Circular 52/2008 — Rules for Purchase Auctions of Savings Protection Bonds (BPAS)

(This Circular was repealed by Circular 5/2012 published in the Official Gazette of the Federation on March 2, 2012) "2008, Year of Physical Education and Sport" CIRCULAR 52/2008 Mexico, D.F. on October 30, 2008.
TO CREDIT INSTITUTIONS,
BROKERAGE HOUSES, INVESTMENT COMPANIES AND INVESTMENT COMPANIES SPECIALIZED IN RETIREMENT FUNDS:
SUBJECT: RULES FOR THE PURCHASE AUCTIONS OF SAVINGS PROTECTION BONDS (SPBs) The Bank of Mexico, based on the provisions of Article 28 of the Political Constitution of the United Mexican States, paragraphs sixth and seventh; 7th fraction I, 8th and 14 of the Bank of Mexico Law; 22 of the Law for Transparency and Order of Financial Services; 8th paragraphs third and sixth; 10, 17, fraction I and 19, fraction IX, which provide for the attribution of the Bank of Mexico, through the Directorate of Central Banking Regulations and the Directorate of Operations to participate in the issuance of regulations respectively, all of the Internal Regulations of the Bank of Mexico; Unique of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, fractions I and IV, with the objective of promoting the sound development of the financial system, has resolved to carry out purchase auctions of Savings Protection Bonds (SPBs), in accordance with the following:

RULES FOR THE PURCHASE AUCTIONS OF SAVINGS PROTECTION BONDS (SPBs)

1. DEFINITIONS
   For the purposes of these Rules, singular or plural, the following shall be understood:
   SPBs: Savings Protection Bonds including SPBs, SPAT and BPA 182, issued by the Institute for the Protection of Bank Savings,

Auctions: the purchase auctions of SPBs provided for in these Rules.

2. BIDDERS
   Only the following persons may submit bids:
   a) Credit institutions; b) Brokerage houses; c) Investment companies; d) Investment companies specialized in retirement funds, and e) Other persons expressly authorized for such purpose by the Bank of Mexico. The corresponding authorization may be limited or revoked, at any time, by the Central Bank itself. The persons mentioned above must always act on their own account. Investment companies regulated by the Investment Companies Law shall submit their bids through the investment company operator that provides them with asset administration services. The Bank of Mexico will not accept bids from the persons mentioned above when, in its judgment, they fail to comply with applicable provisions or do not conform to sound uses or practices of the securities market.

3. CALL FOR BIDS
   The Bank of Mexico will inform bidders of the calls for the Auctions two business banking days before the date on which the respective Auction will take place, starting from 12:00:00 hours, through its electronic page on the worldwide network (Internet) identified by the domain name: www.banxico.org.mx or through any other electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico, unless the Bank announces another date or time for a particular call. Such calls will inform the characteristics of the Auctions, such as:
   a) Date and time when the Auction will be held; b) The type of Auction; c) The keys of the SPB issuances that the Bank of Mexico wishes to purchase, and d) The maximum amount of SPBs that the Bank of Mexico is willing to purchase from bidders.

4. TYPES OF AUCTIONS
   The Auctions may be:
   a) Single-price: those in which SPBs will be accepted starting from the maximum price that the Bank of Mexico is willing to pay, assigning the same price to all bids of equal or lower price; b) Multiple-price: those in which SPBs will be accepted starting from the maximum price that the Bank of Mexico is willing to pay, assigning to each of the accepted bids the specific price indicated by the bidder in the bid itself, or c) Fixed-price: those where the Bank of Mexico determines in advance the price at which it is willing to purchase the SPBs, assigning a fixed price to each of the accepted bids.

5. PRICES
   The mentions contained in these Rules regarding prices refer to clean prices, that is, those that do not include accrued but unpaid interest.
   For Fixed-price Auctions, the Bank of Mexico will announce the price of the SPBs at which it wishes to carry out the purchase, through its Internet electronic page or through any other electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico.

6. BIDS
   6.1 Types of bids
   Single-price or multiple-price bids will be competitive and must indicate: a) the issuance key of the SPB that the bidder intends to sell to the Bank of Mexico; b) the price, expressed up to five decimals, at which the bidder is willing to sell each title, and c) the total nominal value amount of each bid, in quantities expressed in thousands of pesos and rounded to five thousand pesos or multiples of that amount. For Fixed-price Auctions, each bid must indicate: a) the issuance key of the SPB that the bidder intends to sell to the Bank of Mexico and b) the total nominal value amount that the bidder is willing to sell in quantities expressed in thousands of pesos and rounded to five thousand pesos or multiples of that amount.

6.2 Bid limits
The sum of the amounts of the bids submitted by each bidder for each call shall not exceed the maximum amount of SPBs offered that the Bank of Mexico is willing to accept from bidders.

6.3 Submission of bids
Each bidder may submit one or more bids regarding the same call.
Interested parties must submit their bids on the date and time indicated in the respective call, through the Bank of Mexico's Account Holder Attention System (SIAC-BANXICO), or through any other electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico or in requests they prepare according to the model attached as "Appendix 1" of these Rules. The access, identification and, if applicable, operation keys established for the use of electronic computing or telecommunications media will substitute the autograph signature with an electronic one, so that documentary or technical records where they appear will produce the same effects that the laws grant to documents signed by the parties and, consequently, will have equal probative value. Bids submitted according to the model attached as "Appendix 1" must be delivered to the National Operations Management of the Bank of Mexico in a closed envelope accompanied by a cover letter. Both documents must be signed by the same representatives duly authorized by the bidder, and the letter must show the signature knowledge granted by the Bank of Mexico's Cash Account Operations Office, so that said signatures must be registered in the aforementioned Office.

6.4 Effects of bids
Bids submitted to the Bank of Mexico in terms of section 6.3 will produce the widest effects corresponding in law and will imply the bidder's acceptance of all and each of these Rules, as well as the terms and conditions established in the call in which the Bank of Mexico communicates the particular characteristics of the Auction. Every bid will be binding for the bidder who presents it and will be irrevocable. The Bank of Mexico may cancel the request or bids it receives if they do not comply with these Rules or what is stated in the corresponding call; are not clearly legible; have amendments or corrections, or are incomplete or in any way incorrect. Likewise, the Bank of Mexico may reject bids regarding one or more issuances if, in its judgment, the participation of such bids, due to their characteristics, could produce inconvenient effects on the objectives of credit regulation, or of a sound development of the securities market in particular or the financial market in general.

7. ALLOCATION
   In Single-price and Multiple-price Auctions, the bids of each issuance will be assigned according to the ascending order of the corresponding unit prices, without exceeding the maximum amount offered in the call.
   When the Auction is single-price, bids will be assigned at the price corresponding to the last bid that receives allocation, even if it has not been fully attended in its amount.
   In the case of Multiple-price Auctions, bids will be assigned at the price corresponding to each of these bids.
   For Fixed-price Auctions, bids will be assigned at the price determined by the Bank of Mexico and up to the amount indicated in the bid itself.

8. COMMON PROVISIONS
   In the event of tied bids and the amount to be assigned is not sufficient to attend such bids, they will be attended pro-rata with respect to their amount.
   The Bank of Mexico may determine in any Single-price or Multiple-price Auction, the maximum unit price at which it is willing to purchase the SPBs subject to the Auction. In these cases, bids with higher prices will not be attended.
   The Bank of Mexico may declare any Auction completely void, in which case no bid will receive allocation.
   The amounts of SPBs to be delivered by each bidder who has received allocation will be at nominal value, rounded to thousands of pesos.

9. RESULTS
   The Bank of Mexico will inform each bidder individually, through SIAC-BANXICO, no later than sixty minutes after the deadline for the submission of bids, the quantity and unit price of the SPBs that will be purchased from that bidder, as well as the total amount that will be credited to the corresponding account. Likewise, it will make available to all bidders through its electronic page or through any other electronic, computing or telecommunications medium that the Bank of Mexico itself determines, no later than sixty minutes after the deadline for the submission of bids, the general results of the Auction. In the event that due to force majeure or fortuitous event the results of the Auction cannot be made known in accordance with what is stated in this section, the Bank of Mexico will promptly communicate the applicable procedure to make such results known. From the settlement date of the respective Auction, the Bank of Mexico's Library Services Office will keep available to interested parties information on the bids received in each Auction and the amount of SPBs purchased in each of them, without indicating the name of the bidder. The historical information corresponding to the Auctions carried out by the Bank of Mexico will be kept available to interested parties in the aforementioned Office.

10. SETTLEMENT OF AUCTIONS
    10.1 The settlement date of the sale and purchase will be that established in the call. On the settlement day, the Bank of Mexico will instruct the S.D. Indeval Institution for the Deposit of Values, S.A. de C.V., (Indeval) so that the respective sale and purchase is carried out through the delivery against payment procedure provided for in Indeval's internal regulation.
    The persons referred to in letters c), d) and e) of section 2. above, must deliver the SPBs and receive the respective payment through a credit institution or brokerage house. To this effect, the credit institution or brokerage house designated by the bidders must send to the National Operations Processing Management of the Bank of Mexico a communication in terms of "Appendix 2". For the purposes of the foregoing, all SPBs that bidders who have received allocation are obligated to deliver, must be deposited in the corresponding securities accounts, no later than 15:30:00 hours on the day the sale and purchase is settled. When bidders do not have the total SPBs they must deliver in the account designated in the time referred to in the previous paragraph, the Bank of Mexico may, without the need for a judicial declaration, rescind the sale and purchase for the missing amount, so the corresponding credits and debits will not be made in the securities accounts at Indeval and it will be the responsibility of the bidder in question to pay the conventional penalties established. Without prejudice to the above, the Bank of Mexico may disqualify the respective bidder from participating in the Auctions. The amount of the conventional penalty referred to in the previous paragraph will be equivalent to one percent of the nominal amount of the SPBs that were not delivered timely to the Bank of Mexico and will be charged on the same settlement date of the Auction by the Bank of Mexico in the account it holds for the defaulting bidder or to the institution or brokerage house authorized by said bidder in terms of "Appendix 2".

10.2 The settlement of the SPBs must be carried out by adding to the respective unit price the accrued but unpaid interest, from the last interest payment or issuance date as applicable, up to the settlement date, according to the following formula:

I_dev = VN x (c/100) x (d/360)

Where:
I_dev = Accrued interest.
VN = Nominal value of the title. d = Days elapsed between the issuance date or the last interest payment, as applicable, and the settlement date. c = Annual interest rate of the SPB expressed in percentage terms.
In the event that the settlement date coincides with the interest payment date, the days elapsed between the last interest payment date and the settlement date will be equal to zero.

11. GENERAL PROVISIONS
    For market information, the Bank of Mexico will make known to the general public the characteristics of the Auctions, through its Internet electronic page or through any other electronic, computing or telecommunications medium authorized for this purpose by the Bank of Mexico itself. All times referred to in these Rules are referenced to the time zone of Mexico City, Federal District. In the event that due to force majeure or fortuitous event the calls or the results of the Auctions cannot be made known in accordance with what is stated in sections 3. and 9., respectively, the Bank of Mexico will promptly communicate the applicable procedure to make such calls or the results of the respective Auctions known.

APPENDIX 1
MODEL OF REQUEST TO PARTICIPATE IN THE PURCHASE AUCTION OF SAVINGS PROTECTION BONDS (SPBs) REQUEST ON OWN ACCOUNT Mexico, D.F., on ___ of _____________ of 20__.
Bidder Name: _________________________________________ Bidder Key at the Bank of Mexico: ________________________ Issuance Key of the SPB that is willing to sell: __________ BIDS:
Unit Price Total Amount
__________ . __________ __________ thousands of pesos __________ . __________ __________ thousands of pesos __________ . __________ __________ thousands of pesos The PRICES must be expressed up to FIVE decimals.
The PRICES do not include accrued interest.
The cited bids are binding and irrevocable; they will produce the widest effects corresponding in law, and imply our acceptance of all and each of the "Rules for the Purchase Auctions of Savings Protection Bonds (SPBs)" in force, as well as the terms and conditions of the call dated ___ of ____________ of 20__. Sincerely, (bidder's denomination) (name and signature of authorized officials) NOTE: Unused spaces must be cancelled.

APPENDIX 2
MODEL OF INSTRUCTION LETTER TO CHARGE THE ACCOUNT OF CREDIT INSTITUTIONS OR BROKERAGE HOUSES (LETTERHEAD OF THE CREDIT INSTITUTION OR BROKERAGE HOUSE) Mexico, D.F., on __ of __________ of 20__.
BANK OF MEXICO
Av. 5 de Mayo No. 2, Col. Centro,
Mexico, D. F. 06059
Attention: National Operations Processing Management (DENOMINATION OF THE CREDIT INSTITUTION OR BROKERAGE HOUSE), authorizes and instructs irrevocably the Bank of Mexico to process on our behalf, in the securities account that the S.D. Indeval Institution for the Deposit of Values, S.A. de C.V. holds for us, the settlement of the Purchase Auctions of Savings Protection Bonds (SPBs) that, as a result of the purchase Auctions of said SPBs, must be delivered by (DENOMINATION OF THE BIDDER). Likewise, it authorizes and instructs irrevocably that Central Bank to: a) the cash in favor of (DENOMINATION OF THE BIDDER) derived from the purchase operations mentioned in the previous paragraph, be deposited in (the Single Account or Cash Deposit Account) in national currency that said Bank holds for us, and b) the charges that, if applicable, proceed in the aforementioned national currency account that the Bank of Mexico holds for us, for the payment of the conventional penalties that (DENOMINATION OF THE BIDDER) must cover in terms of what is provided in the "Rules for the Purchase Auctions of Savings Protection Bonds (SPBs)" in force. Finally, we make known to you that the authorizations referred to in this document can only be modified or revoked through written communication addressed to that Central Bank and presented with an advance of at least one business banking day before the date on which the respective modification or revocation is intended to take effect. Sincerely, (denomination of the credit institution or brokerage house) (name and signature of authorized officials)

TRANSITORY
UNIQUE. This Circular will enter into force on October 30, 2008.