the electronic, computing or telecommunications medium determined by said Ministry, the Bank of Mexico of the names of those Applicants who submit their application to become a Market Maker and will attach a simple copy of the aforementioned application. From the receipt of said notification, the Bank of Mexico will initiate the process of calculating the respective IAs. Similarly, the Ministry will notify, by the same means, the Bank of Mexico of the names of those Applicants who do not confirm their interest in acting as a Market Maker. 2.2 to 2.5 ..."

3. OBLIGATIONS OF MARKET MAKERS "Financial Intermediaries who are appointed by the Ministry as Market Makers in accordance with this Letter must comply with the following obligations: 3.1 to 3.2 ... 3.3 Comply with the provisions contained in this Letter and other applicable regulations regarding operations with securities and participation in the securities market; adhere to sound market usages and practices, as well as observe in the exercise of rights and in the fulfillment of obligations contained in this Letter, at least, the following principles: a) Responsibility in the negotiation and execution of their operations, as well as in the preparation of reports to authorities; b) Integrity in the use and handling of confidential information obtained in their capacity as Market Makers; c) Transparency in the execution and results of their operations; d) Timeliness and accuracy in the preparation and dissemination of information to the market, as well as in the attention of information requests made by authorities, and e) Objectivity in their relations with market participants. 3.4 and 3.5 ..."

4. RIGHTS OF MARKET MAKERS "Financial Intermediaries who are appointed by the Ministry as Market Makers in accordance with this Letter may carry out the following acts, in accordance with the regulations applicable to them: 4.1 to 4.2 ... 4.2.1 Market Makers interested in entering into said operations must enter into a contract with the Bank of Mexico that will establish the characteristics of the said operations provided for in this Letter, the rights and obligations of the parties, as well as the procedure for constituting and canceling the corresponding guarantees. 4.2.2 Market Makers will always act on their own account as borrowers. The term of the securities lending operations may be up to sixty days. Market Makers may request the Bank of Mexico to renew securities lending operations, provided that the value of the securities granted as collateral complies with what is provided in the following section 4.2.5. Market Makers may at any time determine the early maturity of securities lending operations, in accordance with what is stipulated for this purpose in the respective contracts. The Bank of Mexico will consider securities lending operations it maintains with a specific Market Maker to have matured early, in the event that the respective Financial Intermediary ceases to have such status. The Financial Intermediary that loses the status of Market Maker will be obligated to liquidate the operations and fulfill the obligations resulting from the early maturity in question, in accordance with what is provided in this Letter and what is stipulated in the contract. 4.2.3 Each Market Maker may request to borrow from the Bank of Mexico any issuance of CETES or BONOS currently in the market, up to the equivalent of 2% of the total Outstanding Balance from Primary Operations of said CETES or BONOS and up to 4% of the Outstanding Balance from Primary Operations of each of the issuances of CETES or BONOS. Regarding BONOS that have been placed through an auction in terms of the Rules for the holding of syndicated auctions of government securities, issued by the Bank of Mexico through Circular 16/2011, as well as the modifications to said Rules issued subsequently, Market Makers may request

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017 said BONOS to be lent, starting from the Business Day following that on which the settlement of said syndicated auction takes place. 4.2.4 ... 4.2.5 Market Makers must guarantee securities lending operations by constituting a stock pledge on CETES, BONOS, REVISABLE BONDS, UDIBONOS, BREMS or BPAS, in terms of the Securities Market Law. The value of the securities given in stock pledge must at all times be equal to or greater than 102% of the sum of the value of the BONOS or CETES subject to the loan plus the portion of the daily premium charged through Indeval. For this purpose, the CETES and BONOS subject to the securities lending operation, as well as the securities granted in stock pledge, will be valued daily according to the last price vector determined by the Bank of Mexico, which will be made known to Market Makers by Indeval through the electronic procedure for the holding of specialized securities lending operations called "VALPRE-E". In the event that, at any time, the value of the securities given in stock pledge, determined in accordance with the aforementioned paragraph, corresponding to each Market Maker, is less than the percentage required in terms of said paragraph, the Market Maker in question must, no later than the Business Day following that on which the failure to meet the required percentage is determined, give in stock pledge additional CETES, BONOS, REVISABLE BONDS, UDIBONOS, BREMS or BPAS sufficient to restore the percentage referred to in the cited paragraph. Until it restores the percentage in the terms provided in this paragraph, the aforementioned Market Maker will not be able to carry out securities lending operations with the Bank of Mexico on CETES and BONOS. When the failure to meet the required percentage persists on the Business Day following that on which the Market Maker in question must give in stock pledge additional CETES, BONOS, REVISABLE BONDS, UDIBONOS, BREMS or BPAS sufficient in terms of the aforementioned paragraph, the Bank of Mexico will consider one or several securities lending operations it maintains with the Market Maker in question to have matured early, until the required percentage is restored in terms of this section. The actions adopted by the Bank of Mexico will not exempt the Market Maker from the corresponding conventional penalty for the difference between the guaranteed amount and the required 102%. The Bank of Mexico will notify the Market Maker in question, as well as the Ministry, of the early maturity referred to in the previous paragraph, through some electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico, with at least one Business Day of advance notice to the date on which the Market Maker in question must liquidate the securities lending operations indicated by the Bank of Mexico for this effect. For the purposes of the above, the additional securities given in stock pledge must be deposited in the corresponding accounts before the closing of operations of DALÍ on the Business Day following that on which it was determined that the value of the collateral securities is below the required 102%. 4.2.6 Market Makers must pay the Bank of Mexico daily a premium for each securities lending operation they enter into or that is in effect. The amount of said premium will be obtained by multiplying the weighted government funding rate corresponding to the Business Day prior to the execution of the securities lending operation, which the Bank of Mexico calculates and makes known daily through its website www.banxico.org.mx or any other electronic, computing or telecommunications medium authorized for this purpose by said Bank, by a factor that will be determined in accordance with what is specified in Annex 4 of this Letter. ... Financial Intermediaries who join the list of Market Makers, published by the Ministry in accordance with section 8.2, will not be subject to the factor determined in Annex 4 of this Letter, during the two calendar months following the date of their incorporation as Market Makers. In this case, the premium will be determined by multiplying the weighted government funding rate by a factor of 5%. 4.2.7 The Bank of Mexico will notify, through the electronic, computing or telecommunications medium authorized for this purpose by said Bank, the Market Maker whose Proportional Net Long Position in any of the issuances of BONOS and UDIBONOS averages 35% (thirty-five percent) or more of this percentage in monthly periods in accordance with what is stated in section 4.2.6 of this Letter. Through said notification, the Market Maker in question will be informed that, starting from the Business Day following the notification, its right to carry out securities lending operations with the Bank of Mexico on CETES and BONOS will be suspended. The suspension will remain in effect until the first

Monday, March 6, 2017 OFFICIAL GAZETTE Business Day of the month immediately following that in which it is maintained for two consecutive measurement periods an average less than 35% (thirty-five percent) in each of the months in the Proportional Net Long Position in all issuances of BONOS and UDIBONOS. On the tenth Business Day following that on which the suspension referred to in the previous paragraph takes effect, the Bank of Mexico will consider all securities lending operations it maintains with the Market Maker in question to have matured early. The Bank of Mexico will notify the Market Maker in question, as well as the Ministry, of the early maturity referred to in the previous paragraph, through some electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico, with at least one Business Day of advance notice to the date on which the Market Maker in question must liquidate the securities lending operations indicated by the Bank of Mexico for this effect. 4.2.8 Market Makers may carry out swap operations on CETES and BONOS with the Bank of Mexico, in its capacity as financial agent of the Federal Government, under the terms determined by said Bank for this purpose, adhering to the following: 4.2.8.1 Market Makers will always act on their own account as swap counterparties. Only Market Makers who have entered into securities lending operations in terms of what is provided in section 4.2 may participate in swap operations. 4.2.8.2 Market Makers must carry out swap operations with the sole purpose of using the total amount, at nominal value, of the CETES or BONOS they receive in the swap operation in question, to fully liquidate one or several securities lending operations they have entered into in terms of what is provided in section 4.2 that correspond to the same issuance of the CETES or BONOS obtained in said swaps. The liquidation carried out by Market Makers, in terms of what is provided in this paragraph, must take place on the Business Day corresponding to the day of the settlement of the swap operations entered into in accordance with what is provided in section 4.2.8. The Bank of Mexico will notify, through the electronic, computing or telecommunications medium authorized for this purpose by said Bank, the Ministry and the Market Maker who fails to liquidate in the time and terms established in the previous paragraph. Through said notification, it will be informed that starting from the Business Day following the notification, the Market Maker in question will be suspended, for a period of sixty days, from its right to carry out securities lending operations with the Bank of Mexico on CETES and BONOS, as well as from entering into the swap operations referred to in section 4.2.8. Said suspension will not exempt the Market Maker in question from the corresponding conventional penalty. Once the suspension period referred to in the previous paragraph has passed and provided that the Market Maker has fulfilled the liquidation referred to in the first paragraph of this section, the Bank of Mexico will make this situation known to the Ministry. 4.2.9 Upon maturity of the securities lending operations, Market Makers must return to the Bank of Mexico CETES and BONOS of the same nominal value, species, class and series, of those that were requested for loan. 4.2.10 In the event that Market Makers, upon maturity of the securities lending operations, fail to fulfill the obligation to return to the Bank of Mexico the securities in terms of the previous section, the Bank of Mexico will maintain ownership of the securities given as collateral up to the amount of the obligations owed by the Market Maker arising from the securities lending. In the event that BPAS are granted as collateral to the Bank of Mexico, in accordance with what is provided in the previous paragraph, the Bank of Mexico must, in its capacity as financial agent of the Federal Government, within thirty Business Days following said default, place said BPAS through auctions carried out in terms of the Rules for the Auctions for the Placement of Government Securities and IPAB Securities issued by the Bank of Mexico through Circular 5/2012, as well as the modifications to said Rules issued subsequently. 4.3 ..."

7. RIGHTS OF UDIBONOS MARKET MAKERS "Financial Intermediaries who are appointed by the Ministry as UDIBONOS Market Makers in accordance with this Letter may carry out the following acts, in accordance with the regulations applicable to them:"

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017 7.1 to 7.1.4 ... 7.2 UDIBONOS Market Makers may carry out securities lending transactions on UDIBONOS with the Bank of Mexico, in its capacity as the financial agent of the Federal Government, under the terms provided in this Circular, as well as what is stipulated in the contract they enter into for this purpose with said Bank, adhering to the following: 7.2.1 UDIBONOS Market Makers shall always act on their own account as borrowers. The term of the securities lending transactions may be up to sixty days. UDIBONOS Market Makers may request the Bank of Mexico to renew the securities lending transactions, provided that the value of the titles given as collateral complies with what is provided in the following section 7.2.4. UDIBONOS Market Makers may at any time determine the early maturity of the securities lending transactions, in accordance with the respective contracts. The Bank of Mexico shall declare early maturity of the securities lending transactions it maintains in force with a specific UDIBONOS Market Maker, in the event that said Financial Intermediary ceases to have such status. The Financial Intermediary that loses the status of Market Maker shall be obliged to liquidate the transactions and fulfill the obligations resulting from the early maturity in question, in accordance with what is provided in this Circular and what is stipulated in the contract. 7.2.2 Each of the UDIBONOS Market Makers may request from the Bank of Mexico any issuance of UDIBONOS currently in the market on loan, up to the equivalent of 2% of the total Outstanding Balance from Primary Operations of UDIBONOS and up to 4% of the Outstanding Balance from Primary Operations of each of the issuances of UDIBONOS. Regarding UDIBONOS that have been placed through an auction under the terms of the Rules for the holding of syndicated auctions of government securities, issued by the Bank of Mexico through Circular 16/2011, as well as the modifications to said Rules issued subsequently, UDIBONOS Market Makers may request said UDIBONOS on loan, starting from the next Business Day after the settlement of said syndicated auction takes place. 7.2.3 ... 7.2.4 UDIBONOS Market Makers must guarantee the securities lending transactions by constituting a stock pledge on CETES, BONOS, BONDES REVISABLES, UDIBONOS, BREMS or BPAS, under the terms of the Securities Market Law. The value of the titles given in stock pledge must at all times be equal to or greater than 102% of the sum of the value of the UDIBONOS subject to the loan plus the agreed daily premium. For this purpose, the titles given in stock pledge, as well as the UDIBONOS subject to the loan, shall be valued daily according to the last price vector determined by the Bank of Mexico, which shall be made known to UDIBONOS Market Makers by Indeval, through the electronic procedure for the holding of specialized securities lending transactions called "VALPRE-E". In the event that, at any time, the value of the titles given in stock pledge, determined in accordance with the above paragraph, corresponding to each UDIBONOS Market Maker, is less than the percentage required in terms of said paragraph, the UDIBONOS Market Maker in question must, no later than the next Business Day after that on which the non-compliance with the required percentage is determined, give in stock pledge additional CETES, BONOS, BONDES REVISABLES, UDIBONOS, BREMS or BPAS sufficient to restore the percentage referred to in the cited paragraph. Until it restores the percentage under the terms provided in this paragraph, the referred UDIBONOS Market Maker shall not be able to carry out securities lending transactions with the Bank of Mexico on UDIBONOS. When the non-compliance with the required percentage persists on the next Business Day after that on which the UDIBONOS Market Maker in question must give in stock pledge additional CETES, BONOS, BONDES REVISABLES, UDIBONOS, BREMS or BPAS sufficient in terms of the previous paragraph, the Bank of Mexico shall declare early maturity of one or several securities lending transactions it maintains in force with the referred UDIBONOS Market Maker, until re-establishing the percentage required in terms of this section. The actions adopted by the Bank of Mexico shall not exempt the UDIBONOS Market Maker from the conventional penalty corresponding to the difference between the guaranteed amount and the required 102%. The Bank of Mexico shall notify the UDIBONOS Market Maker in question, as well as the Secretariat, of the early maturity referred to in the previous paragraph, through any electronic, computing or telecommunication medium authorized for this purpose by the Bank of Mexico, with at least one Business Day

Monday, March 6, 2017 OFFICIAL GAZETTE (First Section) of advance notice to the date on which the UDIBONOS Market Maker in question must liquidate the securities lending transactions that the Bank of Mexico indicates for this purpose. For the purposes of the above, the additional titles that are given in stock pledge must be deposited in the corresponding accounts before the close of operations of the DALÍ on the next Business Day after that on which it has been determined that the value of the collateral titles is below the required 102%. 7.2.5 UDIBONOS Market Makers must pay the Bank of Mexico daily a premium for each securities lending transaction they carry out or that is in force. The amount of said premium shall be the result of multiplying the weighted government funding rate corresponding to the Business Day prior to the celebration of the securities lending transaction, which the Bank of Mexico calculates and makes known daily through its website www.banxico.org.mx or any other electronic, computing or telecommunication medium authorized for this purpose by said Bank, by a factor that shall be determined in accordance with what is specified in Annex 5 of this Circular. ... Financial Intermediaries that join the list of UDIBONOS Market Makers, which the Secretariat publishes in accordance with section 8.2, shall not be subject to the factor determined in Annex 5 of this Circular, during the two calendar months following the date of their incorporation as UDIBONOS Market Makers. In this case, the premium shall be determined by multiplying the weighted government funding rate by a factor of 5%. 7.2.6 The Bank of Mexico shall notify, through the electronic, computing or telecommunication medium authorized for this purpose by said Bank, the UDIBONOS Market Maker, whose Proportional Long Net Position in any of the issuances of BONOS and UDIBONOS averages 35% (thirty-five percent) or more of this percentage in monthly periods in accordance with what is indicated in section 7.2.5 of this Circular. Through said notification, the UDIBONOS Market Maker in question shall be informed that, starting from the next Business Day after the notification, its right to carry out securities lending transactions with the Bank of Mexico on UDIBONOS shall be suspended. The suspension shall remain in force until the first Business Day of the month immediately following that in which an average lower than 35% (thirty-five percent) is maintained in each of the months in the Proportional Long Net Position in all issuances of BONOS and UDIBONOS for two consecutive measurement periods. The tenth Business Day following that on which the suspension referred to in the previous paragraph takes effect, the Bank of Mexico shall declare early maturity of all securities lending transactions it maintains in force with the UDIBONOS Market Maker in question. The Bank of Mexico shall notify the UDIBONOS Market Maker in question, as well as the Secretariat, of the early maturity referred to in the first paragraph of this section, through the electronic, computing or telecommunication medium authorized for this purpose by the Bank of Mexico, with at least one Business Day of advance notice to the date on which the UDIBONOS Market Maker in question must liquidate the securities lending transactions that the Bank of Mexico indicates for this purpose. 7.2.7 UDIBONOS Market Makers may carry out value swap transactions on UDIBONOS with the Bank of Mexico, in its capacity as the financial agent of the Federal Government, under the terms that said Bank determines for this purpose, adhering to the following: 7.2.7.1 UDIBONOS Market Makers shall always act on their own account as swapors. Only UDIBONOS Market Makers that have carried out securities lending transactions in accordance with what is provided in section 7.2 may participate in the swap transactions. 7.2.7.2 UDIBONOS Market Makers must carry out the swap transactions with the sole purpose of using the total amount, at nominal value, of the UDIBONOS they receive in the swap transaction in question, to fully liquidate one or more securities lending transactions they have carried out in accordance with what is provided in section 7.2 that correspond to the same issuance of the UDIBONOS obtained in said swaps. The liquidation carried out by UDIBONOS Market Makers, in accordance with what is provided in this paragraph, must be carried out on the Business Day corresponding to the day of settlement of the swap transactions carried out in accordance with what is provided in section 7.2.7. The Bank of Mexico shall notify, through the electronic, computing or telecommunication medium authorized for this purpose by said Bank, the Secretariat and the UDIBONOS Market Maker that fails to comply with the settlement in the time and terms established in the previous paragraph. Through said notification

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017 it shall be informed that starting from the next Business Day after the notification, the UDIBONOS Market Maker in question shall be suspended, for a period of sixty days, from its right to carry out securities lending transactions with the Bank of Mexico on UDIBONOS, as well as from carrying out the swap transactions referred to in section 7.2.7. The referred suspension shall not exempt the UDIBONOS Market Maker in question from the corresponding conventional penalty. Once the suspension period referred to in the previous paragraph has elapsed and provided that the UDIBONOS Market Maker has complied with the settlement referred to in the first paragraph of this section, the Bank of Mexico shall make such situation known to the Secretariat. 7.2.8 Upon maturity of the securities lending transactions, UDIBONOS Market Makers must return to the Bank of Mexico UDIBONOS of the same nominal value, species, class and series, of those that were requested on loan. 7.2.9 In the event that UDIBONOS Market Makers, upon maturity of the securities lending transactions, do not comply with the obligation to return to the Bank of Mexico the titles in terms of the previous section, the Bank of Mexico shall maintain ownership of the titles given as collateral up to the amount of the obligations on the UDIBONOS Market Maker derived from the securities lending. In the event that BPAS are given as guarantee to the Bank of Mexico, in accordance with what is provided in the previous paragraph, the Bank of Mexico must, in its capacity as the financial agent of the Federal Government, within thirty Business Days following said non-compliance, place said BPAS through auctions carried out in accordance with the Rules of the Auctions for the placement of Government Securities and IPAB Securities issued by the Bank of Mexico through Circular 5/2012, as well as the modifications to said Rules issued subsequently.” 8. GENERAL PROVISIONS “8.1 ... 8.2 No later than the Business Day prior to each of the dates specified in subsection a) of section 2.5, the Secretariat shall make known, through the Federal Government website, within the section corresponding to the Secretariat, or through the communication medium determined by said Secretariat, the name of the Financial Institutions that may act as Market Makers and UDIBONOS Market Makers, from the referred dates. ... 8.3 A section dedicated to Market Makers shall be included on the Federal Government website, within the section corresponding to the Secretariat, or through the communication medium determined by said Secretariat. This section will serve to publish: 8.3.1 to 8.4 ... 8.5 The Secretariat shall determine and make known, through the Federal Government website, within the section corresponding to the Secretariat, or through the communication medium determined by said Secretariat, which Financial Intermediaries will cease to act as Market Makers and UDIBONOS Market Makers, when they fail to comply with what is provided in this Circular. ... 8.6 Market Makers and UDIBONOS Market Makers that decide to cease operating with such status, must send a written cancellation notice to the UCP, as well as a copy of the same to the National Operations Directorate of the Bank of Mexico located at Avenida 5 de Mayo Number 6, First Floor, Colonia Centro, C.P. 06059, Mexico City. The said cancellation notice shall take effect from the next Business Day after its receipt by the mentioned authorities. The Secretariat shall remove the name of the respective Financial Intermediaries from the lists referred to in section 8.3 of this Circular.” “Annex 4 Quantification and Collection of the Premium for the Lending of Securities to Market Makers by the Bank of Mexico

Monday, March 6, 2017 OFFICIAL GAZETTE (First Section)

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017

Monday, March 6, 2017 OFFICIAL GAZETTE (First Section) “Annex 5 Quantification and Collection of the Premium for the Lending of Securities to UDIBONOS Market Makers by the Bank of Mexico

(First Section) OFFICIAL GAZETTE Monday, March 6, 2017

Monday, March 6, 2017 OFFICIAL GAZETTE (First Section) d) Part B of the premium shall be determined by the Bank of Mexico, in its capacity as the financial agent of the Federal Government, as the difference between the total premium calculated minus Part A of the premium and shall be collected no later than the next Business Day after the maturity of each securities lending transaction. This collection shall be made through the medium that the Bank of Mexico makes known to UDIBONOS Market Makers with at least three Business Days of advance notice to the date on which the collection must start in the corresponding medium.” TRANSITORY PROVISIONS FIRST.- What is provided in this Circular shall enter into force on the next Business Day after its publication in the Official Gazette of the Federation, except for what is provided in the following article. SECOND.- The modifications to the first and second paragraphs of section 4.2.2, to the first and second paragraphs of section 7.2.1, to section 4.2.8 and to section 7.2.7, contained in this Circular, shall enter into force on April 3, 2017. Respectfully, Mexico City, February 28, 2017.- The Head of the Public Credit Unit, Alberto Torres García.- Rubric