Circular 40/2008 — Modification of Circular 115/2002

"2008, Year of Physical Education and Sport" CIRCULAR 40/2008 Mexico, D.F., September 1, 2008. TO THE BROKERAGE HOUSES: SUBJECT: MODIFICATIONS TO THE PROCEDURE FOR MARKET MAKERS TO EXERCISE THEIR 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 what is provided in Articles 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; 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; 8th paragraphs third and sixth, 10, 12 in relation to Article 19 fractions I, II, VI and IX, and 17 fraction I which provide for the attributions of the Bank of Mexico, through the General Directorate of Central Banking Operations and the Directorate of Central Banking Regulations, to negotiate and formalize, among others, operations with securities; carry out the necessary acts for the issuance, placement, purchase and sale, and redemption of government securities; operate mandates or commissions entrusted to the Bank of Mexico related to the aforementioned attributions, as well as to issue regulations, respectively, all of the Internal Regulations of the Bank of Mexico; Single clause of the Agreement on the Affiliation of Administrative Units of the Bank of Mexico, fractions I and IV; and considering that through Office Number 305.-065/2008 dated April 30, 2008, made known through our Circular 20/2008 of May 7, 2008, the Ministry of Finance and Public Credit renders ineffective Offices 305.-038/2006, 305.-088/2007 and 305.-110/2007 dated February 27, 2006, July 26, 2007 and August 28, 2007, made known through our Circulares 1/2006, 2/2007 and 3/2007, 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 brokerage houses 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 section CB.7.1 the definition "MINISTRY", as well as modify sections CB.7.1, in the definition "OFFICE"; CB.7.2.1; CB.7.2.2, first paragraph; CB.7.2.4; CB.7.2.6; CB.7.2.9; CB.7.2.11 and CB.7.3.1, second paragraph, all of Circular 115/2002, to read as follows:

CB.7 MARKET MAKERS

"CB.7.1 DEFINITIONS ... OFFICE: that issued by the MINISTRY number 305.-065/2008 made known through Circular 20/2008 of the Bank of Mexico, as well as its modifications. MINISTRY: The Ministry of Finance and Public Credit. ..."

CB.7.2. RIGHT OF MARKET MAKERS TO PURCHASE SECURITIES FROM THE BANK OF MEXICO IN ITS CAPACITY AS FINANCIAL AGENT OF THE FEDERAL GOVERNMENT

"CB.7.2.1 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."

"CB.7.2.2 Requests to exercise the aforementioned purchase right must be submitted to the National Operations Department of the Bank of Mexico, between 8:45:00 and 9:00:00 hours on the next business day following the publication of the AUCTION results. ..."

"CB.7.2.4 In the event that for any circumstance the electronic, computing, or telecommunications means referred to in section CB.7.2.3 cannot be used, requests may be submitted via fax during the time period referred to in section CB.7.2.2, 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 Department, located at Avenida 5 de Mayo number 6, first floor, Centro Colonia, in this city. Both documents must be duly signed by the same authorized representatives of the MARKET MAKERS and the letter must show knowledge of signatures granted by the Cash Account Operations Office of the Bank of Mexico, so that signatures must be registered in said Office."

"CB.7.2.6 The Bank of Mexico may invalidate the requests it receives when they do not comply with what is stipulated in CB.7 or the OFFICE, are not clearly legible, have erasures or corrections, or are incomplete or incorrect in any way."

"CB.7.2.9 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 maintains for each MARKET MAKER."

"CB.7.2.11 In the event that any MARKET MAKER does not make full payment of the SECURITIES sold to them, the Bank of Mexico may, without need for judicial declaration, rescind the purchase and sale for the uncovered amount. Without prejudice to the foregoing, the MINISTRY, in terms of what is provided in section 6.5 of the OFFICE, may determine that the brokerage house in question cease to function as a MARKET MAKER.

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 ... 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 sections 4.2.6 and 5.7.2, subsection v), as well as in Annex 2, of the OFFICE."

TRANSITIONAL PROVISION UNIQUE. This Circular shall enter into force on September 1, 2008.