Prudential Regulations

 

 

 

The English version of the Prudential Regulations is published for information purposes only and does not constitute legal advice. However, in case of any interpretation controversy, the Spanish version shall prevail.

 

MexDer, Mercado Mexicano de Derivados, S.A. de C.V., is not responsible for any errors included herein, nor for the use or interpretation of this information by third parties.

 

 

MINISTRY OF FINANCE AND PUBLIC CREDIT

 

 

 

At the margin seal with the Mexican National Emblem reading: United Mexican States, Ministry of Finance and Public Credit, National Banking and Securities Commission

 

PRUDENTIAL PROVISIONS TO WHICH THE PARTICIPANTS IN THE DERIVATIVES CONTRACTS MARKET LISTED IN THE STOCK EXCHANGE WILL BE SUBJECTED TO IN THEIR OPERATIONS

 

 

WHEREAS:

 

That, because of the recent amendments to the Rules to which the participants of the Derivatives Contracts listed in the Stock Exchange Market must be subjected to, published in the Official Journal of the Federation on October 13, 2011, which provides the frame that establishes the rights, obligations and limitations of the participants in the derivatives market in the holding of operations with derivatives contracts in recognized foreign markets, it is appropriate to harmonize these prudential provisions with the new regulatory frame provided in those rules, and

That in that sense, with this amendment it is intended to incorporate to the scope of the provisions the operations channeled by the Brokers and Clearing Members with derivatives contracts in foreign markets, while foreseeing their responsibilities and obligations, in order to provide greater legal certainty in the holding of their operations. Also, the nomenclature of the derivatives contracts listed on the Mexican Market’s Stock Exchanges is hereby distinguished with respect to those listed on stock markets abroad, has decided to issue the following: (NOVEMBER 23, 2011)

 

 

WHEREAS:

 

As established in the mentioned Rules, Brokers and Clearing Members that participate in the market for exchange-listed futures and options may act as managers of Global Accounts;

A special regime is indispensable for the safety net applicable to Global Accounts;

Brokers that intend to manage Global Accounts and are not classified as financial institutions should nevertheless abide by the applicable regulations in order to prevent, detect and report transactions with funds of illicit origin;

It is necessary to supply credit research bureaus with information on Clients who fail to comply with their obligations pertaining to transactions in the market for exchange-listed futures and options, in order to have more information on the Clients' credit record; and

Clients that participate in Global Accounts should be informed of the risks of participating in this type of account; has resolved to issue the following: (JANUARY 4, 2005)

 

 

WHEREAS:

 

It would be advisable to update the criteria for determining which persons are considered independent for the purposes of appropriately forming boards of directors for exchanges and technical committee members of clearinghouses in the futures and options markets, has resolved to issue the following: (NOVEMBER 22, 2001)

 

 

WHEREAS:

 

Pursuant to recent modifications to financial laws, current prudential provisions should now be harmonized so that the procedures for appointing board members, chief executive officers, directors that hold positions in the administration immediately below the chief executive officer, and, when such is the case, compliance officers and statutory auditors, as well as, independent external auditor, of the exchanges and clearinghouses of futures and options, are equivalent to those that must be followed by securities exchanges and securities depository institutions, has resolved to issue the following: (AUGUST 13, 2001)

 

 

WHEREAS:

 

It is now possible for trading members to participate in the market for exchange-listed futures and options without having to acquire the status of members of the futures and options exchange on which they carry out their activities, and that it has been recognized that the various members of those exchanges enjoy equal rights and obligations; and

 

Automated trading by the various participants in the exchange-listed futures and options market should be the only form in which such transactions take place; has resolved to issue the following: (DECEMBER 31, 2000)

 

 

WHEREAS:

 

The definition of transactions for own benefit needs to be adjusted given the possibility that the other financial institutions belonging to the financial group as the trustor credit institution or brokerage firm of the clearing member that settles only that credit institution or brokerage firm's futures and options contracts, might also participate as trustors of the same;

 

The scope of exchanges' regulatory and oversight authority should be broadened in order to increase the control and transparency of transactions by participants in the exchange-listed futures and options market, which will ultimately improve their functionality;

 

The procedures that trading members and clearing members must follow in receiving and executing orders, as well as in assigning and settling operations, should be adjusted to improve equitability in the market, establishing in addition the use of a single system for order receipt and transaction assignment, when credit institutions or brokerage firms are at the same time trustors of a clearing member that executes transactions on its own behalf and trustees of a clearing member that executes transactions on behalf of third parties;

 

In order to make the application of sanctions by exchanges and clearinghouses more efficient and expeditious, the determination and imposition of such sanctions may appropriately be delegated to directors and special committees of those exchanges and clearinghouses, in accordance with the nature of the infraction or the amount of the fine; and

 

In order to lend greater legal security to clients in this market, it is crucial that minimum requirements be established for brokerage contracts signed with trading members and clearing members, has resolved to issue the following: (AUGUST 12, 1998)

 

 

PRUDENTIAL PROVISIONS TO WHICH THE PARTICIPANTS IN THE DERIVATIVES CONTRACTS MARKET LISTED IN THE STOCK EXCHANGE WILL BE SUBJECTED TO IN THEIR OPERATIONS

 

PRELIMINARY PROVISIONS

 

ONE.- For the purposes of these Regulations, the following definitions will apply:

 

a)                   Commission: The National Banking and Securities Commission

 

b)                   Committees: The collegiate bodies established by the Board of Directors of the Exchanges or Technical Committee of Clearing Houses.

 

c)   Board: The Board of Directors of the Exchanges.

 

d)   Compliance Officer: The person responsible for ensuring that the Exchange and the Clearing House, as well as Brokers and Clearing Members, comply with regulations applicable to the               market.

 

e)   Regulations: The present Regulations.

 

f)    Derivatives Contracts’ Market or Markets, to the Derivatives Contracts’ Market listed on the Stock               Exchange.

 

         g)   Independent Members: Persons of recognized prestige in matters of finance who hold no share or          interest in the capital or equity of Brokers, Clearing Members or financial entities that hold shares            or            interests in the capital or equity of the latter, nor hold any office, employment or commission in their                 organizations, except when acting as independent members of the Board of Directors of any of the          above-mentioned financial entities.

 

         h)   Rules: The Mandatory Rules for corporations and trusts participating in the establishment and operation of a         market for listed Futures and Options in an Exchange, published in the Official Gazette of the Federation on            December 31, 1996.

 

i)    Operations for own benefit: Operations settled and, as the case may be, executed by Clearing Members solely and on behalf of their trustors, i.e. full-service banks, brokerage firms and other financial entities in the financial group to which said full-service bank or brokerage firm belongs, in accordance with the Rules, and those executed by Brokers as Clients of a Clearing Member.

 

j)    Operations on behalf of third parties: Operations settled by Clearing Members on behalf of parties           different from their trustor (credit institution and/or brokerage firm), as well as those executed by Brokers          acting as commission agents for a Clearing Member or those who come from Global Accounts.

 

The definitions set forth in Article One of the Rules will apply to the present Regulations.

 

TWO.- These provisions are intended to establish prudential regulation to which the transactions of the Stock Exchanges, Clearing Houses, Brokers and Clearing Members must be subjected to in the Derivatives Contracts’ Market.

It also regulates the transmission and canalization of orders for the operation of Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets with which the Stock Exchange has signed an agreement as provided in the Rules.

 

THREE.- The mercantile law, banking, financial, and mercantile customs, and the Civil Codes for the Federal District and the Federal Code of Civil Procedures will be suppletory in application for all matters not contemplated herein.

 

 

THE EXCHANGES

 

FOUR.- In pursuit of their purpose and as means of raising the Market’s competitiveness and promoting price formation, Exchanges will issue rules to which Brokers, Clearing Members, Clearing Houses, Desk Traders, and other parties must adhere when carrying out activities set forth by the Rules or in these Regulations, and will implement procedures to safeguard Clients’ rights.

 

FIVE.- The bylaws of the Exchanges must include, among others, clauses related to:

 

a)    The rights and obligations of the Exchanges’ Partners.

 

b)    Integration of the Board, agreeing:

 

      i.          That the number of members representing Partners in the Exchange may not exceed 50% of the             Board members appointed, with the other appointments corresponding to Independent Members.

      ii.         That the persons appointed as Board members fulfill the requirements set forth by Articles         Six and Six-Bis herein.

 

c)     Integration of the Committees, specifying:

 

      i.          Their respective functions and responsibilities.

      ii.         That the person responsible to the Board for each Committee must report to the Board                 periodically on its activities, or when events or acts of importance arise which in his or her         opinion warrant it.

      iii.        That their members must be knowledgeable of the functions they perform and must not              have been             condemned by final irrevocable sentence for equity crime.

      iv.        That their members must refrain from participating in any deliberation or resolution when           they have              any interest in a disciplinary process or in applying sanctions, in order to prevent conflicts of           interests and preferential treatment.

 

d)    Removal from the office as Board member or Committee member for unjustified absences to more than two Board or Committee Meetings.

 

e)    Set forth a special quorum and resolutions for the affirmative vote of two thirds of the total Board members when ruling on the application of sanctions considered grave in the terms of its internal regulations, except in case of suspension of operations by Brokers, Clearing Members and Desk Traders or when ruling on matters of importance for the Exchange and the market in general.

 

f)     The authority and obligations of the Compliance Officer.

 

SIX.- The appointment of board members, Chief Executive Officer and directors holding offices at the organizational level immediately below the latter, as well as Compliance Officer, Commissioner, and independent external auditors of the Exchanges must be made exclusively among persons with acknowledged technical skills, honorability and creditworthiness, with ample knowledge and experience in finance or administration, and who fulfill, as minimum, the requirements mentioned in Article Six Bis herein, considering, when applicable, the verification procedure set forth in Article Six Bis 1.

 

SIX BIS.- Appointment of Exchanges’ board members, chair executive officer, directors holding positions at the organizational level immediately below the latter, and Compliance Officer shall be made among persons who:

 

a)    Reside in Mexican territory, in accordance with the provisions of the Federal Tax Code.

 

b)    Have worked for at least five years in offices with high decision making power, requiring knowledge and experience on finance and administration.

 

c)     Do not come under any of the following impediments:

 

      i.          To have pending litigation with the Exchange in question;

      ii.         To have been condemned by irrevocable sentence for equity crime, or to be ineligible to             make     commerce or hold any office, employment or commission in the Mexican public service or financial              system;

      iii.        To have been declared bankrupt or insolvent without having been reinstated,

      iv.        To carry out inspection or oversight activities of the Exchange, regarding the public        management, and

      v.         In the case of Independent Members, to participate in the capital or equity of Brokers, Clearing Members or financial entities that participate in the capital or equity of the latter; hold any office, employment or commission in their organizations, except when acting as   independent        members of the Board of Directors of any of the above-mentioned financial entities.

 

d)    Are not carrying out Exchange regulation activities in the sphere of public management.

 

e)    Do not have conflicts of interests or any interest opposed to those of the Exchange.

 

 

In addition, in the case of the Compliance Officer, the appointment shall be made among persons with an acknowledged prestige in legal practice and holds no share in the capital or equity of Brokers, Clearing Members or financial entities that invest in the capital or equity of the latter, nor hold any employment, office or commission in any of them or serve in their Board of Directors.

The designation of commissioner and independent external auditor will be subject to the provisions of points a) and c) through e) of this Article.

 

SIX BIS 1. - Exchanges must verify that the persons named as board members, chief executive officer, directors at the organizational level immediately below the latter, and Compliance Officer fulfill, before they take office, with the requirements set forth by Articles Six and Six Bis herein. The Commission may establish the criteria for preparing files evidencing compliance with the provisions of this Article, and for compiling the pertinent supporting documents.

 

In any event, the persons mentioned in the preceding paragraph must state:

 

a)      That they do not come under any of the cases specified in Article Six Bis, points c) through e), herein, and

b)      That they are current in their credit obligations of any kind.

 

The Exchange must inform the Commission of its appointments for board members, chair executive officer, directors at the organizational level immediately below the latter, and Compliance Officer within five business days after their designation, expressly indicating their compliance with the pertinent requirements.

 

SEVEN.- The Boards of Directors of the Exchanges will have the following responsibilities:

 

a)      Submit to the shareholders’ meeting for ratification its approval of admission applications for new           partners in            the Exchanges and determine the subscription price of their shares.

 

b)      Authorize and suspend entry on the Exchange’s registry of Brokers and Clearing Members,       immediately notifying it to the Commission.

 

c)       Establish the tariffs, fees or commissions the Exchange will charge for the services it provides.

 

d)      Establish the Committees deemed necessary for the Exchange to fulfill its functions in                accordance with the provisions of Article Five, point b), of the Rules.

 

e)      Take measures to address contingencies under which the trading of Derivatives Contracts listed              in the      Stock Exchange and in general the order of the market are altered or interrupted, which      shall immediately               be notified to the Commission.

 

f)       Issue the Exchange’s Internal Regulations.

 

g)      Order audits of Brokers, Clearing Members, and Clearing Houses.

 

h)      Impose sanctions for breaches to the rules issued by the Exchange.

 

The adoption of measures and imposition of sanctions as mentioned in points e) and h) above may be delegated to the Exchange’s Directors and Committees, considering, in the case of sanctions, the nature of the breach or the amount of contractual penalties.

 

EIGHT.- Compliance Officer’s obligations are as follows:

 

a)      Oversee compliance with the Rules, Regulations and self-regulation standards issued by the Exchange in             which they participate, as well as other regulations applicable to the Market issued by the Authorities.

 

b)      Analyze reports from the Commissioners and the statements of the external auditors, submitting their     opinions to the Board in written form.

 

c)       Propose amendments in the self regulation rules issued by the Exchange to the Board, to establish,        among others, measures to prevent conflicts of interest and avoid improper use of information.

 

d)      Report monthly on the performance of their obligations and immediately report irregularities in the          Market of which they have knowledge while carrying out their duties to the Commission.

 

e)      Attend Board meetings participating with voice but without vote.

 

Compliance Officer will report to the Board and will be responsible for breach of any of its obligations, and subject to sanctions in accordance with the provisions of the Exchange’s internal regulations.

 

NINE.- Exchanges must have:

 

a)     Operating Systems for the trading of Derivatives Contracts listed in the Stock Exchange that enable the Brokers and Clearing Members to have equal conditions in the access to the electronic systems, as well as the information on bids, done acts and of the market in general.

 

b)     Internal control system capable of capturing in an orderly and complete way the information for each transaction, which can identify the Broker, the Clearing Member, the date and time of arrangement, the price and amount of the transaction, the class and type of the Derivatives Contracts listed in the Stock Exchange, the Underlying Asset, the Date of Cancellation, the form and place of settlement, the number of Open Contracts and traded volumes, as well as the one generated because of the transactions coming from Global Accounts.

 

c)     Systems for monitoring and reviewing operations executed daily that can detect violations of procedures for negotiation, receipt of orders, and assignment of operations.

 

d)   Information systems that at the beginning of each session disseminate the closing price of the previous business day of each Derivatives Contract listed in the Stock Exchange, as well as the number of Open Contracts, of real-time information of the transactions and bids arising in the trading session, identifying the type of Derivatives Contract listed in the Stock Exchange, maturity date, market price and, where appropriate, of exercise and of information about the volume of daily transactions and historical data related to the operation of the different Derivatives Contracts listed
in the Stock Exchange.

 

d)     Mechanisms to verify the minimum equity that Brokers and Clearing Members must maintain.

 

e)     Plans and safety procedures in case of contingencies under which the trading of the Derivatives Contracts listed in the Stock Exchange and in general the order in the market are interrupted, altered or prevented.

 

f)      Systems for informing the general public of mechanisms implemented in case of default.

 

g)     Mechanisms to ensure that the procedures for default implemented by the Clearing House are observed.

 

h)     A code of ethics applicable to the Exchange, Clearing House, Clearing Members, Brokers and Desk Traders personnel.

 

 

TEN.- The systems mentioned in the preceding article must:

 

a)    Include strict security measures for accessing their databases.

 

b)    Assure continuity in the record and recording of information, as well as in its updates, and backups.

 

c)     Be capable of detecting alteration or falsification of records of Brokers’ and Clearing Members’ transactions.

 

d)    Have alternative mechanisms in case of interruption or alteration of their operations.

 

 

ELEVEN.- The internal regulations for the Exchanges must include, among others, provisions related to:

 

a)    The requirements and procedures for the admission of Members of the Stock Exchange and Brokers, as well as the causes for which Brokers, Clearing Members and Desk Brokers may be suspended.

 

b)    The mechanisms of trading of the Derivatives Contracts listed in the Stock Exchange, as well as the terms, conditions and forms of arrangement of the operations.

 

c)     The assumptions for the reduction of the limit holdings by Broker, Clearing Member or Client, for each type of Derivatives Contract listed in the Stock Exchange, including those for Global Accounts.

 

d)    The behavior of the Clearing Members, Brokers and Desk Brokers regarding the holding of Derivatives Contracts listed in the Stock Exchange, as well as the procedures and penalties for their enforcement.

 

e)    Recording and use of information generated and processed by the Exchange and the terms under which such information is to be made available to the public.

 

f)     Guidelines for certifying training of personnel employed by Brokers, Clearing Members and the Clearing Houses who participate directly in the operations carried out, including any others the Exchange may determine.

 

g)    Training and updating programs in relation to the Code of Ethics.

 

h)    The safety procedures in case of contingencies under which the trading of the Derivatives Contracts listed in the Stock Exchange is interrupted, altered or prevented.

 

i)      The cases in which the suspension of the trading of the Derivatives Contracts listed in the Stock Exchange shall proceed.

 

j)      Repealed.

 

k)     Procedures to resolve disputes related to operations Brokers and Clearing Members have contracted with their Clients.

 

l)      Procedures for investigating violations to the standards mentioned in point d) above.

 

m)   Guidelines for implementing oversight and audit programs for Brokers, Clearing Members and Clearing Houses.

 

n)    Policies and guidelines for charging rates, fees or commissions for services the Exchange provides.

 

 

TWELVE.- The Stock Exchanges will monitor the activities of the Brokers, Clearing Members, Clearing Houses and Clients, regarding the holding of operations with Derivatives Contracts listed in the Stock Exchange.

Also, the Stock Exchanges will monitor, through the information provided by the Clearing Houses, the settlement and clearing of the Derivatives Contracts listed in the Stock Exchange.

In order to oversee the activities of Brokers, Clearing Members, Clearing Houses and Clients, in accordance with the guidelines mentioned in point m) of the preceding article, Exchanges must develop, through a Committee, a program of ongoing and systematic action designed to ensure due observance of the Rules, the Regulations herein, and self-regulation standards issued.

For the purposes of what is stated in the preceding paragraph, the following shall be considered: the permanent review of the transactions arranged through the operating systems of trading of the Stock Exchange, the observation of the areas where operations are carried out, the audit of records and systems and the analysis of the information of the Brokers, Clearing Members, Clearing Houses and Clients.

 

THIRTEEN.- Standards regulating the conduct of Brokers, Clearing Members, Desk Traders, and the Clearing Houses will be designed to ensure that they conduct their activities with honesty and diligence, to protect the public interest and the Market’s integrity, without detriment to their also being applied to Clients. In this context, the Exchange will consider serious faults to include, among others, the acts and omissions mentioned below:

 

a)    Application of contributions for purposes different from those established in the Rules.

 

b)    To act with malice or bad faith in the trading of Derivatives Contracts listed in the Stock Exchange.

 

c)     The intentional release of false, inaccurate or misleading information regarding the Underlying Asset attached to a Derivatives Contract listed in the Stock Exchange which affects its price, as well as the concealment of relevant facts that could influence said price.

 

d)    Incurring in acts that attempt to manipulate or do manipulate the price of any Underlying Asset.

 

e)    The misuse of privileged information in order to hold Derivatives Contracts listed in the Stock Exchange or transactions with the related Underlying Assets, whose price can be influenced by such information, while it has the character indicated, for personal gain or of others.

 

f)     Omission or alteration of records of executed operations and recording of operations that have not been carried out.

 

g)    Execution of orders from Clients that have not been specifically authorized.

 

h)    Giving false testimony or failing to appear before the Board or any Committee in the course of an investigation, and failing to submit information requested for such purposes.

 

i)      Allowing personnel different from that of the Broker or Clearing Member, or who lack the corresponding valid certification to execute operations on the Exchange’s online trading system.

 

j)      Execution of operations that do not adhere to sane market customs and practices.

 

k)     Execution of operations outside the Exchange.

 

l)      Negotiating operations on their own behalf that do not maintain competitive positions or grant equitable treatment to their Clients.

 

m)   Incurring in any act detrimental to the Exchange and the market in general.

 

For the purposes of the provisions of subparagraph k) of this provision, the transactions with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets shall not be considered off-Exchange transactions, as long as the Stock Exchange has signed an agreement, and whose orders are transmitted by the Brokers and Clearing Members.

 

FOURTEEN.- Exchanges must guarantee the affected party’s right to hearing and observe the essential procedural formalities in applying sanctions for violations of their own regulations, stipulating the terms and conditions for their observance in its internal regulations.

In any event, the sanctions determined must be appropriate for the severity of the violation committed.

Exchanges must report the commission of severe violations of the rules and regulations they issue to the Authorities.

 

FIFTEEN.- The safety procedures that come into operation in case of contingencies under which the trading of Derivatives Contracts listed in the Stock Exchange are interrupted, altered or prevented shall ensure the continuity of the transactions, the integrity in the formation of prices and the safety in the registration of the information generated. These security procedures will not come into operation when the Stock Exchange suspends the trading of the Derivatives Contracts listed in the Stock Exchange in the event that the prices are subjected to changes that the Stock Exchange has previously set as excessive.

 

SIXTEEN.- The Exchange, subject to the opinion of the Clearing House, will establish quantitative and qualitative criteria for positions on Open Contracts that, while falling within the permissible limits represent a significant risk to the Market in case of default, for the Clearing House to constantly monitor such positions in order to prevent any negative impact on the Market itself.

Quantitative criteria will be understood as those related to Clients’ resources, assets, funds, and financial positions, and qualitative criteria those related to Clients’ ethics and creditworthiness.

 

SEVENTEEN.- Rules and regulations related to transparency of mechanisms implemented in case of default most cover aspects of disclosure about:

 

a)    The reasons why the mechanisms are applied.

 

b)    Treatment to be given to operations for own benefit and on behalf of third parties included in the defaulting Broker’s or Clearing Member’s position.

 

c)     Mechanisms to identify defaulting Brokers, Clearing Members, and Clients.

 

d)    Use of the Contributions Fund and the Clearing Fund.

 

e)    Sanctions imposed.

 

 

The aforementioned information must be immediately reported to the Authorities, as well as to the general public by means of publication, announcements by the Exchange in its online trading systems and by any other means the Authorities may determine.

 

EIGHTEEN.- The rules applicable to recording, use, and disclosure of information generated and processed by the Exchanges must describe, in strict chronological order, all events that take place in the online trading system.

 

NINETEEN.- The Stock Exchanges must send daily confirmations of the Derivatives Contracts listed in the Stock Exchange held in the electronic trading system to its Brokers and Clearing Members.

 

TWENTY.- Exchanges, in addition to the information mentioned in Rule Nine, point d) herein, must make available to the Authorities information related to:

 

a)    Number of Derivatives Contracts listed in the Stock Exchange operated by the Brokers and Clearing Members, identifying the transactions held on their own and on behalf of third parties as well as those relating to Global Accounts.

 

b)    Number of Derivatives Contracts listed in the Stock Exchange settled and cleared, classified by class, type of Derivatives Contract and Underlying Asset to which they were referred to, separating those that correspond to Global Accounts.

 

 

TWENTY-ONE.- Exchanges will hear disputes that arise in relation to the contracting of services or operations between Brokers or Clearing Members, as the case may be, with their clientele, when a Client files a complaint requesting that the same Exchange acts as mediator, for which purpose a mediation conference will be arranged.

If no settlement is reached in the mediation conference, or the Client fails to appear, the proceedings will be terminated, without detriment to the parties’ rights to exercise in the competent courts.

In the mediation conference the parties will be exhorted to reconcile their interests, and if this proves impossible, the Exchange will encourage them to appoint one of the arbitrators the Exchange proposes to them, voluntarily and by mutual agreement, leaving it for the parties to decide whether the arbitration is to be by amiable settlement or in arbitration proceedings by strict application of the law.

 

 

BROKERS

 

TWENTY-TWO.- Once they have accomplished the requirements established by the Exchange’s Internal Regulations, Brokers must be registered in the Exchange’s Registry of Brokers and Clearing Members.

For Global Accounts Manager Brokers that do not have character of financial entities, must be established as one of the requirements mentioned in the preceding paragraph the obligation to deliver to the Exchange a manual containing the minimum measures and procedures that said Brokers must observe to prevent, detect and report acts, omissions or operations that might favor, give help or cooperate in any way for the commitment of a felony foreseen in Article 139 of the Federal Penal Code, or that may be mentioned in the assumptions of Article 400 Bis of the same Code. Such measures and procedures must agree, in the pertinent parts, to the general provisions issued in these matters by the Ministry of Finance and Public Credit for the Brokerage Firms.

 

TWENTY-THREE.- The Broker may hold Derivatives Contracts listed in the Stock Exchange in the electronic trading system of the Stock Exchange, without requiring the intermediation of a Clearing Member.

The Broker who holds operations on behalf of clients must sign a contract of commission merchant with a Clearing Member which stipulates, among other aspects, that he will be a commission agent for the Clearing Member for the purpose of the settlement of the Derivatives Contracts listed in the Stock Exchange, without prejudice to include, as applicable, the provisions of the Twenty-fourth provision, final paragraph, and in the Twenty-sixth provision, a) and b) of the Rules.

 

TWENTY-FOUR.- Brokers must have a system to receive, record, and execute orders and assign purchase or sale operations, unless they perform operations solely on their own behalf, including when they act as Market Makers.

The receiving, registration and execution of orders and allocation of transactions system must have an operational program of account segregation, which allows to clearly identify the orders concerning Operations on their own, Operations on behalf of clients, as well as register, immediately, the client’s name or account, sequential folio according to their reception, date and exact time of reception of each order, without such data being able to be affected by any reason or circumstance.

Additionally, Brokers should keep track of the orders that they transmit in order to engage in transactions with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets as provided in the Rules, identifying the transactions on their own and on behalf of their Clients.

Brokers may not carry discretionary accounts, except in the case of Derivatives Contracts listed in the Stock Exchange that are authorized by the Authorities.

 

TWENTY-FIVE.- Brokers will transfer to the Exchange’s online trading system the bids corresponding to each order recorded in its system for receiving, recording, and executing orders, as they are received, within operating hours and observing the pertinent terms and conditions the exchange establishes for each type of order. In any event, orders must be executed respecting the principles of best price, first negotiation and in price equality, first in time first priority.

Brokers will assign operations in their systems in the exact order they are executed on the Exchange.

 

TWENTY-SIX.- The system for receiving, recording, and executing orders and assigning operations must:

 

a)    Contain strict security measures for accessing the database it maintains.

 

b)    Assure continuity in data entry and record, as well as in updates and backups of the information

 

c)     Detect alteration or falsification of records of the Brokers´ transactions.

 

d)    Have alternative mechanisms in case of interruptions or alterations in its operation.

 

 

TWENTY-SEVEN.- Brokers must have risk management systems capable of calculating the daily price movements of the Derivatives Contracts listed in the Stock Exchange that they hold, as well as the ones of their Underlying Assets, except in the cases established by the internal regulations of the Stock Exchanges  when conducting operations solely on their own.

 

TWENTY-EIGHT.- Brokers will send their Clients a monthly statement reflecting the Derivatives Contracts listed in the Stock Exchange arranged through them, the payable fees, the amount of the contributions delivered to the Clearing Member, specifying the Minimum Initial Contributions, the yield and, where appropriate, the return.

In the case of Global Accounts managed by Brokers, the respective account statement must separate the positions, contributions, yields and commissions that correspond to each client. Also, the account statement must contain a legend explicitly and notoriously emphasizing the risks of participating in such type of accounts, as well as the Clients´ obligation of mutualizing the contributions in case of default of the other Clients in the account.

Also, Brokers who transmit orders for the holding of operations with Derivatives Contracts listed in Recognized Foreign Stock Exchanges as provided by the Rules, shall add to the statement that they send their Clients the details of the operations with such Derivatives Contracts, of the commissions and the amount of the resources provided in such markets in order to comply with the obligations of the Derivatives Contracts.

 

TWENTY-NINE.- Brokers must deliver to their Clients, with acknowledgment of receipt, the informative prospectuses mentioned in Article Fifty-Two herein, which will be made available to them by the Clearing Members, as well as their amendments, which will be included as attachments to the brokerage agreements they execute.

 

 

CLEARING HOUSES

 

THIRTY.- The Clearing Houses shall lay down rules to be observed by the Clearing Members in the settlement of the Derivatives Contracts listed in the Stock Exchange, shall monitor that in the arranged operations the terms and conditions agreed are properly and effectively met, and shall implement mechanisms and systems that seek to eliminate the risk of non-compliance in such transactions, in order to give security and confidence to the market.

In no case shall the Clearing House act as counterparty in the operations with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets.

 

THIRTY-ONE.- The trust agreement for Clearing Houses must include, among others, clauses referring to:

 

a)    The criteria for admission of trustors, considering in the case of Clearing Members the aspects regarding technical capacity, financial viability and technical equipment sufficient for the development of their settling activity in accordance with the Underlying Assets of the Derivatives Contracts listed in the Stock Exchange that they settle. In any case, it must be provided that the records of fiduciary rights that document the participation of the trustors shall remain deposited in the Clearing House in order to prevent their circulation or negotiation.

 

b)    The formation of the Technical Committee, specifying:

 

      i.          Participation of the Exchange’s board members, Clearing Members, and Independent Members,             without detriment to the provisions of Article Eighteen, fourth paragraph, of the Rules.

      ii.         That its members must be persons who satisfy the requirements mentioned in Articles Six and Six           Bis herein.

 

c)     The formation of the Committees, specifying:

 

      i.          Their functions and responsibilities.

      ii.         That the persons representing such Committees before the Technical Committee must report on              their activities periodically, or when acts or events arise of an importance that, in their opinion,          warrants it.

      iii.        That their members must have prior knowledge of the functions they are to perform and must not             have been condemned by final sentence for equity felonies, and

      iv.        That their members must refrain from participating in any deliberation or resolution when they have        an interest in disciplinary proceedings or in imposition of sanctions, in order to prevent conflicts of                 interest and preferential treatment.

 

d)    Removal from the Technical Committee or other Committee for unjustified failure to attend two of its meetings.

 

e)    Determination of a special quorum, and resolutions with the affirmative vote of two-thirds of the Technical Committee members, in the case of interventions in Clearing Members and application of sanctions considered grave in the terms of their internal regulations.

 

 

THIRTY-TWO.- The Technical Committee of the Clearing House in accordance with the policies and guidelines established in the trust agreement, will have the following functions:

 

a)    Ruling on applications for admission of trustors, as well as determining the amounts they must contribute to the trust.

 

b)    Authorizing and suspending entry in the Clearing House’s Registry of Clearing Members, immediately notifying it to the Commission.

 

c)     Establish timetables to carry out the clearing and settlement of the Derivatives Contracts listed in the Stock Exchange.

 

d)    Setting the tariffs, fees or commissions the Clearing House will charge for the services it provides.

 

e)    Issuing the Clearing House’s Internal Regulations.

 

f)     Overseeing the activities of the Clearing Members.

 

g)    Forming the Committees deemed necessary to ensure that the Clearing House fulfills its functions optimally, creating, moreover, in addition to those mentioned in Article Twenty, point o), of the Rules, those responsible for handling matters related to the admission of Clearing Members, self-regulation, discipline, and ethics.

 

h)    Conducting audits of its Clearing Members, in coordination with the Exchange.

 

i)      Determine jointly with the Stock Exchange the limit holdings by Clearing Member, Client and Global Account for each type of Derivatives Contract listed in the Stock Exchange, as well as the assumptions on which the Clearing Members will have to increase the Minimum Initial Contributions.

 

j)      Imposing sanctions for violations of the standards issued by the Clearing House. This power may be delegated to the Clearing House’s Directors and Committees, depending on the nature of the breach or the amount of the applicable contractual penalties.

 

 

THIRTY-THREE.- The appointment of the Clearing House’s Technical Committee members, chief executive officer, and directors in offices at the organizational level immediately below the latter shall be made among persons who satisfy, as applicable, the requirements established in Articles Six and Six Bis, observing, for such purpose, the procedure for verifying compliance indicated in Article Six Bis 1 herein.

 

THIRTY-FOUR.- Clearing Houses must have:

 

a)    A system that settles and clears the Derivatives Contracts listed in the Stock Exchange, that enables them to validate the information received from their Clearing Members and the clear separation of accounts, as well as to value on a daily basis at market prices the holdings maintained by the Brokers, Clearing Members and Clients.

 

b)    Monitoring systems that identify Brokers’, Clearing Members’ and Clients’ positions and position limits, even when the latter settle contracts through two or more Clearing Members.

 

c)     A risk measurement system that allows them to at least verify the situation of their Clearing Members with respect to the minimum capital, the Minimum Initial Contributions, the Daily Settlements and the Extraordinary Settlements in order to ensure the sufficiency of the resources available to meet the obligations derived from the Derivatives Contracts listed in the Stock Exchange.

 

d)    Security plans and procedures for contingencies that may interrupt or alter the clearing and settlement system.

 

e)    Mechanisms that seek the delivery of the Underlying Asset and that verify that the bonded warehouses and any entity that receives goods to be delivered physically in order to comply with the Derivatives Contracts listed in the Stock Exchange, maintain records that describe the quantity, quality classification, storage conditions and space requirements of the relevant Underlying Asset.

 

f)     Mechanisms which, in coordination with the Exchange, ensure proper treatment of Clearing Members’ positions, funds, and assets in case of default.

 

g)    Information systems to the Stock Exchange and the Clearing Members regarding the number and amount of Derivatives Contracts listed in the Stock Exchange cleared and settled daily, sorted by class and type, as well as the Underlying to which they were referred, and that identifies the transactions made by each Clearing Member.

 

 

THIRTY-FIVE.- The systems mentioned in the preceding point must:

 

a)    Contain strict security measures for accessing the database they feature.

 

b)    Assure continuity in data entry and record, as well as in updates and backups of the information.

 

c)     Detect alteration or falsification of records of operations settled by the Clearing Members.

 

d)    Have alternative mechanisms in case of alterations or interruptions in their operation.

 

THIRTY-SIX.- The internal regulations for Clearing Houses must include, among others, provisions concerning:

 

a)    The requirements and procedures for admission of trustors, and to the classification of Clearing Members in accordance with the Underlying Assets cleared, as well as the reasons why the operations of their Clearing Members may be suspended, specifically pointing the treatment to be given to the Open Contracts of the Clearing Member concerned.

 

b)     The clearing and settlement mechanisms of the Derivatives Contracts listed in the Stock Exchange.

c)     The rights and obligations that the Clearing House and the Clearing Members will have in the clearing and settlement of Derivatives Contracts listed in the Stock Exchange.

d)    The operation, hedge, and investment regime for the Clearing Fund, and the terms and conditions for payment of the amounts that must be contributed to said Clearing Fund.

 

e)    The terms and conditions for requiring Minimum Initial Contributions and Extraordinary Settlements.

 

f)     Account separation methodology.

 

g)    The behavior of the Clearing Members with respect to the settlement of the Derivatives Contracts listed in the Stock Exchange, as well as the procedures and penalties for their enforcement.

 

h)    Security procedures in case of contingencies that may interrupt or alter the clearing and settlement system.

 

i)      The assumptions for the determination of limit holdings by Customer or Global Account for each type of Derivatives Contract listed in the Stock Exchange.

 

j)      The procedures implemented for breaches of Derivatives Contracts listed in the Stock Exchange.

 

k)     Recording, use, and, as appropriate, disclosure of the information the Clearing House issues and processes.

 

l)      Guidelines for implementing programs for oversight and auditing of Clearing Members.

 

m)   Policies and guidelines for collecting tariffs, fees or commissions for services the Clearing House provides.

 

 

THIRTY-SEVEN.- Clearing Houses must have a safety net that works in the event that a Client fails to deliver Daily Settlements or Extraordinary Settlements, in accordance with the following minimum conditions:

 

a)    The Clearing Member must immediately notify the Exchange and the Clearing House the details of the defaulting Client and of the details of the default. Further, this Clearing House will have to inform immediately to the Ministry of Finance and Public Credit, to the Commission, to the Central Bank (Banco de México) and to the rest of the Brokers and Clearing Members.

 

b)    The Clearing Member shall use the Surplus of the Minimum Initial Contribution requested to the non-compliant Client on any Open Contract in order to meet their obligations with the Clearing House. When the Surplus of the Minimum Initial Contribution has been spent, the Clearing Member shall request the Clearing House to release the Minimum Initial Contributions corresponding to the Derivatives Contracts listed in the Stock Exchange of the Client where there is shortage.

 

c)     Simultaneously with the actions mentioned in the preceding point, the Clearing Member and the Clearing House will establish a program for settling Open Contracts of the Client, on any Underlying Asset. The Minimum Initial Contributions, and any other resources released with such actions will be used to meet the defaulting Client’s obligations.

 

d)    If the funds released prove insufficient, the Clearing Member must use the surplus in its minimum equity, and must notify immediately the information of the defaulting Client and the details of the default to the credit information associations.

 

                If this proves insufficient to cover the loss, the Clearing House accordingly to its Internal Regulations will                subject the Clearing Member to administrative intervention, in order to immediately transfer the Open             Contracts of its other Clients, and when applicable Surpluses in Minimum Initial Contributions to the Clearing        Member(s) to which Clients wishes to be transferred. If those transfers were impossible, the aforementioned       Clearing House will settle them in the Market trough Brokers or Clearing Members it determines. Once the                Clearing Member is intervened, the Clearing House will use the Clearing Member’s minimum equity to cover                the amount of its losses.

 

e)    If the trustor, full-service bank or brokerage firm of the Clearing Member intervened holds an interest in another Clearing Member that only executes Operations on its own behalf, the latter’s equity will be used to cover the losses of the Clearing Member intervened.

 

f)     If the funds obtained pursuant to the preceding points prove insufficient, the Clearing House will make use of the Clearing Fund, for up to its total amount.

 

g)    As a last resort, the Clearing House may request Extraordinary Settlements from its Clearing Members, to cover the remaining losses and restore the Clearing Fund.

 

 

For Global Accounts, the Safety Net must adjust to the established in the following provisions Thirty Seven Bis to Thirty Seven Bis 2.

 

THIRTY-SEVEN BIS.- Clearing Houses must have a Safety Net that operates in case of defaulting Global Accounts Clients.

 

THIRTY-SEVEN BIS 1.- When Global Accounts are managed by a Broker, the Safety Net mentioned in point Thirty Seven Bis, must contemplate at least the following:

 

a)    The Broker who manages the Global Accounts will notify immediately the Exchange, the Clearing House and the Clearing Member the information of the defaulting Client and the details of the default. And, said Clearing House must immediately notify the Ministry of Finance and Public Credit, the Commission, the Central Bank (Banco de México) and all other Brokers and Clearing Members.

 

b)    The broker manager will close the positions of the defaulting Client and will deliver to the Clearing Member the Surplus in Minimum Initial Contributions of the referred Client.

 

                In turn, the Clearing Member must deliver to the Clearing House the aforementioned Surplus in Minimum             Initial Contributions, so along with the other freed resources that correspond to the defaulting Client, the               pending obligations be settled.

 

c)     If the previous turns out to be insufficient, the Clearing House will order all the Brokers and Clearing Members to verify if there exist other open interests of the defaulting Client, in which case, positions will be closed if the Clearing House judge it is necessary, with the purpose of using all the available resources to cover the amount of the debt after settling the pending obligations derived from the operations of such Client.

 

d)    In case a shortage persists, the Broker who manages the Global Account will be responsible of covering it up to the amount of its capital. Further, said Broker will notify immediately the Clearing Member such situation, which will inform the information of the defaulting Client and the details of the default to the credit information associations.

              

                If necessary, the Clearing House, in terms of its internal regulations, will subject the respective Broker to                administrative intervention, in order to transfer immediately the other Global Accounts different from the one       in which a default was registered, and when applicable Surpluses in Minimum Initial Contributions of those            Accounts, to the Broker or Clearing Member to which Clients wishes to be transferred. In the event that             those transfers were not possible, the referred Clearing House will settle them in the market through the               Brokers or Clearing Members it determines.

 

e)    In the event the previous turns out to be insufficient, the Clearing House will close the necessary positions of the other Clients of the Global Account that registered the default, in a proportional way to its participation in the Account, and will use the resources to settle the pending obligations. In case there is any remainder, the manager will redistribute proportional to the amount of their Contributions, among the Clients, including the value of their position in the closing of the corresponding day.

 

f)     If the resources mentioned in the previous points are insufficient, the Clearing Member through which the operations of the correspondent Global Account have been handling to the Clearing House must cover the shortage. If necessary, the Clearing House, in terms of its internal regulations, will subject such Clearing Member to administrative intervention, in order to transfer immediately the Open Contracts of its other Clients, including those of other Global Accounts, as well as, when applicable Surpluses in Minimum Initial Contributions, to the Broker or Clearing Member to which Clients wishes to be transferred. In the event that those transfers were not possible, the referred Clearing House will settle them in the market through the Brokers or Clearing Members it determines. Once the Clearing Member is intervened, the Clearing House will use up to the Clearing Member’s total amount of the equity to cover the amount of its losses.

 

g)    In case the trustor of the Clearing Member intervened participates in another Clearing Member who executes operations exclusively on its own behalf, the latter’s equity will be used to cover the shortage.

 

h)    In the event that the resources obtained in accordance with the preceding procedure prove insufficient, the Clearing House will make use of the Compensation Fund.

 

i)      As a last resort, the Clearing House may request Extraordinary Settlements from its Clearing Members, to cover the remaining losses and restore the Compensation Fund.

 

 

THIRTY-SEVEN BIS 2.- When Global Accounts are managed by Clearing Members, the safety net mentioned in provision Thirty-Seven Bis, must contemplate at least the following:

 

a)    The Clearing Member who manages the Global Account will notify immediately the Clearing House and the Exchange the information of the defaulting Client and the details of the default. As well as, said Clearing House must immediately notify the Ministry of Finance and Public Credit, the Commission, the Central Bank (Banco de México) and all other Brokers and Clearing Members.

 

b)    The Clearing Member manager will close the positions of the defaulting Client and will deliver to the Clearing House the Surpluses in Minimum Initial Contributions, so along with the other freed resources that correspond to the defaulting Client, the pending obligations be settled.

 

c)     If the previous turns out to be insufficient, the Clearing House will order all the Brokers and Clearing Members to verify if there exist other open interests of the defaulting Client, in which case, positions will be closed if the Clearing House judge it is necessary, with the purpose of using all the available resources to cover the amount of the debt after settling the pending obligations derived from the operations of such Client.

 

d)    In case a shortage persists, the Clearing Member who manages the Global Account will be responsible of covering it up to the amount of its equity. Further, said Clearing Member will notify immediately the credit information associations the information of the defaulting Client and the details of the default.

 

If necessary, the Clearing House, in terms of its internal regulations, will subject the respective Clearing Member to administrative intervention, in order to transfer immediately the Open Contracts of its other Clients, including those of other Global Accounts different from the one in which a default was registered, and when applicable Surpluses in Minimum Initial Contributions, to the Broker or Clearing Member to which Clients wishes to be transferred. In the event that those transfers were not possible, the referred Clearing House will settle them in the market through the Brokers or Clearing Members it determines.

 

e)    If the shortage subsists and the trustor of the Clearing Member intervened participates in another Clearing Member who executes operations exclusively on its own behalf, the latter’s equity will be used to cover the shortage.

 

f)     In the event the previous turns out to be insufficient, the Clearing House will close the necessary positions of the other Clients of the Global Account that registered the default, in a proportional way to its participation in the Account, and will use the resources to settle the pending obligations. In the case there is any remainder, the manager will redistribute proportional to the amount of their Contributions, among the Clients, including the value of their position in the closing of the corresponding day.

 

 

g)    In the event that the resources obtained as in accordance with the preceding procedure prove insufficient, the Clearing House will make use of the Compensation Fund.

 

h)    As a last resort, the Clearing House may request Extraordinary Settlements from its Clearing Members, to cover the remaining losses and restore the Compensation Fund.

 

 

THIRTY-EIGHT.- The safety net mentioned in the preceding regulation shall work in case a Clearing Member that only executes operations on its own behalf, fails to deliver the Daily Settlements or Extraordinary Settlements, in accordance with the following minimum conditions:

 

a)    The Clearing House must immediately notify the Ministry of Finance and Public Credit, the Commission, the (Central Bank), and the other Brokers and Clearing Member(s).

 

b)    The Clearing House will use the Minimum Initial Contribution corresponding to the Derivatives Contracts listed in the Stock Exchange for which there is shortage. The resources freed by this action will be used to meet the obligations of the Clearing Member.

 

c)     If the funds released prove insufficient to cover the amount of the loss, the Clearing House will subject the Clearing Member to administrative intervention in order to settle its Open Contracts on the market. The Minimum Initial Contributions, and any other funds released by this action, will be used to cover the obligations of the defaulting Clearing Member.

 

d)    If the funds released prove insufficient, the Clearing House will use the equity of the Clearing Member intervened to cover the amount of the loss.

 

e)    If the trustor, full-service bank or brokerage firm of the Clearing Member intervened holds a share of another Clearing Member that only executes Operations on its own behalf, the latter’s equity will be used to cover the losses of the Clearing Member intervened.

 

f)     If the funds obtained pursuant to the preceding points prove insufficient, the Clearing House will make use of the Clearing Fund, up to its total amount.

 

g)    As a last resort, the Clearing House may request Extraordinary Settlements from its Clearing Members, to cover the remaining loss and restore the Clearing Fund.

 

 

THIRTY-NINE.- The Clearing House may request Extraordinary Settlements from its Clearing Members at any time during the meeting, in accordance with the policies and guidelines that the Committee responsible for risk management has established to such effect.

If the amount of the Minimum Initial Contributions or Extraordinary Settlements exceeds the amounts required under the aforementioned policies and guidelines, the Clearing House must return the surplus amounts to the corresponding Clearing Member.

 

FORTY.- Clearing Houses must guarantee the affected party’s right to hearing, and observe the essential procedural formalities in applying sanctions for violations of their standards, specifying, to such effect, the terms and conditions for their observance in their internal regulations.

In any event, the sanctions imposed must be appropriate to the seriousness of the violation committed.

Clearing Houses must report grave infringements on the standards they issue to the Authorities.

 

FORTY-ONE.- The Clearing Houses shall send on a daily basis to their Clearing Members the confirmations of the Derivatives Contracts listed in the Stock Exchange cleared and settled on their own or through them.

Also, the Clearing Houses will send their Clearing Members a monthly statement that reflects the Derivatives Contracts listed in the Stock Exchange cleared and settled through them, the Open Contracts that they hold, the amount of the Contributions, specifying the amount of Minimum Initial Contributions, their yield and, where appropriate, their return.

 

FORTY-TWO.- The Clearing Houses, in addition to the information referred to in subsection g) of the Thirty-fourth of these Provisions, shall make available to the Authorities information about the number and amount of Open Contracts that the Clearing Members have in their holding, identifying the type and class of Derivatives Contract listed in the Stock Exchange, as well as the most important features of them.

 

 

CLEARING MEMBERS

 

FORTY-THREE.- The Clearing Members must enroll in the Registry of Brokers and Clearing Members of the Stock Exchange where they hold Derivatives Contracts listed in the Stock Exchange and in the Registry of Clearing Members of the Clearing House in which they settle Derivatives Contracts listed in the Stock Exchange.

 

FORTY-FOUR.- The Clearing Members that settle and conclude Derivatives Contracts listed in the Stock Exchange must have a reception, registration and enforcement of orders and allocation of operations system, similar to the one referred to in Provisions Twenty-fourth to Twenty-sixth.

Full-service banks or brokerage firms that are trustors in a trust created to operate as a Clearing Member that executes Operations on its own behalf and at the same time serve as trustees for Clearing Members that execute Operations on behalf of third parties must use a single system for receiving orders and assigning operations for both Clearing Members.

The Clearing Members may not hold discretionary accounts, except in the case of Derivatives Contracts listed in the Stock Exchange that are authorized by the Authorities.

 

FORTY-FIVE.- The Clearing Members must have systems that allow them to have a daily monitoring of the settled Derivatives Contracts listed in the Stock Exchange, including at least the following records:

 

a)    Of settlements of Derivatives Contracts listed in the Stock Exchange that identify the Client’s name and account number, class and type of Derivatives Contracts listed in the Stock Exchange, settlement date and time and amount of the contributions.

                The settlement records shall be conducted following the order established for the allocation of transactions           in the second paragraph of the Twenty-fifth Provision.

 

b)    Contributions, showing the amount of those corresponding to Open Contracts, those deposited by Clients, and Surpluses in Minimum Initial Contributions.

 

c)     Of Daily and Extraordinary Settlements, as well as of the amounts contributed to the Compensation Fund. Also, they should conduct studies or credit analysis regarding the Clients prior to conducting transactions with Derivatives Contracts listed in the Stock Exchange.

 

 

FORTY-SIX.- Clearing Members must have systems that allow them to:

 

a)    Appraise at any time their Open Contracts, as well as the Contributions.

 

b)    Collect and reimburse Contributions.

 

 

FORTY- SEVEN.- The systems to which Articles Forty-Four through Forty-Six above refer must:

 

a)    Have strict security measures for accessing their databases.

 

b)    Assure continuity in data entry and record, as well as in updates and backups of the information.

 

c)     Allow the detection of alterations or falsifications of operations executed by Brokers and Clearing Members.

 

d)    Have alternative mechanisms in case of alterations or interruptions in their operation.

 

 

FORTY-EIGHT.- The Clearing Members must have risk management systems capable of calculating at all times the movements in the price of the Derivative Contracts listed in the Stock Exchange that they hold and of their Underlying Assets, as well as projecting results by considering variations in the aforementioned prices.

Personnel responsible for risk management systems must have sufficient capacity and experience to analyze the functioning of the market, given that the opinions or recommendations issued by the risk management area are to be taken into account in the Clearing Member’s operative decisions.

 

FORTY-EIGHTH BIS.- The Clearing Members who wish to transmit, on their own or on behalf of their Clients, orders for the holding of operations with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets, in terms of the Rules, shall meet the requirements of access to the canalization of orders’ system established by the internal regulations of the Stock Exchange of which they are members.

 

FORTY-NINE.- The Clearing Members of Derivatives Contracts listed in the Stock Exchange to financial Underlying Assets shall count with the services of a credit institution or brokerage house for the delivery of resources and, where appropriate, values, through a system of transfers into deposit accounts.

Clearing Members will notify Clients of the form, place and hours, in which payments of differences or deliveries of Underlying Assets are to be made.

 

FIFTY.- The Clearing Members of Derivatives Contracts listed in the Stock Exchange referred to non-financial Underlying Assets shall have access to bonded warehouses that have security systems that:

 

a)    Protect the integrity of the Underlying Assets.

 

b)    Maintain controls on entry and departure of Underlying Assets.

 

c)     Keep records by type of Underlying Asset settled, specifying date and time of delivery.

 

d)    Issue reports on certificates of delivery to Clients, signed and sealed by both the Clearing Member and the Clearing House.

 

e)    Have alternative mechanisms in the event that the Underlying Asset cannot be delivered for reasons of force majeure or fortuitous event.

 

In any event, Clearing Members may only operate with general deposit warehouses that have the Commission’s authorization to handle deliveries of Underlying Assets.

 

FIFTY-ONE.- The Clearing Members will prepare a ticket or receipt for each transaction and send to the Clients daily the confirmations about the number of Derivatives Contracts listed in the Stock Exchange held and settled on behalf of them, containing at least a brief description of the class and type of Derivatives Contract listed in the Stock Exchange, the exercise price and the Underlying Asset. The same procedure will be carried out with each Client who participates in a Global Account.

On the other hand, and if so requested by the Client, the Clearing Member may send only the weighted average price for each client’s order or the addition of the transactions concluded during the day.

Also, the Clearing Members will send the Clients a monthly statement reflecting the Derivatives Contracts listed in the Stock Exchange held and, where applicable, settled; the Open Contracts held; the gains or losses realized during the month; the amount of the Contributions received and delivered, specifying the amount of the Minimum Initial Contributions, their yield and, where applicable, their return, as well as the charges and fees charged for managing the account.

In the case of Global Accounts managed by Clearing Members, the respective account statement must have the positions, contributions, yields and commissions individually corresponding to each Client. Also, the statement must contain a legend explicitly and notoriously emphasizing the risks of participating in such type of accounts and the Clients´ obligation of mutualizing the contributions in case of default of the other Clients in the account.

Also, the Clearing Members who transmit orders for the holding of operations with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets, as provided by the Rules, shall add to the statement sent to their Clients the detail of the operations with such Derivative Contracts, of the fees and the amount of resources provided in these markets in order to meet the obligations of the Derivatives Contracts.

 

FIFTY-TWO.- The Clearing Members shall develop prospects containing information about the class and type of Derivatives Contracts listed in the Stock Exchange that they celebrate and settle, with special emphasis on explaining to their Clients the risks inherent therein. These prospects will be included as annexes of the intermediation contracts that they sign, and to that end they must deliver them to their Clients with acknowledgment of receipt.

Further, Clearing Members must provide Brokers acting as their commission agents with the pertinent informative prospectuses, as well as their amendments, for the purposes mentioned in Article Twenty-Nine herein.

In the event that the Clearing Members transmit orders for the holding of operations with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets, as provided in the Rules, they must inform their Clients about the class, type and other characteristics of those Derivatives Contracts, as well as about the risks inherent to them through the means established in the respective contracts.

 

 

GENERAL PROVISIONS

 

FIFTY-THREE.- Each and every one of the acts, Derivatives Contracts listed in the Stock Exchange or transactions performed by the Brokers, Clearing Members, Clearing Houses and Stock Exchanges must be registered in their accounting. The accounting, books and corresponding documents shall be governed by the general provisions issued by the Commission, and in any case they must be kept for a period of five years, counted from the date of the act, Derivatives Contract or transaction that originated them.

The Brokers, Clearing Members, Clearing Houses and Stock Exchanges may microfilm, record on optical discs or retain by any other means that the Commission authorizes, all the books, records or documents referred to above, after two years of the acts, Derivatives Contracts or transactions have been made, in accordance with the general provisions issued by the Commission itself according to the technical basis for microfilming, recording on optical disks or other conservation means and for its management, that are set by the aforementioned Commission.

Original negatives obtained by the microfilm system and images recorded on optic disc systems or by any other means authorized by the Commission, as well as printouts obtained from such systems, duly certified by an authorized officer of the Broker, Clearing Member, Clearing House or Exchange will have the same value of proof in court as the books, records, and documents microfilmed, recorded on optic discs or kept by any other authorized means.

 

FIFTY-FOUR.- The Commission, by means of general regulations, will indicate the bases for approval of the monthly financial statements and annual general balance sheet by the Board or Technical Committee, of the Exchanges, Brokers, Clearing Members, and Clearing Houses, their publication in wide-circulation newspapers, as well as the procedure applicable for their review made by the Commission.

The Commission may order any and all corrections that, in its opinion, are essential and warrant publication, resolving, in consequence, that they be published with the pertinent amendments, and, if so resolved, such publication will take place within fifteen days after the resolution is passed.

The annual general balance sheet must be audited by an independent external auditor, who will be appointed directly by the shareholders’ meeting or Technical Committee in question.

The aforementioned auditors must provide the Commission and the Exchange with statements and other elements of proof that support their records and conclusions. If, in the course or as a result of their audit, they detect irregularities that could affect the stability or solvency of the Brokers, Clearing Members, Clearing House or Exchange, the auditors will be obliged to notify the Commission accordingly. The Commission, by means of general regulations, may establish mandatory characteristics and requirements for the external auditors and for their records.

 

FIFTY-FIVE.- Brokers, Clearing Members, Clearing Houses and Exchanges must present the information and documentation the Authorities require in the manner and terms they establish to such effect.

 

FIFTY-SIX.- The advertising or information to the public about the Derivatives Contracts listed in the Stock Exchange, as well as about the services provided by the Brokers, Clearing Members, Clearing Houses and Stock Exchanges shall be subjected to the guidelines and criteria established by the Commission through general provisions, oriented to ensure the accuracy and clarity of information distributed, to contribute to the healthy and balanced development of the Market and to prevent unfair competition.

The Commission may order the suspension or correction of advertising or information that, in its opinion, may imply inaccuracy, obscurity or unfaithful competition or that for any other reason could lead to erroneous conclusions regarding the operations or services described.

 

FIFTY-SEVEN.- The authorities are, at the request of the respective Stock Exchange, to approve the terms and conditions of the Derivatives Contracts listed in the Stock Exchange that are to be negotiated. To that effect, the Stock Exchanges must submit documentation that contains:

 

a)    The main features of the Derivatives Contracts listed in the Stock Exchange, indicating among others, the term, amount, quantity, quality, minimum and maximum fluctuation of the price, method of fixing the premium, manner and place of settlement, including its justification.

 

b)    Information on the Underlying Asset.

 

c)     The trading mechanism.

 

d)    The appraisal method to be applied by the Clearing House.

 

e)    Contributions to be requested.

 

f)     Term for implementation in the market.

 

The minimum and maximum fluctuation of the price and the mechanics of the trading of the Derivatives Contracts listed in the Stock Exchange referred to in subparagraphs a) and c) above may be modified by the Stock Exchange in the terms established in its internal rules.

 

FIFTY-EIGHT.- The cash held in the Clearing Fund and in the Contributions Fund must be invested in demand cash deposits, government securities with term under ninety (90) days, or repurchase agreements at the same term for such instruments, as well as any other securities approved by the Authorities.

 

FIFTY-NINE.- If the Derivatives Contracts listed in the Stock Exchange Derivatives are not made in terms of the provisions applicable to them, or there are irregularities of any kind with the Brokers, Clearing Members, Clearing Houses and Stock Exchanges that affect their stability or solvency or endanger the interests of the public or of its creditors, the Commission may:

 

a)    Order the Exchange and the Clearing House to take measures to regularize the status of the Trading Member, Clearing Member or Client in question, establishing a term for compliance.

 

b)    Instruct the Stock Exchange to halt the irregular operations and order the House to proceed with the transfer or settlement of the Derivatives Contracts listed in the Stock Exchange.

 

c)     Appoint the persons who are to substitute the Board or Technical Committee, and who will take charge of the Exchange, Clearing House, Operator or Clearing Member, as the case may be.

 

SIXTY.- Brokerage contracts that Clearing Members or Brokers execute with Clients must include among others, clauses covering:

 

a)    The adhesion of the Clients to the self-regulatory rules issued by the Stock Exchange in which they carry out the Derivatives Contracts listed in the Stock Exchange.

 

b)    The main features and use of the systems for reception of orders and allocation of purchase and sale transactions of Derivatives Contracts listed in the Stock Exchange.

 

c)     The value of proof of original photographic negatives taken from the microfilm system and images recorded by optic disc systems or any other means authorized by the Commission, and printouts obtained from such systems, duly certified by the authorized officer of the Broker, Clearing Member, Clearing House or Exchange mentioned in Article Fifty-Three herein.

 

d)    Prohibition to the Clients of executing indirect operations for third parties, through their brokerage contracts, except in the case of Global Accounts or brokerage contracts which are carried out by foreign financial entities which handle accounts with equal, analog or similar characteristics to the Global Accounts, as long as the authorization of the Exchange is obtained, according to the requirements established in its internal regulations.

 

e)    The destination of the Contributions delivered by the Client through the Clearing Member to the Clearing House in the face of the breach of the obligations contracted by the Client in the Derivatives Contracts listed in the Stock Exchange, including non-payment of penalties.

 

f)     Contractual penalties applicable for Clients, establishing, among others, those to be imposed for:

 

      i.          The breach of the obligation to refrain from signing Derivatives
            Contracts listed in the Stock Exchange, for personal or for third parties’ gain, with any type of      Underlying Asset whose price may be influenced by the use of privileged information, as long as it     has the character indicated.

                  For the purposes of the preceding paragraph, the term privileged information will be understood as         the knowledge of acts, facts or events capable of influencing the prices of the Underlying Assets       object of the Derivatives Contracts listed in the Stock Exchange, while such information has not             been made known the public. In any case, they may provide for circumstances in which it is          presumed that a Client can have access to privileged information concerning the Underlying Assets                in question, as well as establish periods during which said Clients shall refrain from carrying out               directly or through an intermediary Derivative Contracts listed in the Stock Exchange.

      ii.         Performance of operations of manipulation, simulation or triangulation.

      iii.        The holding of Derivatives Contracts listed in the Stock Exchange whose objects are Underlying               Assets on which the Client, in accordance with the applicable regulations, cannot operate.

 

g)    The explicit authorization of the Client for the holding of operations with Derivatives Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets as provided by the Rules, through the orders’ canalization schemes habilitated by the respective Stock Exchange and for the delivery of the resources for the fulfillment of the obligations on their own.

 

   In any case the Client shall manifest that he will be subjected to the law applicable to the Recognized      Foreign Derivatives Market concerned and that he knows the risks inherent to the transaction with the              Derivatives Contracts listed in the Stock Exchange of the said Market. Also, that he gives his permission for        information to be provided to the foreign regulatory agencies for the operations concluded with Derivatives             Contracts listed in Stock Exchanges of Recognized Foreign Derivatives Markets as provided in the Rules.

 

   In the holding of the transactions referred to in this subsection, under no circumstances shall the Clearing              House act as counterparty in the transactions conducted in Recognized Foreign Derivatives Markets.

 

As well as, brokerage agreements must stipulate that the amount of contractual penalties will be used to create an equity reserve for the Clearing House, which will be applied after the Clearing Fund is exhausted in accordance with the minimum order foreseen for the safety net mentioned in Articles Thirty-Seven and Thirty-Eight herein.

The brokerage agreements and other documentation mentioned in Articles Twenty-Eight, Twenty-Nine, Fifty-One, and Fifty-Two herein, as well as any other written communication directed to Clients, will be printed on the Broker’s or Clearing Member’s letterhead, which must clearly indicating its corporate name or trade name, must be different from that used by the Broker’s shareholders or individuals acting in such capacity, or the Clearing Member’s trustors.

 

 

TRANSITORY ARTICLE

 

SOLE.- This Resolution will be in force the day after its publication in the Official Gazette of the Federation.

 

Mexico City, Federal District, December 15, 2004.- By Chairman of the National Banking and Securities Commission, Jonathan Davis Arzac.- Signature.

 

 

TRANSITORY ARTICLES

 

ONE.- This Resolution will be in force the day after its publication in the Official Gazette of the Federation.

 

TWO.- For the effects of the foreseen in the second transitory provision of the Resolution that modified the prudential regulations to which participants in the market for listed futures and options will adhere in their operations, published in the Official Gazette of the Federation on August 13, 2001, the appointments of board members, commissioner, chief executive officer, directors holding positions at the organizational level immediately below the latter, Compliance Officer, Technical Committee members, and independent external auditor of the Exchanges and Clearing Houses, that, on the effective date of this Resolution, are awaiting approval by the Commission’s governing board, will be subject to the provisions of Articles Six, Six Bis, Six Bis 1, and Thirty-Three, and said Exchanges and Clearing Houses will have a term of thirty business days after this resolution is in force to notify the Commission that they have conducted the verification mentioned in Article Six Bis 1.

 

Mexico City, Federal District, October 31, 2001.- By Chairman of the National Banking and Securities Commission, Jonathan Davis Arzac.- Signature.

 

 

TRANSITORY ARTICLES

 

ONE.- This Resolution will be in force the day after its publication in the Official Gazette of the Federation.

 

TWO.- The appointments of board members, commissioner, chief executive officer, directors holding positions at the organizational level immediately below the latter, Compliance Officer, Technical Committee members, and independent external auditor of the Exchanges and Clearing Houses, that, on the effective date of this Resolution, are awaiting approval by the Commission’s governing board, will be subject to the provisions of Articles Six, Six Bis, Six Bis 1, and Thirty-Three, and said Exchanges and Clearing Houses will have a term of thirty business days after such date to notify the Commission that they have conducted the verification mentioned in Article Six Bis 1.

 

Mexico City, Federal District, July 3, 2001.- By Chairman of the National Banking and Securities Commission, Jonathan Davis Arzac.- Signature.

 

 

TRANSITORY ARTICLE

 

SOLE.- These Regulations will be in force the day after their publication in the Official Gazette of the Federation.

 

Mexico City, Federal District, December 13, 2000. - By Chairman of the National Banking and Securities Commission, Jonathan Davis Arzac.- Signature.

 

 

TRANSITORY ARTICLES

 

ONE.- This Resolution will be in force the day after its publication in the Official Gazette of the Federation.

 

TWO.- While the National Banking and Securities Commission has not issue the general dispositions set forth  by Article Fifty-Three, the “Accountings Criteria for Credit Institutions” and the “Accountings Criteria for Brokerage Firms” must apply, published by the Commission through Circulars 1343 and 10-208 Bis, dated on January 10 and 31, 1997.

 

Mexico City, Federal District, July 24, 1998.- By Chairman of the National Banking and Securities Commission, Eduardo Fernández García.- Signature.

 

 

TRANSITORY ARTICLE

 

SOLE.- This resolution shall enter into force on the day following its publication in the Official Journal of the Federation.

 

México City, November 3, 2011.- The President of the National Banking and Securities Commission, Guillermo Enrique Babatz Torres.- Signature.