Circular 8/2012 — Modifies Circular 1/2002

Friday, June 15, 2012 OFFICIAL GAZETTE (First Section) 105

CIRCULAR 8/2012 addressed to specialized investment societies of retirement funds, regarding modifications to Circular 1/2002.

At the margin a logo, which says: Bank of Mexico.

CIRCULAR 8/2012 TO THE SPECIALIZED INVESTMENT SOCIETIES OF RETIREMENT FUNDS: SUBJECT: MODIFICATIONS TO CIRCULAR 1/2002

The Bank of Mexico, considering the request made to it by the National Commission for the Retirement Savings System (CONSAR) with respect to the issuance of the "General provisions establishing the investment regime to which specialized investment societies of retirement funds shall be subject," deems it appropriate to adapt its regulation regarding derivative financial operations applicable to these investment societies, among other purposes, in order to include new underlyings on which such operations may be entered into.

For the above reason and in order to continue promoting the sound development of the financial system, based on Article 28 of the Political Constitution of the United Mexican States, paragraphs six and seven; Article 24 of the Bank of Mexico Law; Article 48, fraction IX of the Retirement Savings Systems Law; Article 22 of the Law for Transparency and Ordering of Financial Services; Article 4, first paragraph, Article 8, paragraphs four and seven, Article 10, first paragraph, Article 12, first paragraph in relation to Article 19, fraction VII, and Article 14 Bis, first paragraph in relation to Article 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 General Legal Directorate, respectively, as well as fractions VII and XI of Article Two of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved to modify the definitions of "Settlement," "Future Operations," "Option Operations," and "Underlyings" of Rule One; Rules Four and Eight; to add to the aforementioned Rule One the definitions of "Swap Contracts," "Business Day," and "UDIS," as well as Rule Ten; and to eliminate from the aforementioned Rule One the definitions of "Bank Business Day(s)," "Swap Operations," and "Reference Countries," all of which are contained in the "Rules to which specialized investment societies of retirement funds shall be subject in the celebration of financial operations known as derivatives" contained in Circular 1/2002, to read as follows:

RULES TO WHICH SPECIALIZED INVESTMENT SOCIETIES OF RETIREMENT FUNDS SHALL BE SUBJECT IN THE CELEBRATION OF FINANCIAL OPERATIONS KNOWN AS DERIVATIVES

"RULE ONE.- For the purposes of these Rules, the following shall be understood, in singular or plural:

. . .

Swap Contracts: to 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 is carried out;

. . .

Settlement: the fulfillment of the obligations of the parties in a Future Operation, Option Operation, or Swap Contract;

. . .

Future Operations: to 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 shall be settled on a date subsequent to the fourth Business Day following the day of their conclusion;

Option Operations: to 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 undertakes to sell or buy, as applicable, said

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Underlying;

. . .

Underlying(s): to the following: a) Shares, a group or basket of shares, or share-referenced securities, that trade on a stock exchange of countries eligible for investments provided for in the CONSAR provisions establishing the investment regime applicable to the Societies; b) Price indices on shares that trade on a stock exchange of countries eligible for investments provided for in the CONSAR provisions establishing the investment regime applicable to the Societies; c) National currency, Foreign Exchange, and UDIS; d) Price indices referring to inflation; e) Nominal, real, or excess interest rates, which include any debt instrument; 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, and k) Price indices authorized by the Risk Analysis Committee provided for in the Retirement Savings Systems Law, which are formed by prices of derivative financial operations on commodities included or not in the preceding subsections, and

UDIS: to accounting units, whose value in national currency is published by the Bank of Mexico in the Official Gazette of the Federation, in accordance with Article Three of 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" and Article 20 Ter of the Federal Tax Code."

"RULE FOUR.- The Societies may carry out, in over-the-counter markets or in Recognized Markets, as applicable, Future Operations, Option Operations, or Swap Contracts, on Underlyings.

Future Operations, Option Operations, or Swap Contracts that the Societies carry out in over-the-counter markets shall be carried out only 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 countries eligible for investments provided for in the CONSAR provisions establishing the investment regime applicable to the Societies and that are authorized to act as financial entities by the competent authorities of such countries. In both cases, the aforementioned entities must have the minimum ratings determined for such effect by CONSAR.

Societies may not enter into so-called "credit derivative operations," nor financial operations known as derivatives on another of such operations, except Option Operations on Future Operations of any Underlying that are carried out in MexDer, Mexican Derivatives Market, S.A. de C.V., and in any other market authorized by the Bank of Mexico for such effect."

"RULE EIGHT.- Societies that enter into Future Operations, Option Operations, or Swap Contracts, may pledge cash deposits and/or government securities, as well as make contributions whose purpose is to ensure the fulfillment of the aforementioned operations."

"RULE TEN.- Societies that enter into Future Operations and Option Operations on the Underlyings indicated in subsections g), h), i), and j), are prohibited from settling them in kind."

TRANSITORY SINGLE. This Circular shall enter into force on June 20, 2012.

Mexico, D.F., June 13, 2012.- BANK OF MEXICO: The General Director of Central Bank Operations, Francisco Javier Duclaud González de Castilla.- Signature.- The General Legal Director, Héctor Reynaldo Tinoco Jaramillo.- Signature.

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For any inquiries regarding the content of this Circular, please contact the General Manager of Authorizations, Inquiries, and Legal Control, located at Avenida 5 de Mayo number 2, Colonia Centro, Mexico City, D.F., C.P. 06059, or by telephone at 5237.2308, 5237.2317, or 5237.2000 Ext. 3200.