Circular 5/2025 — Modifies Circular 22/2017

Thursday, May 22, 2025 OFFICIAL GAZETTE 183
BANCO DE MEXICO
CIRCULAR 5/2025 addressed to Credit Institutions, Brokerage Houses, Exchange Houses, and other intermediaries that are part of Financial Groups, regarding the Modifications to Circular 22/2017 (Rules applicable to the report by participants to the Bank of Mexico regarding adherence to the Global Code of Conduct in the conduct of foreign exchange operations).

A logo appears at the margin, stating: Bank of Mexico.- "2025, Year of the Indigenous Woman".

CIRCULAR 5/2025
TO CREDIT INSTITUTIONS, BROKERAGE HOUSES, EXCHANGE HOUSES, AND OTHER INTERMEDIARIES THAT ARE PART OF FINANCIAL GROUPS:

SUBJECT: MODIFICATIONS TO CIRCULAR 22/2017 (RULES APPLICABLE TO THE REPORT BY PARTICIPANTS TO THE BANK OF MEXICO REGARDING ADHERENCE TO THE GLOBAL CODE OF CONDUCT IN THE CONDUCT OF FOREIGN EXCHANGE OPERATIONS)

The Bank of Mexico, in order to ensure the sound development of the foreign exchange market in Mexico, has determined to modify Annex 1 of the "Rules applicable to the report by participants to the Bank of Mexico regarding adherence to the Global Code of Conduct in the conduct of foreign exchange operations," contained in Circular 22/2017. It should be noted that the Board of Governors of this Central Bank determined to exempt these modifications from the aforementioned public consultation process, as these only aim to adapt the content of the aforementioned Rules to the terms of the Global Code of Conduct updated by the Global Foreign Exchange Committee (GFXC, in English) in its sessions on December 5 and 6, 2024.

Therefore, based on Articles 28, paragraphs seventh and eighth, of the Political Constitution of the United Mexican States; 24, 26, and 32, of the Bank of Mexico Law; 9, of the Organic Law of National Financial Institutions; 6, of the Organic Law of the Federal Mortgage Society; 9, of the Organic Law of the Bienestar Bank; 9, of the Organic Law of the National Foreign Trade Bank; 10, of the Organic Law of the National Bank of Public Works and Services; 8, of the Organic Law of the National Bank of the Army, Air Force, and Navy; 22, of the Law for Transparency and Ordering of Financial Services; 4, first paragraph, 8, paragraphs fourth and eighth, 10, first paragraph, 12, first paragraph, in relation to 19 Bis, fraction V, and 14 Bis, first paragraph, in relation to 17, fraction I, of the Internal Regulations of the Bank of Mexico, which grant the authority to issue provisions through the General Directorate of Central Bank Operations and the General Legal Directorate, respectively; as well as Second, fractions VI and X, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico and numeral 13, fraction IV, of the Policies for public consultation of general provisions issued by the Bank of Mexico, it has resolved to modify Annex 1 of the "Rules applicable to the report by participants to the Bank of Mexico regarding adherence to the Global Code of Conduct in the conduct of foreign exchange operations" contained in Circular 22/2017, to remain in the following terms:

RULES APPLICABLE TO THE REPORT BY PARTICIPANTS TO THE BANK OF MEXICO REGARDING ADHERENCE TO THE GLOBAL CODE OF CONDUCT IN THE CONDUCT OF FOREIGN EXCHANGE OPERATIONS

ANNEX 1
GLOBAL CODE OF CONDUCT

"PREAMBLE
I. What is the Global Code of Conduct of the Foreign Exchange Market?
The present set of global good practice principles in the foreign exchange market (Global Code of Conduct) has been developed in order to establish a common set of guidelines to promote integrity and effective functioning of the wholesale foreign exchange market (FX Market). 1

The intention of this document is to promote a robust, fair, liquid, open, and adequately transparent market, in which the diversity of Market Participants, backed by resilient infrastructures, are able to carry out their negotiations reliably and effectively at competitive prices that reflect available market information, adhering to acceptable standards of conduct.

The Global Code of Conduct does not impose legal or regulatory obligations on Market Participants nor does it substitute regulation, but rather intends to function as a complement to any or all local laws, rules, and regulations, by identifying global good practices and processes.

The Global Code of Conduct is maintained and updated by the Global Foreign Exchange Committee (GFXC).

The GFXC was established in May 2017 as a representative forum of central banks and private sector participants to promote collaboration and communication on issues related to the foreign exchange market, exchange views on trends and developments of the aforementioned market, as well as promote, maintain, and update the Global Code of Conduct.

The Committee regularly evaluates particular developments of the foreign exchange market in order to determine if these justify specific review of the Global Code of Conduct and, in those cases where it deems appropriate, carries out a comprehensive review of the Global Code of Conduct.

More information is available at www.globalfxc.org

The Global Code of Conduct is organized around six guiding principles.

• Ethics: Market Participants are expected to behave in an ethical and professional manner to promote fairness and integrity of the FX Market.
• Governance: Market Participants are expected to have a sound and effective governance framework that makes it possible to establish clear responsibilities in their activities in the FX Market, allows for comprehensive supervision, and promotes their responsible participation in the FX Market.
• Execution: Market Participants are expected to be careful in the negotiation and execution of transactions with the purpose of promoting a robust, fair, open, liquid, and sufficiently transparent FX Market.
• Information Sharing: Market Participants are expected to be clear and precise in their communications and protect Confidential Information in order to achieve effective communication that supports a robust, fair, open, liquid, and sufficiently transparent FX Market.
• Risk Management and Regulatory Compliance: Market Participants are expected to promote and maintain a robust control and regulatory compliance environment to identify, measure, monitor, manage, and report, effectively, the risks associated with their participation in the FX Market.
• Confirmation and Settlement Processes: Market Participants are expected to implement robust, efficient, transparent, and risk-mitigating post-negotiation processes, in order to promote predictable, smooth, and timely settlement of FX Market transactions.

Occasionally, the GFXC publishes reports to promote a broader knowledge and understanding of particular aspects of the foreign exchange market and also, in those cases where it is relevant, to highlight how such reports relate to the good practice principles described in the Code ("GFXC Reports"). The GFXC Reports contain useful explanatory material on the background of the Code Principles and their practical implementation, but these are not part of the Code, nor of the Commitment Statement. The aforementioned GFXC Reports are available (in English) on the GFXC website:

• GFXC Execution Principles Working Group Report on Last Look.
• Commentary on Principle 11 and the role of pre-hedging in today’s FX landscape.
• The Role of Disclosure and Transparency on Anonymous E-Trading Platforms.
• The Role of ‘Cover and Deal’ Arrangements in the Global FX Market.

Thursday, May 22, 2025 OFFICIAL GAZETTE 185

• The Role of Disclosure and Transparency in the Global FX Market.

The Global Code of Conduct and Applicable Regulation Market Participants must be aware of and comply with the laws, rules, and other regulation applicable to them and to the FX Market in each jurisdiction in which they conduct business (Applicable Legislation). Market Participants will continue to be responsible for having internal policies and procedures to comply with such Applicable Legislation.

The content of this guide does not in any way substitute or modify the Applicable Legislation. Likewise, this guide does not represent the judgment of any regulator, supervisor, or any authority, self-regulatory body with powers in the relevant markets or of Market Participants, nor does it intend to restrict their discretion, and does not grant any legal mitigation for violations of the Applicable Legislation.

The purpose of this Global Code of Conduct is to serve as an essential reference for Market Participants in the conduct of their business in the FX Market, as well as in the development and review of their internal procedures. It is not intended to be a comprehensive guide for conducting transactions in the FX Market.

Some of the terms used in this Global Code of Conduct may be provided or defined in a particular manner in the Applicable Legislation, which may imply certain duties or obligations in some jurisdiction. Since the intention of this document is to serve as a code of good practice for Market Participants operating in different jurisdictions, it is not intended that the meanings assigned to terms in any jurisdiction be applicable for the interpretation of this Global Code of Conduct. For clarity, the terms used in this Global Code of Conduct shall be understood in accordance with the meanings commonly accepted in practice in the FX Market without granting them specific legal or regulatory meanings.

Annex 2 contains a glossary of the terms that appear with capital letters throughout this Global Code of Conduct."

...

"PRINCIPLE 9
Market Participants must handle Client orders in a fair and transparent manner, in accordance with the capacities in which they act.

Market Participants are expected to handle Client orders in a fair and transparent manner. The manner in which they will do so and the applicable best practices will depend on the roles in which Market Participants are acting, as described in the previous Principle 8. Although the FX Market has traditionally operated through the Principal figure, the Agent figure is also used. Therefore, this principle applies to both figures, as well as to Electronic Trading Platforms and Interdealer Brokers.

ROLES
Regardless of their role, all Market Participants handling orders must:

• have clear standards tending to provide a fair and transparent outcome for the Client;
• be truthful in their statements;
• use clear and unambiguous language;
• specify whether the prices they are providing are firm or merely indicative;
• have adequate processes that allow rejecting Client orders for products considered inappropriate for the Client;
• not conduct transactions with the intention of causing market disruption (for further guidance see Principle 12 on Execution), and
• provide all relevant information to the Client prior to negotiating their orders, so that the Client can decide in an informed manner whether to execute the transaction or not.

Market Participants must inform their Clients of factors such as:

• the manner in which orders are handled and executed, including whether they are aggregated or prioritized according to time;

186 OFFICIAL GAZETTE Thursday, May 22, 2025

• the possibility that orders be executed electronically or manually, depending on the disclosed terms;
• the various factors that could affect the execution policy, which generally include positioning terms, whether the Market Participant, managing Client orders, is assuming or not the risks associated with those transactions, prevailing liquidity and market conditions, other Client orders and/or trading strategies that could affect the execution policy;
• whether there is discretion or if it is expected to exist, and how it should be exercised;
• the basis or reasons why requests and/or orders may be rejected; and
• when possible, what the hours policy is and if it applies, both when the order is accepted and when it is activated or executed (for further guidance see Principle 36 on Risk Management and Regulatory Compliance).

Market Participants handling Client orders in their role as Principal must:

• inform the terms and conditions under which the Principal will interact with the Client, which may include:
  √ that the Principal acts on its own behalf as the Client's counterparty; √ the manner in which the Principal will communicate and negotiate quotation requests and indicative prices, the discussion or placement of orders, and any other relevant data that could lead to the execution of transactions; and √ the manner in which potential or existing conflicts of interest that may arise when acting as Principal or as a market maker will be identified and addressed;
• clearly establish the moment when market risk may be transferred;
• have activities as market makers and as risk management, such as hedging transactions, in accordance with their trading strategy, positioning, assumed risk, and prevailing liquidity and market conditions, and
• have internal Margin policies consistent with the guidelines provided in this Global Code of Conduct.

Market Participants handling Client orders in their role as Agent must:

• communicate to the Client the nature of their relationship;
• seek to obtain the result requested by their Client;
• establish a transparent order execution policy, which must provide Clients with relevant information about their order, which may include:
  √ information on where the company may execute the Client's orders; √ the factors that influenced the selection of trading platforms, and √ information on how the Agent intends to execute the Client's orders in a timely, fair, and expeditious manner;
• be transparent with their Clients regarding their terms and conditions, which clearly establish the fees and commissions applicable during the contract term, and
• share information related to accepted orders in their capacity as Agent with market makers or Principal trading desks exclusively when necessary to request a competitive quote (for further guidance see Principle 19 on Information Sharing).

Market Participants operating Electronic Trading Platforms must:

• have transparent rules for users;
• clearly inform any restriction or requirement applicable to the use of electronic quotes;
• clearly establish the point at which market risk can be transferred;
• appropriately reveal their subscription services and associated benefits offered, including market information (so that Clients have the opportunity to choose the best services for which they are eligible);
• expressly declare their policies for sharing Client interaction data with third parties, such as order or transaction data derived from interaction with the Client and

Thursday, May 22, 2025 OFFICIAL GAZETTE 187 that are not anonymized or aggregated, within appropriate information disclosure documents (including regulations, guides, among others), which must include at least:
√ the level of detail of the information available; √ the type of users for whom it will be available, and √ the frequency and latency with which such market information will be available.

Client interaction data include, but are not limited to, data on potential or actual foreign exchange transactions by Clients, including quotation requests, as well as other transactional data related to a Client order, or with the execution of a transaction.

The foregoing will not be applicable to data shared with third parties with the express consent of the Client or, in accordance with Principle 20 of the Global Code of Conduct, include data that are shared with third parties such as regulators or public authorities.

To allow Clients to more easily compare information sharing policies, the use of GFXC Disclosure Cover Sheets is encouraged.

Market Participants operating anonymous Electronic Trading Platforms that offer the use of unique identifiers ("tags") must, when applicable:

• disclose appropriate information to all users regarding which specific counterparty information is provided through said tags, and to whom such information is provided;
• disclose appropriate information to all users indicating at which point in a transaction the tag assigned to a user is provided to their counterparty;
• have information disclosure documents (including regulations, guides, among others) containing clear policies related to the manner in which tags are assigned and administered, including policies related to the re-tagging procedure;
• maintain audit records for all tag assignments and for those cases of re-tagging.

Market Participants acting as Interdealer Brokers must:

• meet similar expectations as those described above for Market Participants handling Client orders in their role as Agents;

Interdealer Brokers may operate via voice, as Voice Brokerage Services, or may operate partially or totally via electronic means. Those that have an electronic component will also be considered as Electronic Trading Platforms and, therefore, must meet the expectations of law described for Market Participants operating Electronic Trading Platforms.

Market Participants acting as Clients must:

• be aware of the responsibilities they should expect from others, as mentioned previously;
• be aware of the risks associated with transactions they request and take, and
• periodically evaluate the execution of received orders."

"PRINCIPLE 10
Market Participants must process orders in a transparent, fair, and in accordance with the relevant characteristics applicable to different types of orders.

Market Participants must be aware that different types of orders may have different characteristics for execution. For example:

Market Participants executing Stop Loss Type Orders must:

• obtain from the Client the necessary information to define the terms of the Stop Loss Type Order, such as reference price, amount, validity, and trigger of the orders, and;
• reveal to Clients whether risk management transactions may be executed near the level established for the execution of the Stop Loss Type Order and that those transactions may impact the reference price and result in the triggering of the Stop Loss Type Order.

Examples of unacceptable practices:

• negotiating or acting with the purpose of moving the market to the Stop Loss level, and

188 DIARIO OFICIAL Thursday, May 22, 2025

• offer Stop Loss Orders, which are based on the deliberate formation of losses.

Market Participants who are filling a Client Order, even partially, must:

• act fairly and reasonably in accordance with prevailing market circumstances, as well as any other factor disclosed to the Client, when determining whether and how to fill the Client Order, paying attention to other relevant policies;
• decide whether and how to fill a Client Order, including partially, and communicate that decision to the Client as soon as possible, and
• fill Client Orders in full within the parameters specified by the Client, subject to factors such as the need to prioritize among Client orders and the availability of any credit line that the Market Participant may grant to the Client at that time.

Market Participants handling Client orders to trade at a particular reference price (Fixing Orders) must:

• understand the associated risks and know the applicable procedures;
• refrain from sharing information inappropriately, whether through collusion or otherwise, or attempting to influence the exchange rate;
• refrain from intentionally influencing the reference exchange rate to benefit directly or through Client flows that have the exchange rate as the underlying of their transactions with them, and
• behave in accordance with what is established in the Recommendations of the Report on Reference Exchange Rates by the Financial Stability Board, 4 which include, but are not limited to, among others:
  √ pricing transactions transparently and consistently with the risk inherent in accepting such transactions, and √ establishing and enforcing internal procedures and guidelines to collect and execute Fixing Orders.

Indicative examples of acceptable practices:

• trade an order before, during, or after the close of the reference exchange rate calculation window, provided it is not done in a manner that intentionally generates a negative impact on the market price and the Client's outcome.
• aggregate all Client interests and execute the net amount;

Indicative examples of unacceptable practices:

• buy or sell an amount greater than the Client's interest seconds prior to the close of the reference exchange rate calculation period with the intention of increasing or decreasing its price to the detriment of the Client;
• buy or sell an amount shortly before the reference exchange rate calculation period in such a way that there is an intention to negatively impact the market price and the Client's outcome;
• show large interest in the market during the reference exchange rate calculation period with the intention of manipulating said price to the detriment of the Client;
• report specific Client transactions to the reference price to persons other than those authorized, and
• act with other Market Participants to increase or decrease the reference exchange rate to the detriment of a Client's interests (for further guidance see Principles 19 and 20 on Information Exchange.)

Market Participants processing orders that could potentially have relevant market impacts must do so with particular care and attention. For example, certain transactions, such as mergers and acquisitions, could have a relevant impact on the market.

Market Participants who initiate orders on behalf of their Clients, acting in their capacity as Principal, in those cases where the execution of the foreign exchange transactions is subject to a prior written agreement with the Client identifying the moment when the Market Participant must initiate said foreign exchange transactions (such as auxiliary services to facilitate the closing of a securities or futures transaction, or agreements relating to hedging services on foreign exchange transactions) must:

4 See Final Report of the Financial Stability Board on Reference Exchange Rates, dated September 30, 2014.

Thursday, May 22, 2025 DIARIO OFICIAL 189

• Operate within the parameters established in the written agreement;
• Establish and disclose a transparent order execution policy that includes:
  √ factors affecting the execution of Client orders; √ factors affecting the choice of trading platform, and √ information on how the Principal provides fair and transparent execution of Client orders.
• Be transparent with their Clients regarding terms and conditions, mainly those establishing the fees and commissions applicable throughout the term of the agreement; and
• Make available to the Client sufficient information allowing them to evaluate the quality of execution. In cases where available, such information must include the date and time of execution along with the prevailing reference rates (internal or external) at the time of execution.”

…

“SETTLEMENT RISK
PRINCIPLE 35

Market Participants must reduce their Settlement Risk, to the extent possible, by settling foreign exchange transactions through settlement methods that eliminate Settlement Risk, for example, by using services that provide payment versus payment (PVP) settlement, when this form of settlement is available.

When determining settlement methods for foreign exchange transactions, Market Participants must consider the following hierarchy to reduce Settlement Risk:

1. Whenever possible, Market Participants must eliminate Settlement Risk, for example, by using settlement services that provide payment versus payment (PVP).
2. In those cases where it is not possible to eliminate Settlement Risk, Market Participants must reduce the size and duration of their Settlement Risk to the extent possible. Netting of foreign exchange settlement obligations is encouraged (particularly through the use of automated netting systems on settlement).
3. Whenever possible, bilateral gross settlement must be minimized.

When used by Market Participants, and to the extent possible, the netting of foreign exchange settlement obligations must be adequately evidenced by appropriate documentation (for example, standard market netting documentation). The aforementioned netting obligation may be bilateral or multilateral.

Market Participants must agree on the settlement method to be used for a specific product and currency as part of the integration or onboarding process for each new counterparty. Once agreed, the settlement method must be used consistently, and ad hoc agreements with the same counterparty should be considered only on an exceptional basis. Market Participants must also periodically review their settlement method options agreed upon with a view to reducing Settlement Risk to the extent possible.

The management and relevant staff of each area involved in the foreign exchange operations of a Market Participant must have a deep knowledge of the settlement process and the tools that can be used to mitigate Settlement Risk, including, when available, the use of PVP settlement. Market Participants must consider creating internal incentives and mechanisms to reduce risks associated with foreign exchange settlement. For example, by using automated solutions instead of manual processes. Furthermore, Market Participants must also monitor the evolution of the sector in terms of Settlement Risk mitigation, as well as seek to adopt best practices.

See also the Confirmation and Settlement section for more details on this topic.”

…

“III. Netting and Settlement Processes
PRINCIPLE 50

Market Participants must adequately measure, monitor, and control their Settlement Risk in a manner equivalent to other counterparty credit exposures.

In cases where payment versus payment (PVP) is not possible, Settlement Risk must be adequately measured, monitored, and controlled. To avoid underestimating the size of the exposure to a counterparty, Market Participants must recognize that the exposure includes the total value of all payments that cannot be revoked or cancelled, as well as any unconfirmed transaction that has been settled definitively.

To avoid underestimating the size and duration of exposures, Market Participants must recognize that exposure to Settlement Risk with their counterparty begins at the moment a payment order for the sold currency cannot be revoked or cancelled with certainty and ends when it is confirmed that the purchased currency has been settled definitively.

Market Participants must establish pre-set limits (on their Settlement Risk), which must not be greater than the maximum exposure they are willing to incur with respect to a specific counterparty, as well as use controls equivalent to those applied to other credit exposures with the same counterparty. Market Participants must monitor the utilization of the aforementioned limits to ensure that their exposures do not exceed the maximum allowed. When it is decided to allow a counterparty to exceed its exposure limit, appropriate approval must be obtained.

When settlement amounts are netted, the initial confirmation of the transactions to be netted must be carried out in a similar manner to how it would be done for any other foreign exchange transaction. All initial transactions must be confirmed before being included in netting calculations. Regarding bilateral netting, the procedures for netting the net settlement values used by Market Participants must also include a procedure for confirming the bilateral net amounts for each currency, obtained at a certain time of day or cut-off point previously agreed upon between counterparties.”

“PRINCIPLE 51

Market Participants must use Standard Settlement Instructions (SSIs)

Whenever possible, SSIs must be implemented for all products and currencies traded with those counterparties with whom Market Participants maintain a business relationship. The responsibility for entering, authenticating, and providing maintenance of SSIs must be held by employees who are clearly segregated from staff responsible for sales and trade execution, and ideally, also from operational staff responsible for transaction settlement.

SSIs must be stored securely and be available for use with all settlement systems to facilitate direct and complete processing.

The use of multiple settlement instructions (in contrast to a single SSI) with the same counterparty for the same type of product and currency is not recommended and should only be used when required for a business reason or risk. For example, when a Market Participant has different business lines and operates a different SSI per business line; or when the Market Participant uses multiple custodians for the same currency.

Due to the Settlement Risk it entails, the use of multiple SSIs with the same counterparty for the same type of product and currency must be subject to adequate controls. When multiple settlement instructions are used, there must be a default SSI that must be applied until notified otherwise.

SSIs must be configured with a specific start date, and the capture records and their modifications (including audit trails) must have the relevant approvals, such as review by at least two people. Counterparties must be notified of any changes to SSIs with sufficient advance notice before their effective date. Any change, notification, as well as any new SSIs, must be sent, whenever possible, through authenticated and standardized messages.

All transactions must be settled in accordance with the SSIs in effect on the value date of the transaction in question. Transactions pending settlement at the time SSIs are modified (and whose value date coincides with, or is after, the start date for the new SSIs) must be reconfirmed before carrying out the corresponding settlement (either bilaterally or through the transmission of authenticated messages).

In cases where SSIs are not available (or existing SSIs are not appropriate for a particular foreign exchange transaction), alternative settlement instructions to be used must be delivered as soon as possible. Such instructions must be exchanged through an authenticated message, or by other secure means, and verified subsequently as part of the transaction confirmation process.”

Thursday, May 22, 2025 DIARIO OFICIAL 191

…

“ANNEX 1
Examples

The examples presented in the Global Code of Conduct are intended to clarify the principles and show the situations in which the principles may apply. The examples are complex and are not intended to be precise rules or prescriptive or exhaustive guidelines, nor should they be understood or interpreted as such. Nor is it intended that the examples grant exceptions or be an exhaustive list of situations that may arise. In fact, it is expressly recognized that facts and circumstances may and will vary. In some examples, specific market roles are used to provide a more realistic example; however, the conduct exemplified applies to all Market Participants.

The examples are grouped in accordance with the guiding principles and in terms of the principle being exemplified. Notwithstanding the foregoing, in several cases, the example may be applied to various guiding principles. Examples marked with “x” show behaviors that should be avoided; examples marked with “✓” indicate behaviors that the Global Code of Conduct seeks to foster and reinforce. It is intended to update this Annex as the Foreign Exchange Market evolves.

Similarly to other sections of the Global Code of Conduct, Market Participants must interpret these examples professionally and responsibly. Market Participants are expected to use their good judgment and act in an ethical and professional manner.

EXECUTION

Market Participants must have clear the roles in which they act. (PRINCIPLE 8)

✓ A Client requests a Market Participant to buy EUR/NOK on its behalf in the market. The Market Participant and the Client have an agreement establishing that the former will act as Agent and will add its fees. The Market Participant executes the order in the market, showing the execution analysis and adding the fee.

Market Participants must have clear the roles in which they act. In this example, the parties specified in advance the roles in which they will act and that the Market Participant will add the fee cost. Specifically, the Market Participant executes the Client's request in its capacity as agent and is transparent about the nature of the execution and the associated cost.

✓ A Client requests a Market Participant to buy EUR/NOK as a Market Order. The Market Participant and the Client have a relationship through the Principal figure stipulated in their terms and conditions. The Market Participant fills the Client's order in accordance with the agreed terms, possibly using its own inventory and the liquidity available in the market.

Market Participants must have clear the roles in which they act. In this example, the parties have clearly specified, in advance, the roles in which they will act, disclosing in advance the terms and conditions under which the Market Participant will interact with the Client. Specifically, the Market Participant and the Client, acting as Principals, agreed to execute the transaction.

Market Participants must handle Client orders fairly and transparently. (PRINCIPLES 9 AND 10)

✓ A bank receives an order for a large amount from a fund (Client) to sell EUR/PLN at the 4 p.m. London time reference exchange rate (fix). In accordance with the agreed terms and conditions, the bank will act as Principal and may hedge the foreign exchange transactions depending on market conditions. The bank hedges part of the ordered amounts before the time window for determining the reference exchange rate (fixing window), as it estimates that the duration of the referred five-minute period is too short to settle the total amount of the transaction without affecting the market rate to the detriment of the Client. The bank also retains part of the risk in its book and does not trade the total amount of the order in the market, thereby reducing the impact on the market from the Client's order on the reference exchange rate, with the intention of benefiting the Client.

192 OFFICIAL GAZETTE Thursday, May 22, 2025

Market Participants are expected to manage orders with fairness and transparency. In this example, the Client and the bank agreed that the latter would act as Principal. The bank executes the transaction in a manner that benefits the Client by reducing the impact of the Client's order on the market.

X A Market Participant has several orders from various Clients to buy USD/ZAR. The Market Participant has informed its Clients about its electronic order processing policy, which processes orders in the order they are received from Clients. The Market Participant executes another client's order first, despite receiving it after other orders.

Market Participants must make their Clients aware of the factors affecting how orders are handled and executed, including whether orders are aggregated or prioritized according to timing, and must establish clear standards aimed at providing a fair and transparent outcome for the Client. In this example, the Market Participant has made the Client aware of its order processing policy, yet violates that policy when executing orders in a non-sequential manner.

X A Client calls a Market Participant to execute a series of foreign exchange transactions, mentioning that these are carried out under the agency contract they have established. The agency contract includes a previously negotiated fee. When executing the transactions, the Market Participant's execution desk adds an undisclosed additional differential for each transaction executed, causing the Client to pay an amount in excess of the previously negotiated fee.

A Market Participant handling Client orders in its role as Agent must be transparent with its Clients regarding its terms and conditions, which must clearly establish costs for fees and commissions. In this example, the Market Participant charges a fee in excess of the previously negotiated amount and does not disclose this to the Client.

X Operator A tells Voice Brokerage Service B that it has a large amount to execute at a reference exchange rate (fix) and needs help to establish a favorable rate for its benefit. Voice Brokerage Service B informs Operator C, who has a similar order, and all agree to combine their orders to create a larger impact during or prior to the window for determining the reference exchange rate (fix).

Market Participants must handle orders fairly and transparently, must not disclose operational information related to Clients (Principle 19), and must behave in an ethical and professional manner (Principles 1 and 2). Collusion to intentionally influence the reference exchange rate (fix), as illustrated in this example, is neither ethical nor professional. Disclosure of information regarding a Client's transactions to external parties is non-competitive conduct that undermines the fair and effective functioning of the Foreign Exchange Market.

✓ A corporate treasury contacts a bank to buy a large amount of GBP/SEK at the reference exchange rate (fix) of 11:00 a.m. the following morning, New York time zone. The Client and the bank agree that the latter will act as Principal and may hedge the transaction. Considering that liquidity around 11:00 a.m. is not sufficient to absorb the order, the bank begins buying small amounts of GBP/SEK during the morning to limit the market impact of the transaction. The bank fills the Client's order at 11:00 a.m. at the reference exchange rate (fix), using its inventory.

Market Participants must handle Client orders fairly and transparently. In this example, the Market Participant strives to achieve a fair outcome for its Client.

X A Client instructs a Market Participant to buy 5 billion USD/JPY at the 4:00 p.m. reference exchange rate (fix) as part of a cross-border merger and acquisition transaction. After receiving the instruction, but before 4:00 p.m., the Market Participant buys 300 million USD/JPY for its own book and not as part of a risk management strategy for the transaction. After the determination of the reference exchange rate (fix) at 4:00 p.m., the Market Participant sells 300 million USD/JPY for its own book, solely to take advantage of the price movement caused by the Client's order.

Market Participants must handle Client orders fairly and transparently, and Confidential Information obtained from a Client may only be used for the specific purpose for which it was provided. In this example, the Market Participant uses its knowledge of the Client's order and the expected market impact of the Fixing Order to obtain profits, potentially harming and putting the Client at a disadvantage.

✓ A bank is anticipating an order related to a probable merger and acquisition transaction on behalf of a Client involving the sale of a large amount of a specific currency. The bank recognizes that this transaction may have a considerable impact on the market and, therefore, proactively involves the Client in discussing a potential execution strategy, including but not limited to, internal flow reconciliation, execution timing, use of algorithms, and use of Pre-Hedging. The bank hedges in anticipation of the order with the Client's consent and with the intention of managing the risk associated with the anticipated transaction and seeking to obtain a better outcome for the Client.

Market Participants handling orders that by their size could potentially have relevant impacts on the market must do so with particular attention and care. The order described in this example is large and may have a relevant impact on the market, so the parties involved take various steps to supervise and execute it appropriately.

✓ An asset manager executes a transaction to buy 50 million GBP/USD on an electronic platform. The platform shares details, without disaggregating and without anonymizing, the referred transaction (for example, order amount, order start time, agreed price, prevailing average price, among others), with a third party that provides ACT. Transactional data is also shared with a company that provides the platform with analysis of Clients' foreign exchange activities. The financial details of the transaction, such as the profit generated by the transaction, are also shared with the platform's auditors.

The platform must disclose, within the applicable disclosure documents, that it shares transactional data without disaggregating and without anonymizing with an ACT provider and with a company that provides the platform with analysis of Clients' foreign exchange activities. It is suggested that this information be disclosed in the Disclosure Cover Sheets issued by the CGMC. The platform does not need to disclose that it shares data on the profits generated by the foreign exchange transaction in question with the auditors, as this is permitted in accordance with Principle 20.

✓ A Market Participant acting in its role as Principal in relation to its responsibilities as custodian and subject to the terms of a written agreement on foreign exchange services with a Client, buys ZAR, to fund an asset purchase on behalf of its Client, and applies a pre-agreed differential/fee to the exchange rate negotiated in the market. The Market Participant makes information available to the Client so that the Client can judge the quality of the execution, including the time and date of the transaction, as well as the prevailing reference market rate at that time, if available.

These circumstances meet the criteria of Principle 10 for enhanced disclosure requirements, namely:
✓ The Market Participant acting as Principal initiates the transaction on behalf of the Client.
✓ There is a prior written agreement authorizing the Principal to initiate the transaction.

A Market Participant acting in these circumstances must clearly establish the terms and conditions of its relationship with the Client to execute transactions, including any applicable fees and commissions.

✓ A Client uses an electronic instant messaging platform to instruct a limit order with a bank as counterparty, requesting to sell 30 million AUD/USD at a quote above the prevailing market prices at that time. The Client also expects the bank to adhere to the higher disclosure requirements indicated in Principle 10, particularly with regard to full disclosure regarding fees and commissions associated with the transaction. The Principal respectfully declines to provide additional transparency treatment, highlighting that the order initiated by the Client does not meet the characteristics to be treated in accordance with the higher disclosure requirements.

In this example, it is the Client, rather than a Market Participant acting on behalf of the Client, who initiates the transaction. Additionally, there is no pre-existing written agreement authorizing the Market Participant to initiate the transaction. In the absence of both conditions, the specific considerations and disclosure requirements indicated in Principle 10 for a Market Participant initiating Client orders in a Principal role would not be applicable. However, other considerations and disclosure requirements applicable to other types of orders described in Principle 10 may still be applicable.

Market Participants shall only perform Pre-Hedging when acting as Principal and must do so fairly and transparently. (PRINCIPLE 11)

✓ A Market Participant has revealed to a Client acting as Principal that it may perform Pre-Hedging on anticipated orders of said Client. The Client requests the Market Participant for a buy position for a large amount of USD/CAD during an illiquid period of the day. Due to liquidity conditions and the size of the anticipated order, the Market Participant expects it will have to quote a significantly lower buy price than what is shown on the screen of the Interdealer Brokerage Service (IDB). However, before determining its quote, and with the purpose of improving its price to the Client, the Market Participant tests market liquidity by selling a small amount through the Interdealer Brokerage Service (IDB). The Market Participant quotes the Client a buy price for the total amount, taking into consideration, for the Client's benefit, the amount already sold.

Market Participants shall only perform Pre-Hedging to cover anticipated orders of their Client when acting as Principals and without the intention of creating a disadvantage for the Client. In this example, the Market Participant has performed Pre-Hedging on part of the order to manage the potential risk associated with the anticipated order and to benefit the Client, specifically by taking into consideration the price benefit of the amount covered via Pre-Hedging for the Client.

X A Client requests a bank for a buy position for 75 million USD/JPY. The bank has revealed to its Client acting as Principal that it may perform Pre-Hedging on anticipated orders of said Client. The bank then sells 150 million USD/JPY in the market outside its ordinary operations and before addressing the requested buy position, with the intention of taking advantage of the information from the Client's request and benefiting from a potentially lower market price.

Pre-Hedging is intended to manage the risk associated with anticipated Client orders, designed to benefit the Client. Market Participants shall only perform Pre-Hedging with Client orders when acting as Principal. In this example, the amount intentionally sold by the bank as part of the Pre-Hedging was not proportional to the risk inherent in the anticipated transaction and was not designed to benefit the Client. The bank acted with the intention of taking advantage of the Client's transaction request for its own benefit and potentially puts the Client at a disadvantage. A Market Participant must also consider the prevailing market conditions and the size and nature of the anticipated transaction when evaluating whether to perform Pre-Hedging regarding said transaction.

Market Participants shall not solicit transactions, create orders, or provide prices with the intention of creating a disruption in the functioning of the market or impeding price discovery. (PRINCIPLE 12)

X A Market Participant wishes to sell a large amount of USD/MXN. Before doing so, the Market Participant executes a number of successive small purchases of USD/MXN on a widely consulted Electronic Trading Platform with the intention of increasing the market price and inducing other Market Participants to buy USD. Subsequently, the Market Participant executes the original sell order on one or more Electronic Trading Platforms at a higher price.

Market Participants shall not solicit transactions or create orders with the intention of causing a disruption in the functioning of the market or impeding the price discovery process, including actions aimed at giving a false impression of the market price, depth, or liquidity. This example illustrates a strategy aimed at causing artificial movements in the price. While Market Participants generally split large transactions to mitigate the impact of a transaction, in this case, the small transactions are performed with the intention of provoking an artificial movement in the price. The Market Participant plans to sell a large amount of currency but performs small buy operations to create a false impression in the market.

Thursday, May 22, 2025 OFFICIAL GAZETTE 193

X A Market Participant wishes to sell a large amount of USD/MXN. Repeatedly, it shows small sell quotes on a widely consulted Electronic Trading Platform. The Market Participant chooses to use another dealing code of the same institution on the same Electronic Trading Platform in order to lift these successive larger orders with the intention of deceiving the market.

This is an extension of the previous example. The conduct gives the false impression that multiple counterparties are participating in a rally when in reality they come from the same institution. The use of these strategies must be avoided.

X A Client can obtain a profit by raising the 4:00 p.m. reference exchange rate (fix) in relation to a particular currency pair. It calls a bank at 3:45 p.m. and places a Fixing Order and then instructs the bank to "buy the amount as soon as possible in the first minute of the reference exchange rate calculation time window."

Market Participants shall not require transactions or create orders with the intention of creating a disruption in the functioning of the market or impeding the price discovery process, including the adoption of strategies aimed at creating a false impression in the market price, depth, or liquidity. The Client's request in this example is with the intention of creating a false impression in the market price and its depth.

X A hedge fund has a long position on an exotic Put option in euros. The currency has been weakening during the New York session towards the knock-in level. Knowing that liquidity will continue to decrease during the Asia session, due to a holiday, and in order to reach the knock-in level of the option, the hedge fund leaves open a large Stop Loss Sell Order for the Asia opening with Bank A at a fair price just above the knock-in level. At the same time, the hedge fund leaves a limit buy order with Bank B for the same amount in euros but at a level just below the knock-in level. Neither Bank A nor Bank B knows that the hedge fund has a long position on an exotic Put option in euros.

Market Participants shall not solicit transactions or create orders with the intention of creating artificial movements in the price. In this example, the hedge fund has sought to benefit (by achieving the knock-in level of the option) by leaving orders designed to cause artificial movements in the price inconsistent with the prevailing market conditions.

X An Interdealer Brokerage Service (IDB) announces a price without having received instruction from a brokerage house, a dealer bank, or another financial institution. When an operator attempts to hit or lift the price, the Interdealer Brokerage Service (IDB) informs the operator that the quote has already been traded by another participant or has been withdrawn.

Market Participants shall not provide prices with the intention of impeding the price discovery process, including strategies designed to create a false impression of the market price, depth, or liquidity. The practice illustrated in this example, sometimes known as "flying a price," is a pricing strategy that intentionally gives a false impression that there is greater liquidity than is actually available. It can occur in an Interdealer Brokerage Service (IDB) operating by voice or electronically, or through an Electronic Trading Platform that falsely attributes its prices to another participant. This conduct is also inappropriate for other types of Market Participants.

Market Participants must understand the manner in which reference prices, including highs and lows, are established in relation to their operations and/or orders. (PRINCIPLE 13)

✓ A market maker reveals to a Client the manner in which reference prices will be established. After a steep drop in USD/JPY, the market maker executes the Client's Stop Loss Order using a reference rate in accordance with its own policy and its prior disclosure.

Market Participants must understand the manner in which reference prices are established in relation to their operations and orders. In this example, the market maker reveals to the Client the manner in which reference prices will be established.

Margins shall be equitable and reasonable. (PRINCIPLE 14)

196 OFFICIAL GAZETTE Thursday, May 22, 2025

X A bank receives a Stop Loss Order from a Client to sell GBP/USD at a certain level.
When that level is being traded in the market, the bank executes the Stop Loss Order with a slight slippage. Notwithstanding the foregoing, the bank fills the Client's order at a slightly lower exchange rate after having charged the Margin and without having previously informed the Client that the total execution price of a Stop Loss Order was subject to a Margin.
The Margin must be fair and reasonable, and Market Participants must promote transparency by informing their Clients that their final price in the transaction may include a Margin and that it may impact the price and execution of orders triggered at a specific level. In this example, the bank has not revealed to the Client how the Margin will affect the total price of the order.

X A bank charges a higher margin to a company than the margin it charges to other companies of the same size, credit risk, and business relationship, taking advantage of the company's lack of sophistication to understand and question the price granted by the bank.
The Margin shall be fair and reasonable and may reflect various considerations, such as risks assumed, costs incurred, and services provided to a particular Client, factors related to a specific transaction, and the general relationship with the Client. The application of the Margin in this example is not fair or reasonable, as it discriminates among Clients based on their level of sophistication. In the following example, the difference in the Margin charged to each of the Clients is motivated by differences in the general relationship with the Client, in this case, by the volume of business.

✓ A bank charges different Margins to companies of similar size and credit level due to differences in the dimension of their relationship with Clients. For example, the volume of business these Clients operate with the bank is of very different magnitudes.

Market Participants must identify and resolve their operational differences as soon as possible in order to contribute to the proper functioning of the Foreign Exchange Market. (PRINCIPLE 15)

X A hedge fund executes a transaction through an Operator (executing dealer) to perform a Give Up of a brokerage house to its Prime Brokerage Service. The terms of the transaction provided by the hedge fund to its Prime Brokerage Service cannot be reconciled with those provided by the Operator. When notified by the Prime Brokerage Service that there is a discrepancy in the transaction details, the hedge fund responds that the Operator (executing dealer) has made a mistake and that the Prime Brokerage Service must resolve the operational discrepancy. Market Participants must resolve differences as soon as possible. In particular, Clients of Prime Brokers and operators are responsible for resolving transaction differences to make timely modifications and reconcile transaction terms through the Prime Brokerage Service. In this example, the hedge fund assigns the responsibility for resolving the difference to the Prime Brokerage Service. Notwithstanding the foregoing, the hedge fund should have contacted the Operator directly to resolve this difference, as the identity of the counterparties is known by the hedge fund and the operator.

✓ A Client uses an Electronic Trading Platform to execute foreign exchange transactions on behalf of its Prime Brokerage Service. The rules of the Electronic Trading Platform do not allow revealing to the Client the name of the Operator whose orders correlate with those of the Client itself. The Electronic Trading Platform confirms a transaction at a price that differs from the Client's records. The Electronic Trading Platform and the Prime Brokerage Service work together with the Client to provide a prompt solution to the operational difference. Specifically, the Electronic Trading Platform contacts the operator while maintaining the Client's confidentiality. Market Participants must resolve operational differences as soon as possible and protect Confidential Information, as established in Principle 20. When access to the market can be obtained anonymously, the grantor of access must help resolve operational differences. In this example, although the Client and the operator are responsible for resolving the discrepancy in the transaction, they require help from the Prime Brokerage Service and the Electronic Trading Platform since the Client and the Operator do not know, and should not know, the name of the other.

Market Participants that employ the last look practice must be transparent in its use and provide relevant information to their Clients. (PRINCIPLE 17)

X A Market Participant sends a transaction request to an anonymous liquidity provider to buy 1 million EUR/USD at a price of 13 through an Electronic Trading Platform

Thursday, May 22, 2025 OFFICIAL GAZETTE 197

while the displayed price is 12/13. It is understood that this transaction request is subject to a last look window before being accepted and confirmed by the anonymous liquidity provider. During this window, the liquidity provider places buy orders at levels lower than the price of 13. If these orders are filled, the liquidity provider confirms and fills the Market Participant's transaction request, but if the buy orders are not filled, it does not attend to the Market Participant's transaction request. Market Participants shall only use the last look practice as a risk control mechanism to verify factors such as validity and price. In this example, the liquidity provider improperly uses the information contained in the Client's transaction request to determine if it can obtain a profit and has no intention of filling the order unless it can obtain a profit.

✓ A Client sends various transaction requests subject to a last look window, and its liquidity provider has made known the purposes for which the last look practice may be used. The Client reviews information related to the average fill ratios in such transactions. The information suggests that the average is lower than expected, and the Client goes to its liquidity provider to discuss the reasons for this. Market Participants that employ the last look practice must be transparent regarding its use and provide appropriate information to their Clients. It is also good practice to be able to engage in conversations with Clients about how their orders have been handled. In this example, the Market Participant's transparency has allowed the Client to make an informed decision about how their orders are handled and promotes dialogue between the two parties.

X A Client requests to buy 25 million EUR/USD on an Electronic Trading Platform. During the last look window, the Market Participant, taking into account the Client's transaction request, modifies its prices upwards on the Electronic Trading Platforms.
Market Participants must not use the information contained in a Client's transaction request during the last look window. In this example, the Market Participant uses the information contained in the Client's transaction request to change its prices on the Electronic Trading Platforms during the last look window. By doing this, the Market Participant could potentially signal the Client's interests to the market, who could be at a disadvantage if the Market Participant subsequently rejects the transaction.

✓ A Client requests to buy 20 million USD/MXN from a Market Participant through an Electronic Trading Platform. During the last look window associated with that transaction request, the Market Participant continues updating its prices in USD/MXN and other pairs on a number of platforms. The prices that the Market Participant displays on these platforms reflect normal sources of the Market Participant's pricing algorithms, including movements in market prices and other transactions completed by the Market Participant; notwithstanding the foregoing, it does not use the information from the Client's transaction request as a source for such price changes during the last look window. Market Participants may update their prices while a last look window remains open if the update is completely independent of the relevant transaction request, as doing so allows Market Participants to facilitate continuous price formation. Given the speed of electronic negotiations, Market Participants will need to make periodic updates to their prices while one or more last look windows remain open. In this example, the Market Participant does not take the transaction request into account when updating prices during the last look window.

X A Client requests to sell 50 million EUR/USD to a Market Participant (Bank A), at the price quoted to it by Bank A itself. The Client makes a transaction request under the understanding that Bank A will not assume any market risk related to the transaction request and will only complete the request after conducting offsetting transactions in the market. During the last look window, Bank A sends a transaction request to another Market Participant (its liquidity provider) to sell 50 million EUR/USD. This transaction request is

198 OFFICIAL GAZETTE Thursday, May 22, 2025

accepted by the liquidity provider. During the last look window, the market moves downward. Bank A executes its Client's order for 45 million EUR/USD, instead of doing so for the total amount of 50 million originally traded, rejecting the remaining 5 million EUR/USD. Bank A covers its remaining short position of 5 million EUR/USD in the market at a lower price.
Market Participants that use transaction request information to conduct operational activity during the last look window must always transmit to their Client the entire volume that was traded during that period. In this example, the bank did not transfer to its Client the total volume traded in the last look window, but rather sought to gain an advantage over price movements to close its position with a greater profit in the market.

Market Participants that provide algorithm-based operations or aggregation services to their Clients must provide them with adequate information on how they operate. (PRINCIPLE 18)

X An aggregator channels an order preferentially through an Electronic Trading Platform that offers brokerage rebates. The aggregator provider does not inform Clients that brokerage rebates affect preferences in the choice of the channel through which orders are routed.
Market Participants that provide aggregation services to Clients must adequately inform them of how they operate, in particular, they must inform them generally of how the preference order for routing services is determined. In this example, the aggregation service provider has not informed of a determining factor in the preference order for routing services.

✓ A Client selects a bank's execution algorithm to buy 100 million GBP/USD. The bank advertises this particular product as an algorithm that executes on a 'Direct Market Access' (DMA) basis. The Client understands that this means that the bank's algorithm desk will select the corresponding liquidity after comparing multiple sources, with the intention of offering the Client the highest quality of execution during that period. The bank has also indicated that the algorithm in question may use internal liquidity. Likewise, the bank has also revealed how the algorithm handles potential conflicts of interest arising from this dual role. After the order has been executed, the bank provides post-trade data transparently, demonstrating the origin and price of each transaction executed to complete the order placed by the algorithm. Upon reviewing the post-trade data, the Client feels confident that the algorithm selected the best available liquidity at the time of execution. Market Participants must be clear about the roles under which they act. Market Participants must handle orders fairly and transparently in line with the roles under which they act (Principle 9). Market Participants that provide algorithm-based operations or aggregation services to Clients must adequately disclose information related to how they operate. Banks that wish to offer their own liquidity while operating DMA Algo algorithms must provide clarity and transparency regarding this practice through information disclosure and handle any conflict of interest that may impact the handling of the Client's order. Likewise, they must make available to the Client sufficient post-trade information, so that the Client can verify that the algorithm always selected the best prices available in the market, or with respect to the bank's internal liquidity.

X A Client selects a bank's execution algorithm to buy 100 million GBP/USD. The bank advertises this particular product as an algorithm that executes on a 'Direct Market Access' (DMA) basis. The Client understands that this means that the bank's algorithm desk will select liquidity after comparing multiple sources, with the intention of offering the Client the highest quality of execution during that period. The bank has also indicated that the algorithm may use internal liquidity. However, the bank is not correctly managing the conflicts of interest arising from this dual role: the market-making desk has access to the content of the primary order (parent order), and the execution algorithm logic is predetermined to direct the last 20 million GBP/USD to the market-making desk with the aim of maximizing performance (of the bank). Market Participants must handle orders fairly and transparently, in line with the roles under which they act (Principle 9); likewise, Market Participants that provide algorithm-based operations or aggregation services to Clients must adequately disclose

Thursday, May 22, 2025 OFFICIAL GAZETTE 199

that information related to how they operate. In this example, the bank has not completely revealed how the DMA Algo works or manages conflicts of interest in this dual role. The bank in question is using Confidential Information and prioritizing its own price determination over that determined by the market.”

…

“Annex 2
Glossary of Terms

Agent: Market Participant that executes orders on behalf of its Clients, in accordance with the mandate granted by the Client, and without assuming any market risk related to such orders.

Execution Algorithm: Execution of an order through computer programs that use algorithms. For example, at the most basic level, a computer program automates the process of dividing a larger order known as a 'parent order' into multiple smaller orders called 'child orders', and executes them over a period of time.

Applicable Legislation: Laws, regulations, and other general provisions applicable to Market Participants and the Foreign Exchange Market in each jurisdiction where Market Participants conduct business.

Interest (Axe): The interest that a Market Participant may have in executing a transaction in a specific product or currency pair at a price that could be better than the prevailing rate in the market.

Client: Market Participant that requests transactions and activities through or from other Market Participants that provide market-making services or other transaction execution services in the Foreign Exchange Market. A Market Participant may act as a Client in some circumstances or as a market maker in others.

Compliance Risk: Risk of incurring legal or regulatory sanctions, material financial losses, or reputational loss as a result of a Market Participant failing to comply with laws, regulations, rules, industry standards, and codes of conduct applicable to its foreign exchange activities. Compliance includes observing appropriate standards of market conduct, managing conflicts of interest, fair treatment of clients, and adopting measures to prevent money laundering and terrorist financing.

Confidential Information: Information that must be treated as reserved, including that related to Foreign Exchange Market Transaction Information and Information Designated as Confidential.

Corporate Treasury Center: Market Participant within a group or consortium composed primarily of non-financial companies, that conducts external transactions (outside the group) as a Client (unless expressly stated that it acts in another capacity), both on its own behalf and on behalf of its parent companies, subsidiaries, branches, affiliates, or companies that make up the business group it represents.

Information Designated as Confidential: Reserved, confidential, exclusive-use, proprietary information, and any other information that Market Participants agree to designate a higher level of reserve, which at their discretion, may be formalized through the signing of written confidentiality agreements or any similar agreement.

Direct Market Access Algo (DMA Algo): A particular execution algorithm. To complete the instructions of a Client presented through a DMA Algo, a Market Participant will select liquidity through multiple sources, with the intention of offering the highest quality of execution available during that period to the Client. All liquidity obtained to complete the order is transferred directly to the Client through transactions between the Market Participant and the Client. In those cases where the Market Participant provides its internal liquidity to the algorithm, said participant must compete on an equivalent and fair basis with the others

200 OFFICIAL GAZETTE Thursday, May 22, 2025 external liquidity sources and must be transparent about its dual role as algorithm provider and liquidity provider.
Direct Payment: Transfer of funds to the account of the counterparty involved in the transaction to settle a foreign exchange operation.
Electronic Trading Platform: Any system that allows Market Participants to execute operations electronically in the Foreign Exchange Market.
Electronic Trading Activities: These activities may include operating, taking or determining prices and providing and/or using trading algorithms, through an Electronic Trading Platform.
FX: Exchange rate.
Foreign Exchange Market: Market for wholesale foreign exchange operations.
Foreign Exchange Market Trading Information: May take various forms, including information relating to past, present or future operations or to the Market Participant’s or its Clients’ own positions, as well as related information that is sensitive and is received as part of its foreign exchange activities.
CMC (FXC): Foreign Exchange Market Committee.
Fixing Order: Order to operate at a specific reference exchange rate.
Give Up: Process by which operations are transferred to a Brokerage Service (Prime Broker) by a counterparty designated by the Brokerage Service (Prime Broker) to execute transactions with a Brokerage Service Client (Prime Broker Client).
Global Code of Conduct: Set of global principles of good practice in the Foreign Exchange Market.
Interdealer Broker Service (IDB): Financial intermediary that facilitates operations between broker-dealers, dealer banks and other financial entities, rather than private individuals. This includes brokerages (brokers) that execute orders via voice, electronic means and hybrid systems. Brokerages (brokers) with any degree of electronic execution will also be considered as a subcategory of Electronic Trading Platforms. Mark Up: Differential in favor or charge that may be included in the final price of an operation as consideration to the Market Participant for various considerations, which may include assumed risks, costs incurred and services provided to a particular Client. Market Color: Shared viewpoint of Market Participants regarding the general state of the market and its trends. Market Order: Request or communication from a counterparty to enter into a foreign exchange operation with a Market Participant to buy or sell a foreign exchange instrument at the level available in the market at that time. Market Participant: See the definition contained in the preamble. Proprietary Transactions: Operation by personnel for their own benefit or for their indirect benefit (for example, for the benefit of family members and close persons). Pre-Hedging: Risk management associated with one or more Client orders in advance, designed to benefit them in relation to such orders and any other transactions resulting from them. Prime Broker: Entity that grants credit intermediation to one or more parties in an operation, in accordance with the previously agreed terms and conditions governing the provision of such credit. This entity may also offer complementary or related services including operational and technological services.

Thursday, May 22, 2025 OFFICIAL GAZETTE 201
Prime Brokerage Participant: Market Participant that acts as (i) Prime Broker, (ii) Client using the services of the Prime Broker (Prime Broker Client) or (iii) Market Participant that acts as a price maker or execution intermediary (such as an Agent or platform) between the Prime Broker Client and the Prime Broker.
Principal: Market Participant acting on its own account.
Real Time: Time closest to that in which a process or event actually takes place.
Settlement Risk: Risk of loss of the total amount of the operation due to the counterparty’s failure to settle. This may arise from the payment of the currency being sold, but with a failure to receive payment of the currency being purchased (This Settlement Risk is also known as “Herstatt Risk”).
SSI (Standing Settlement Instruction): Permanent settlement instruction.
Standard Settlement Instructions (SSIs): Payment instructions that have been previously agreed upon and are used to transfer funds each time an operation is executed with the same counterparty for a specific product and currencies. Standard Settlement Instructions may also be known as “standing settlement instructions”.
Standards: Internal policies of a Market Participant, external codes (the Global Code of Conduct and any of its annexes published by regional Foreign Exchange Committees or in the jurisdictions where the Market Participant is incorporated or operates) and other relevant guidelines (such as those established by international public sector organizations such as the Bank for International Settlements and the Basel Committee on Banking Supervision). Stop Loss Order: Contingent order that activates a buy or sell order for a specific notional amount when a reference price reaches or exceeds a predetermined activation level. There are different variants of Stop Loss Orders, depending on the execution relationship between counterparties, the reference exchange rate, the trigger and the nature of the activated order. A series of parameters are required to fully define a Stop Loss Order, such as the reference exchange rate, the order amount, the validity period and the trigger. Third-Party Payment: Transfer of funds to the account of an entity other than the counterparty involved in the transaction to settle a foreign exchange operation. Transaction Cost Analysis (TCA): Analysis to evaluate the quality of execution of an operation – for example, by comparing the resulting price in the execution of an operation against a specific reference. Value Date: Date on which a Market Participant and its counterparty agree to settle their obligations, making the relevant payments and transferring ownership of the traded currencies. Voice Brokerage Service: An Interdealer Broker Service with responsibility for both counterparties, that negotiates foreign exchange operations via telephone, conversational systems and/or hybrid systems.” TRANSITORY PROVISIONS FIRST.- This Circular shall enter into force the day following its publication in the Official Gazette of the Federation. SECOND.- Entities that, as of the date of publication of this Circular, have communicated to the Bank of Mexico their decision to adhere to the Global Code of Conduct in accordance with letter A of the 3rd of the Rules, must send a new communication in terms of the second paragraph of said Rule 3rd, no later than April 30, 2026. THIRD.- Entities that, as of the date mentioned in the preceding TRANSITORY PROVISION SECOND, have not submitted the communication indicated in said TRANSITORY PROVISION SECOND, will be identified in the publication referred to in the 6th of the Rules as if their decision was not to adhere to the Global Code of Conduct.

202 OFFICIAL GAZETTE Thursday, May 22, 2025
Conduct. This is without prejudice to the sanctions that correspond in terms of the applicable provisions.
Mexico City, May 13, 2025.- BANK OF MEXICO: Director General of Central Banking Operations, Gerardo Israel García López.- Initials.- General Legal Director, Erik Mauricio Sánchez Medina.- Initials.
For any queries regarding the content of this Circular, the Bank of Mexico is at your disposal through the Directorate of Central Banking Authorizations and Sanctions at phone number (55) 5237-2000 extension 3200.