Modification of Articles 9 and 10 of Chapter V - Performance Evaluation of Primary Dealers and Primary Dealer Aspirants, Rights and Obligations of the BCU Primary Dealer Program Regulation

Montevideo, May 23, 2024
Ref: MODIFICATION OF ARTS. 9 AND 10 OF CHAPTER V - PERFORMANCE EVALUATION OF PRIMARY DEALERS AND PRIMARY DEALER ASPIRANTS, RIGHTS AND OBLIGATIONS OF THE REGULATION OF THE BCU PRIMARY DEALER PROGRAM.

It is brought to your knowledge that this Central Bank adopted, on May 22, 2024, Resolution D/159/2024, which is attached.

Cr. Fabio Malacrida
Area Manager of Asset and Liability Management (Exp. No. 2012-50-1-02011)

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CIRCULAR NO. 2457

BOARD OF DIRECTORS - RESOLUTION
Montevideo, May 22, 2024.

BOARD OF DIRECTORS

HAVING VIEWED: the Regulation of the Primary Dealer Program for Issuances of the Central Bank of Uruguay approved by Resolution D/127/2016 of May 25, 2016 and subsequently modified by Resolutions D/84/2018 of April 18, 2018 and D/236/2022 of September 28, 2022.

CONSIDERING: I) that according to the technical proposal of the Economic Policy and Markets Management, it is appropriate to modify the performance evaluation criteria for Primary Dealers and Primary Dealer Aspirants, in order to more adequately weigh their contribution to the objectives referred to in Article 2 of the Primary Dealer Program Regulation;

II) that it is of crucial importance for the fulfillment of the institutional objectives of the Central Bank of Uruguay to have an active and deep secondary market for securities, which facilitates and improves the mechanisms for the transmission of Monetary Policy through the information provided by the yield curve;

III) that the Primary Dealer Program for Issuances of the Central Bank of Uruguay has acquired a solid state of maturity and is evaluated as successful for the fulfillment of the objectives for which it was created;

IV) that the Central Bank of Uruguay is competent to establish and modify the terms and conditions of the securities it issues.

ATTENTIVE: to the above, to the provisions of Articles 3, 4, 7, 25, 27, 50 and 55 letter A) of Law No. 16.696 of March 30, 1995 in the wording given by Articles 1 and 5 of Law No. 18.401 of October 24, 2008, to the opinion of the Legal Advisory No. 2024/0144 of May 15, 2024, to what was reported by the Economic Policy and Markets Management on May 16, 2024 and other background information appearing in file No. 2012-50-1-2011,

IT IS RESOLVED:

1. Modify Articles 9 and 10 of Chapter V – Performance Evaluation of Primary Dealers and Primary Dealer Aspirants, Rights and Obligations of the Regulation of the Primary Dealer Program for Issuances of the Central Bank of Uruguay, which shall be drafted as follows:

R.No.: D-159-2024
File No.: 2012-50-1-02011
D-159-2024.pdf Folio No. 809
CIRCULAR NO. 2457

BOARD OF DIRECTORS - RESOLUTION

Article 9. Performance Evaluation of Primary Dealers1.
The Central Bank of Uruguay will evaluate institutions designated as Primary Dealers according to their contribution to the objectives set forth in Chapter II of this regulation and to the demonstrated performance, taking into account their participation in the Primary Market and Secondary Market, as well as factors derived from compliance with the obligations provided for in this regulation. The evaluation of their performance will be carried out considering the following parameters:

• Participation in the Primary Market;
• Participation in the Secondary Market;
• Screen presence (Secondary Market), to be valued based on spreads, volumes, and screen time of offers;
• Information provided to the BCU within the framework of the obligation provided for in letter b) of Article 5 of the regulation,
  The value and method of calculation of each parameter will be communicated in due course.
  In the event of a tie in the rating of two or more Primary Dealers in total performance, the final ranking will be established by especially valuing their performance in the Secondary Market. If the tie persists, their performance regarding the obligation indicated in letter a) of Article 5 will be valued. The performance of each Primary Dealer will be evaluated by the Central Bank for each qualification period. At the beginning of each period, previously obtained qualifications will not be considered: all participating institutions will start with a score of 0.

Article 10. Performance Evaluation of Primary Dealer Aspirants.
The Central Bank of Uruguay will also evaluate institutions designated as Primary Dealer Aspirants, according to their contribution to the objectives set forth in Chapter II of this regulation. The evaluation of their performance will be carried out considering the following parameters:

• Participation in the Primary Market;
• Participation in the Secondary Market;

1 For the purposes of measuring the performance of Primary Dealers, operations that imply the transfer to the special guarantee account of Public Debt Securities will not be taken into account.

R.No.: D-159-2024
File No.: 2012-50-1-02011
D-159-2024.pdf Folio No. 810
CIRCULAR NO. 2457

BOARD OF DIRECTORS - RESOLUTION

• Screen presence (Secondary Market), to be valued based on spreads, volumes, and screen time of offers;
• Information provided to the Central Bank of Uruguay within the framework of the obligation provided for in letter b) of Article 5 of the regulation.
  The value and method of calculation of each parameter will be communicated in due course.
  The performance of each Primary Dealer Aspirant will be evaluated by the Central Bank for each qualification period. At the beginning of each period, previously obtained qualifications will not be considered: all participating institutions will start with a score of 0. The resulting ranking may enable a maximum of 2 Primary Dealer Aspirants to join the list of Primary Dealers, replacing the Primary Dealer(s) with the lowest score in their respective ranking.

2. The modifications referred to in the preceding items 1 and 2 will begin to take effect from the next qualification period, as provided for in the Regulation of the Primary Dealer Program for Issuances of the Central Bank of Uruguay.

3. Entrust the Economic Policy and Markets Management with the definition and communication of the performance evaluation parameters referred to in Articles 9 and 10 in their previous wording.

4. Entrust the Economic Policy and Markets Management with the communication of the provisions herein by circular.

(Today's Session – Minutes No. 3709)
(File No. 2012-50-1-2011)

Jorge Christy
General Secretary
Aar/am/ds

Publishable Resolution
R.No.: D-159-2024
Signatory: Jorge Eduardo Christy Davies Date: 22/05/2024 16:26:56 File No.: 2012-50-1-02011 D-159-2024.pdf Folio No. 811 CIRCULAR NO. 2457