Circular CAMEX 1-333. Provisions for the determination of the reference exchange rate

BANCO CENTRAL DE LA REPUBLICA ARGENTINA
COMUNICACION “A” 3500 | 01/03/02
__________________________________________________________________ TO FINANCIAL ENTITIES:
Ref.: Circular
CAMEX 1 – 333.
Provisions for the determination of the reference exchange rate

We address you to inform you that this Institution has adopted the following provisions applicable to the determination of a reference exchange rate:

1. The Central Bank will obtain, on each banking business day, quotes for the buy and sell exchange rate of the United States dollar for transactions settleable in pesos and United States dollars on the date of the quote. These quotes, requested through the SIOPEL system of the Electronic Open Market to all participating entities, must reflect the prevailing conditions in the wholesale foreign exchange market. These quote requests will be made in three daily rounds: between 10:00 and 10:59; between 12:00 and 12:59; and between 14:00 and 14:59.

2. For this purpose, the Central Bank will randomly select, within each of said periods, a fifteen-minute interval to request the aforementioned quotes from at least four entities.

3. The Central Bank will request these quotes for an amount that reflects the prevailing practice in the wholesale foreign exchange market. The amount will be the same for all the aforementioned periods.

4. The quotes submitted through the SIOPEL system will have the character of being mandatory and irrevocable.

5. The quotes must be representative of the prevailing conditions in the foreign exchange market at the time they are submitted.

6. The Central Bank may disregard quotes that do not comply with the provisions of these dispositions.

7. The Central Bank will proceed to calculate the equilibrium exchange rate corresponding to each of the aforementioned periods by applying the procedure referred to in Annex I to this Communication. Subsequently, it will obtain the arithmetic average of the three equilibrium exchange rates, rounding the result to four decimal places.

8. The Central Bank will inform, via press release, the exchange rate resulting from the prescribed procedure and will publish it on the institutional website on the immediate next banking business day.

9. The Central Bank Library will maintain, available to interested parties, information regarding the quotes starting from the third banking business day following the date on which the Central Bank requested the corresponding quotes, indicating the name of the institutions that submitted them.

10. Entities willing to participate in the present quote scheme must send a note expressing this desire and their commitment to the External Operations Department. The text of this note is attached in Annex II.

We salute you very attentively.
BANCO CENTRAL DE LA REPUBLICA ARGENTINA
Juan I. Basco Raúl O. Planes
Manager of External Operations Submanager General of Operations

ANNEX I:
It will be available in printed form from 05.03.2002.

ANNEX 1
Calculation Algorithm

1) Vectors are constructed:
(1) (2) (k)
Xv = (Xv , Xv , ..., Xv ) where
(1) (2) (k)
Xv , Xv , ..., Xv , are the sell exchange rates ordered from smallest to largest from the positions presented by a number k of credit institutions, and (1) (2) (k) Xc = (Xc , Xc , ..., Xc ) where (1) (2) (k) Xc , Xc , ..., Xc , are the buy exchange rates ordered from largest to smallest.

2) Let u be the number of positive components of the difference vector:
{( ),( ),...,( )}
(1) (1) (2) (2) ( ) (k) v k
Xc − Xv = (Xc − Xv , Xc − Xv , ..., Xc − Xv )

3) The equilibrium exchange rate for each period will be calculated as the arithmetic average of the exchange rates s1 and s2, where

I.- If k > u > 0

{ }
( ) ( 1)
1
,
+
= u c u s max(Xv , X )

{ }
( 1) ( )
2
, u c u s min(Xv , X )
+
=

II.- If u = 0

(1)
1 Xv s =

(1)
2 Xc s =

ANNEX II
Text to be sent by entities wishing to participate in the quote scheme:
To the External Operations Department
Central Bank of the Republic of Argentina
Reconquista 266
1003 Buenos Aires Argentina

By means of this, we manifest our interest in participating in the survey on the exchange rate quote that that Central Bank will request daily through the SIOPEL system of the Electronic Open Market, as provided for in Communication “A” 3500. In this way, we commit to supplying the quotes that are required of us.

We salute you attentively.