Circular CAMEX 1 - 288: Direct Participation in Exchange and Open Market Operations

BANCO CENTRAL DE LA REPUBLICA ARGENTINA __________________________________________________________________ COMUNICACION " A " 1979 I 13/07/92 __________________________________________________________________ TO FINANCIAL INSTITUTIONS: Ref.: Circular CAMEX 1 - 288. We address the banking institutions, finance companies and exchange houses to inform them that the selection of participants to operate directly with the Banco Central through the Exchange and Open Market Operations Desk, regulated by Communication "A" 1935 of 25.02.91, has been rendered without effect, so that such participation shall be unrestricted for all interested parties, within the conditions and in accordance with the criteria set forth below. 1. PARTICIPANTS: - Banking institutions, finance companies and exchange houses that express their interest by submitting the note whose model is attached as ANNEX I, and undertake to pay the semi-annual connection fee informed below. - Banking institutions $ 20.000.- - Finance companies and Exchange Houses $ 6.000.- Applications will be received by the Exchange and Open Market Operations Desk on the 15th and 16th of the current month and the first semester, which will be irregular, will begin on 20.07.92. Thereafter, the semesters will begin on the first business day of the months of January and July of each year. The connection fee will be debited in 6 equal and consecutive monthly installments on the first business day of each month, the first corresponding to 20.07.92. With respect to the fees accrued and unpaid for the period from 01.05.92 to 19.07.92, they will be debited on 20.07.92 in the current accounts of those who had been participating in the operations under the terms of Communication "A" 1759 and who, in turn, applied for a new period in accordance with the provisions of Communication "A" 1935. 2. OPERATIONS: 2.1. Purchase of United States dollar foreign currency. 2.1.1. For these purposes the Banco Central will open two daily trading sessions. During the first, which will operate between 10:00 and 13:00, purchases of foreign currency will be arranged at $ 0,99 per dollar to be settled

"spot value against disposal of funds abroad".

Consequently, the purchased foreign currency must be credited in the correspondent that the Banco Central indicates in New York on the day of arrangement or the following business day if it is a holiday, and the equivalent in pesos - after verification of the receipt of said foreign currency - will be credited in the current account of the selling entity on the business day following the receipt of the foreign currency, with value equal to the day of arrangement. In the case of exchange houses, the credit will be made with value on the day of credit, except that they instruct payment to a financial institution for the credit of its current account therein, in which case it will be credited with value date on the day of arrangement.

During the second session, which will operate between 13:30 and 15:00, purchases of foreign currency will also be arranged at $ 0,99 per dollar, but to be settled "Value today against disposal of funds abroad".

In this market, the foreign currency must be credited in the correspondent that the Banco Central indicates in New York on the business day following the day of arrangement, and the equivalent in pesos - after verification of the receipt of the foreign currency - will be credited in the current account of the financial institutions in the Banco Central, on the business day following the receipt of the foreign currency with value date on the day of arrangement. In the case of exchange houses, the credit will be made with value on the day of credit, except that they instruct payment to a financial institution for the credit of its current account therein, in which case it will be credited with value date on the day of arrangement.

2.1.2. Financial institutions and exchange houses must adopt all necessary measures so that their payment instructions abroad are fulfilled in time and form, given that good value will not be accepted in receipts received late and the lack of credit of the foreign currency in the current account of the Banco Central will give rise, inexcusably, to the suspension of the credit of the equivalent pesos in the current account of the entity.

If during the third business day in Buenos Aires following the date on which the foreign currency should have been paid, its receipt is not verified on the previous business day in the account of the Banco Central, the purchase will be annulled by arranging an ex officio sale that will be made at the convertibility exchange rate. The operations will be settled the same day by compensation, proceeding to debit in the current account of the entity the resulting exchange difference. The debit will remain firm even in the case that the current account registers an improper balance, a situation that will be covered by the RUNOR rules that regulate the matter.

Financial institutions and exchange houses that incur 2 breaches in a calendar month or 5 breaches in the last 6 calendar months, including the current one, will be suspended from operating with the Exchange and Open Market Operations Desk for a term of 30 consecutive days. If the breaches are repeated in the quantities indicated above, the financial institution or exchange house will be definitively removed from the list of operators with which the Banco Central operates directly.

In case of suspension, the monthly installment corresponding to the connection fee will continue to be debited. In the case of a repetition, at the time the exclusion is ordered, all the monthly installments remaining to complete the semester will be debited jointly.

If a breach occurs that, in the judgment of the Central Bank, may be considered to have occurred for reasons unrelated to the local operator, it shall not be counted for the application of sanctions; however, the crediting of the equivalent amount in pesos shall be made on the business day following the day of entry of the foreign currency, after verification of its crediting to the Central Bank's account, without recognition of value date.

2.2. Sale of United States dollar foreign currency.

The Central Bank shall sell United States dollar foreign currency at the convertibility exchange rate to be settled "value today", that is, the equivalent pesos shall be debited to the buyers on the day of the agreement, while the foreign currency shall be paid on the following business day in the New York market.

If the debit to the current account is rejected because the buyer does not have sufficient funds, the transfer of the foreign currency shall not be made and the sale shall be cancelled by entering into an ex officio purchase at the exchange rate of $ 0.99 per dollar. Both transactions shall be settled by offset and the resulting exchange difference shall be debited to the entity's current account. The debit shall remain firm even if the current account records an improper balance, a situation that will be covered by the RUNOR rules that regulate the matter.

2.3. Active swap transactions for the Central Bank.

2.3.1. Against United States dollar foreign currency.

These transactions shall be carried out for a minimum term of 3 business days counted from the date of agreement, and a maximum of 30 calendar days. In the latter case, the Central Bank may limit it to shorter periods, which shall be made known through the Exchange and Open Market Trading Desk.

The purchase and sale transactions, considered individually for these purposes, shall conform to the provisions of points 2.1. and 2.2. above, except in cases where the cancellation of the swap transaction is applicable due to breach in the delivery of the foreign currency, in which both transactions shall be offset on the third business day following the date of agreement, regardless of the maturity of the forward sale transaction.

The buying exchange rate is set at $ 0.99 per dollar, and the selling rate shall be the same exchange rate plus an amount equivalent to the interest resulting from applying, for the period covered by the swap, the interest rate set by the Central Bank for active swap transactions minus the 30-day LIBO interest rate reported daily for the acceptance of United States dollar deposits for the account and order of the Central Bank or the rate that may replace it in due course.

Consequently, entities shall have "cash" from the business day following the receipt of the funds abroad by the Central Bank, while they shall have "numerals" from the day of agreement, as a result of the crediting with value date.

2.3.2. Against public securities.

These transactions shall be carried out under the same conditions as those established for swaps against United States dollar foreign currency, except for the following:

a) The crediting of the equivalent amount in pesos shall be made on the business day following the date of agreement, with value as of that date, after verification that the securities were credited, on the date of agreement, to Account No. 313/4 - Comitente 10 that the Central Bank of the Argentine Republic holds at Caja de Valores S.A. The failure to transfer the securities shall have the same treatment as that established for breaches in the delivery of foreign currency (point 2.3.1.). If the cancellation of the swap transaction is applicable, it shall be made on the third business day following the date of agreement, by offset with the forward sale regardless of its original maturity.

With respect to the computation of breaches, the limits of 2 and 5 referred to in point 2.1.2. shall be considered.

b) The interest rate shall be the one established daily by the Central Bank through telephone information at the opening of the market.

c) The purchase of the securities shall be made at the weighted average quotation of what was traded in immediate cash, in pesos, on the previous business day on the Buenos Aires Stock Exchange. If the security has not been traded, a similar quotation shall be taken from the Electronic Open Market. If there is no quotation on the previous business day, the weighted average of the last day traded on any of the markets shall be taken, in the order indicated.

d) The entities, together with the deposit of the securities, shall provide a margin of 10% as a guarantee for loss of quotation of the security. While the swap transaction is in force, if the quotation of the security on the Buenos Aires Stock Exchange (or on the Electronic Open Market, if no transactions are recorded on the former) decreases by 8% or more with respect to the sale price traded, within 24 hours they shall increase said margin by 8% of the number of securities traded. These margins shall be deposited in Account No. 313/4 - Comitente 15 that the Central Bank of the Argentine Republic holds at Caja de Valores S.A.

e) The debit to the entities' current accounts for the cancellation of the swap transaction shall be made on the maturity date, and the crediting of the securities to the accounts they indicate shall be made on the following business day. If the entity's current account at the Central Bank records an improper balance, the debit shall remain firm, a situation that will be covered by the RUNOR rules that regulate the matter. The delivery of the securities shall be suspended until the situation is regularized or they are applied for the same purpose.

The services corresponding to securities received by the Central Bank that are settled while the swap transactions are in force shall be collected by this Institution and transferred to the entities at the maturity of said transactions.

e) These operations may be arranged during the two daily trading sessions.

3. COMPLEMENTARY PROVISIONS.

3.1. It is set at u$s. 10,000,000.- and u$s. 3,000,000.- the maximum limit to be purchased daily from banking entities and financial companies, respectively, as regulation and passive repo operations. With respect to exchange houses, the maximum limit to be purchased daily as regulation is set at u$s 3,000,000.-

With regard to the sale of US dollars at the convertibility exchange rate, no limitations are established.

3.2. Entities must submit forms 2600-B separately according to the transactions carried out in each of the trading sessions, and must report in the "Settlement Date" box the day on which the pesos will be credited to the entity's current account and in the "With value on" box, the day on which the foreign currency will be received by the Central Bank abroad. Likewise, in the upper margin of form 2600, entities must state, following the operation code, the legend "FIRST SESSION" or "SECOND SESSION", as applicable.

3.3. Purchases/sales arranged as counterpart of operations under payment agreements and reciprocal credits (arbitrages) for cancellation of export prefinancing, import financing and non-commercial payment operations, as well as counterpart operations for financing to the Public Sector, shall continue to be settled "value today". These operations, which shall be arranged during the First Market Session, must be settled by submitting a form 2600, B or C, as applicable, independently of the one corresponding to regulation operations.

3.3. As from the entry into force of this Communication, the provisions of Communication "C" 6610 of 25.11.91 are rendered ineffective.

We greet you very attentively

CENTRAL BANK OF THE ARGENTINE REPUBLIC

Juan Ignacio Basco
Raul Omar Planes
Deputy Manager of
Manager of
Open Market
Open Market

• With copy to Financial Companies, Exchange Houses and Brokers
  Exchange.

ANNEX

Buenos Aires,

To the Central Bank of the Argentine Republic, Open Market Management, Foreign Exchange and Open Market Operations Desk.

We address you in order to inform you of our decision to operate directly with the Foreign Exchange and Open Market Operations Desk, in accordance with the provisions made known through Communication "A" 1979 of 13.07.92.

Consequently, we authorize the debit from our current account of the corresponding Connection Fee.

We greet you very attentively.

Authorized signatures that are registered with the Central Bank for the issuance of checks.