Circular 7/2017 — Modifications to the Procedure for Acting as Market Makers of Government Securities

Monday, April 3, 2017 OFFICIAL GAZETTE (Third Section) BANK OF MEXICO CIRCULAR 7/2017 addressed to credit institutions and brokerage houses, regarding modifications to the procedure for acting as market makers of government securities.

A logo is placed at the margin, which reads: Bank of Mexico.

CIRCULAR 7/2017 TO CREDIT INSTITUTIONS AND BROKERAGE HOUSES: SUBJECT: MODIFICATIONS TO THE PROCEDURE FOR ACTING AS MARKET MAKERS OF GOVERNMENT SECURITIES

The Bank of Mexico, in its capacity as the financial agent of the Federal Government –and in response to the modifications that the Ministry of Finance and Public Credit, through office number 305.-053/2017, dated March 30, 2017, has resolved to carry out on the procedure to which credit institutions and brokerage houses acting as market makers regarding the government securities referred to in office number 305.-027/2011 of said Ministry, made known by this Central Bank through its Circular 5/2011, dated February 14, 2011, as well as modifications to said procedure issued subsequently– attaches to the present copy of the cited office number 305.-053/2017, in order to make the content known to these entities, for the effects indicated therein.

The foregoing, based on what is provided in articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 3, fraction III, 7, fraction I, and 10, of the Bank of Mexico Law, 22 of the Law for Transparency and Order of Financial Services, 8, paragraphs fourth and seventh, 12, first paragraph, in relation to 19 Bis, fraction V, and 17, fraction I, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Central Bank Operations and the Directorate of Central Bank Regulations, respectively, as well as Second, fractions VI and X, of the Agreement on the Attachment of Administrative Units of the Bank of Mexico.

Mexico City, March 30, 2017.- The General Director of Central Bank Operations, Jaime José Cortina Morfín.- Signature.- The Director of Central Bank Regulations, Mario Ladislao Tamez López Negrete.- Signature.

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

84 (Third Section) OFFICIAL GAZETTE Monday, April 3, 2017

"At the margin a seal with the National Coat of Arms, which reads: United Mexican States.- Ministry of Finance and Public Credit.- Undersecretariat of Finance and Public Credit.- Public Credit Unit.

“2017, Year of the Centenary of the Promulgation of the Political Constitution of the United Mexican States”

Office No. 305.-053/2017 Mexico City, March 30, 2017.

LIC. JAIME JOSÉ CORTINA MORFÍN General Director of Central Bank Operations Bank of Mexico

Present.

We refer to office number B10/JCM/2017/05, dated March 29, 2017, through which this Central Bank, in relation to the operations that Market Makers may carry out, proposes a series of reforms to the offices previously issued by this Ministry in this matter, so that the funding rate used to calculate the premium that Market Makers and UDIBONOS Market Makers must pay to the Bank of Mexico, corresponds to that determined and published by the Central Bank on the business day prior to the date on which the calculation is made.

On this matter, this Ministry of Finance and Public Credit, through the Public Credit Unit, based on articles 4th, fractions I and V of the Federal Public Debt Law; 3rd, fraction III, 7th, fraction I, 8th and 10 of the Bank of Mexico Law; 17 fractions VIII, X and XXI of the Internal Regulations of the Ministry of Finance and Public Credit; 1st, fraction VI, 2nd and 3rd of the Decree authorizing the Ministry of Finance and Public Credit to issue Federal Government Development Bonds, published in the DOF on September 22, 1987, modified by Decree published in the DOF on September 9, 1998; the Decree establishing the obligations that may be denominated in Investment Units and reforming and adding various provisions of the Federal Tax Code and the Income Tax Law, published in the DOF on April 1, 1995, modified by Decree published in the DOF on December 7, 2009 and article 20 Ter of the Federal Tax Code, considers it convenient to continue fostering the development of the market for Federal Government Fixed Rate Development Bonds (BONOS) and those denominated in Investment Units (UDIBONOS).

Therefore, it has decided to modify Office 305.-027/2011 dated January 27, 2011, modified by Offices 305.-105/2011 dated July 26, 2011, 305.-178/2011 dated November 18, 2011, 305.-023/2012 dated February 9, 2012, 305.-085/2012 dated July 3, 2012, 305.-010/2014 dated February 7, 2014 and Office 305.-035/2014 dated May 14, 2014, in its section 4.2.6, and modify the Second Transitory Article of the Ministry of Finance and Public Credit office number 305.-033/2017, dated February 28, 2017, made known by the Bank of Mexico through Circular 4/2017, to remain in the following terms:

"TRANSITORIES FIRST.- ... SECOND.- The modifications to the first and second paragraphs of section 4.2.2, the first and second paragraphs of section 7.2.1, section 4.2.8 and section 7.2.7, contained in this Office, will enter into force on April 7, 2017."

Monday, April 3, 2017 OFFICIAL GAZETTE (Third Section)

I. Likewise, it has decided to modify Office 305.-027/2011 dated January 27, 2011, modified by Offices 305.-105/2011 dated July 26, 2011, 305.-178/2011 dated November 18, 2011, 305.-023/2012 dated February 9, 2012, 305.-085/2012 dated July 3, 2012, 305.-010/2014 dated February 7, 2014, 305.-035/2014 dated May 14, 2014, 305.059/2015 dated July 1, 2015 and Office 305.-033/2017, dated February 28, 2017, in its sections 4.2.6 and 7.2.5, to remain in the following terms:

4. RIGHTS OF MARKET MAKERS "... 4.1. to 4.2.5 ... 4.2.6 Market Makers must pay the Bank of Mexico a premium daily for each securities lending operation they carry out or that is in effect. The amount of said premium will be obtained by multiplying the weighted government funding rate that the Bank of Mexico calculates and makes known daily through its website www.banxico.org.mx or any other electronic, computing or telecommunications medium authorized for this purpose by said Bank, corresponding to the second Business Day prior to the date on which the respective premium must be paid to said Bank, by a factor that will be determined in accordance with what is specified in Annex 4 of this Office. ... ... 4.2.7 to 4.3 ..."

5. RIGHTS OF UDIBONOS MARKET MAKERS "... 7.1 to 7.2.4 ... 7.2.5 UDIBONOS Market Makers must pay the Bank of Mexico a premium daily for each securities lending operation they carry out or that is in effect. The amount of said premium will be obtained by multiplying the weighted government funding rate that the Bank of Mexico calculates and makes known daily through its website www.banxico.org.mx or any other electronic, computing or telecommunications medium authorized for this purpose by said Bank, corresponding to the second Business Day prior to the date on which the respective premium must be paid to said Bank, by a factor that will be determined in accordance with what is specified in Annex 5 of this Office. ... ... 7.2.6 to 7.2.9 ..."

TRANSITORIES Sole.- What is established in this Office will enter into force on the Business Day of its publication in the Official Gazette of the Federation.

Respectfully, The Head of the Public Credit Unit, Alberto Torres García.- Signature.

cc Lic. Victor Manuel Mastache Villalobos, Deputy General Director of Legal Credit Procedures. SHCP

86 (Third Section) OFFICIAL GAZETTE Monday, April 3, 2017

Lic. Rubén Omar Rincón Espinoza, Area Director. SHCP.