Circular 6/2013 — Derivative Operations of SIEFORES

(First Section) OFFICIAL GAZETTE Friday, December 27, 2013 BANK OF MEXICO CIRCULAR 6/2013, addressed to the Specialized Investment Societies for Retirement Fund Companies, regarding derivative operations. At the margin, a logo that says: Bank of Mexico. CIRCULAR 6/2013 TO THE SPECIALIZED INVESTMENT SOCIETIES FOR RETIREMENT FUND COMPANIES: SUBJECT: DERIVATIVE OPERATIONS The Bank of Mexico, considering the request made by the National Commission for the Retirement Savings System through letters with reference D00/410/1429/2013 and D00/400/1516/2013, in order to allow these societies to enter into option operations on futures operations, option operations on swap contracts (Swaps), as well as futures operations on Swaps, with the purpose that they are able to better manage risks arising from unexpected events, has resolved to update the regime applicable to the derivative operations that these societies may carry out, as well as to incorporate into it the operations requested by the aforementioned Commission. For the above reason and with the objective of continuing to promote the sound development of the financial system, based on articles 28, paragraphs sixth and seventh of the Political Constitution of the United Mexican States; 24 of the Bank of Mexico Law; 48, fraction IX of the Retirement Savings Systems Law; 22 of the Law for the Transparency and Ordering of Financial Services; 4th, first paragraph, 8th, paragraphs fourth and seventh, 10, first paragraph, 17, fraction I, 19 Bis, fraction V and 25 Bis 1, fraction IV of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the Central Banking Dispositions Directorate, the National Operations Directorate and the Regulation and Supervision Directorate, respectively, as well as Article Two of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, fractions I, VI and X, has resolved to issue the "Rules to which the special investment societies for retirement funds must adhere in carrying out derivative operations", in the following terms:

RULES TO WHICH THE SPECIALIZED INVESTMENT SOCIETIES FOR RETIREMENT FUNDS MUST ADHERE IN CARRYING OUT DERIVATIVE OPERATIONS

1. DEFINITIONS For the purposes of these Rules, the following shall be understood, in singular or plural: CONSAR: the National Commission for the Retirement Savings System; Swap Contracts (Swaps): operations in which the parties agree to exchange cash flows during a specified period; Business Day: a day that is a business day both in the United Mexican States in terms of the general provisions issued for such effect by the National Banking and Securities Commission, as well as in the market or markets where the settlement of the operation takes place;

Friday, December 27, 2013 OFFICIAL GAZETTE (First Section)

Currencies: United States dollars, as well as any other freely transferable foreign currency convertible to the aforementioned currency; Settlement: the fulfillment of the obligations of the parties in a Derivative Operation; Futures Operations: purchase or sale operations of an Underlying, pursuant to which the parties agree to fulfill their respective obligations at the agreed price of said Underlying at the time the operation is concluded. These operations must be settled on a date subsequent to the fourth Business Day following the day of their conclusion; Option Operations: operations in which the buyer, by paying a premium to the seller, acquires the right, but not the obligation, to buy or sell an Underlying at the agreed price at the time the operation is concluded, on one or more Business Days, and the seller is obligated to sell or buy, as appropriate, said Underlying; Derivative Operation: interchangeably, Swap Contracts (Swaps), Futures Operations and Option Operations, as well as, where applicable, any others authorized by the Bank of Mexico; Eligible Countries for Investments: those determined by CONSAR; Society: the specialized investment society for retirement funds, and Underlyings: the following: a) Individual stocks, a group or basket of stocks, or securities referenced to stocks, that trade on a stock exchange in the Eligible Countries for Investments; b) Price indices on stocks that trade on a stock exchange in the Eligible Countries for Investments; c) National currency, Currencies and UDIS; d) Price indices related to inflation; e) Nominal, real or excess interest rates, which include any debt security; f) Gold and silver; g) Corn, wheat, soybeans, sugar, rice, sorghum, cotton, oats, coffee, orange juice, cocoa, barley, milk, canola, soybean oil and soybean meal; h) Pork meat, swine and cattle; i) Natural gas, heating fuel, diesel, gasoline and crude oil; j) Aluminum, copper, nickel, platinum, lead and zinc; k) Price indices authorized by the Risk Analysis Committee provided for in the Retirement Savings Systems Law, which are formed by prices of financial derivative operations on commodities included or not in the previous subsections, and l) Any others authorized by the Bank of Mexico.

2. PERMITTED DERIVATIVE OPERATIONS Societies may carry out Derivative Operations, on Underlyings, including: I. Futures Operations on Swap Contracts (Swaps); II. Option Operations on Futures Operations, and III. Option Operations on Swap Contracts (Swaps).

3. MARKETS AND COUNTERPARTIES Societies may carry out Derivative Operations in markets of the Eligible Countries for Investments. Societies may only carry out over-the-counter Derivative Operations with financial institutions authorized by the Bank of Mexico to carry out such operations on their own account or with foreign financial entities established in the Eligible Countries for Investments that are authorized to act as such by the competent authorities of said countries.

4. PROHIBITION Societies may not enter into so-called "credit derivative operations", nor Derivative Operations on any other such operations except those provided for in Rule 2.

5. SETTLEMENT Regarding Derivative Operations whose Settlement is carried out through the calculation of differences, only prices, rates or indices that have a market reference and that are not unilaterally determined or determinable by the Society itself or by any entity that is part of the same financial group to which its retirement fund administrator belongs may be used for said calculation. Societies that enter into Derivative Operations on the Underlyings indicated in subsections f), g), h), i) and j) of the definition of this term provided for in Rule 1 are prohibited from settling them in kind.

6. GUARANTEES In carrying out Derivative Operations, Societies may constitute and receive deposits in cash and securities as guarantee to reduce the risk of default of the operations.

7. APPLICABLE REGULATION Societies that carry out Derivative Operations must adhere to what is provided for in these Rules, regardless of what is provided in the rest of the applicable regulation.

TRANSITORY PROVISIONS FIRST. This Circular shall enter into force on the third business day following its publication in the Official Gazette of the Federation. SECOND. From the entry into force of this Circular, the "Rules to which the special investment societies for retirement funds must adhere in the celebration of financial operations known as derivatives" contained in Circular 1/2002 are hereby repealed, including its modifications made known through Circulares 1/2002 Bis, 1/2002 Bis 1, 25/2009 and 8/2012, published in the Official Gazette of the Federation on August 6, 2004, September 30, 2005, October 30, 2009 and June 15, 2012, respectively.

Friday, December 27, 2013 OFFICIAL GAZETTE (First Section)

Mexico, D.F., December 26, 2013.- BANK OF MEXICO: The Director of Central Banking Dispositions, Eduardo Aurelio Gómez Alcázar.- Initials.- The Director of National Operations, Alfredo Sordo Janeiro.- Initials.- The Director of Regulation and Supervision, Viviana Garza Salazar.- Initials. For any inquiries regarding the content of this Circular, please contact the Authorization, Consultations and Legal Control Management, at the phone numbers (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.