Emerging Markets Rates and Currencies Handbook

The most relevant benchmark rate for the Mexican Peso is the Banxico FIX, which is used to settle transactions the second working day following the expiry day. The FIX rate was created to settle liabilities denominated in foreign currency payable within Mexican territory. Central Bank surveys FX dealer institutions on three different time periods, between 9am to 12pm, every business day and it calculates the average of the wholesale market quotes. It then publishes daily the Benchmark FIX Rate at 12pm local time (UTC-6). Bloomberg Ticker: {MXN BDEM Currency} The spot market for MXN is very liquid and transactions can be settled in T+0, T+1 or T+2, with T+0 settlement being the market standard. Spot transactions settled after 4 business days from the closing date are considered derivatives by the Central Bank and are subject to compliance with derivatives regulation. Fully deliverable and non-deliverable forwards are available both onshore and offshore. However, the market standard is deliverable contracts. These instruments are usually traded with tenors up to 2 years with greater liquidity concentrated on contracts up to 1 year. NDFs can be cash settled in either MXN or USD. Regulation Offshore Restrictions: The remittance of funds or payments and the repatriation of profits, dividends, interest payments, capital or any other service payment abroad are not subject to any restrictions. Local entities are allowed to trade the spot market offshore and foreign entities have full access of the onshore spot market although repatriation of dividends is subject to compliance with the Income Tax Law (Ley del Impuesto sobre la Renta). Local and foreign currency accounts are available to resident and non-resident entities, however, all non- resident entities are required to register local foreign currency accounts with the banking authorities. Circular 4/2012 issued by the Central Bank establishes the guidelines for derivatives trading that need to be followed by banks, development banks, brokerage dealers, and other Mexican regulated entities. Its guidelines include the type of derivative transactions, underlying assets, permitted counterparties, instruments,guarantes, settlement procedures, prohibitions, suspensions and sanctions. It also requires derivative transactions to be documented under master agreements or ISDAs. There is a liquid market for MXN plain vanilla and exotic options that can be either deliverable or non- deliverable, available both onshore and offshore. Deliverable options are settled in either MXN or USD. Greater liquidity can be found on tenors up to 3 years. Exchange traded MXN options are available at the CME and MEXDER. Other local regulations that must be observed, among others, when transacting with currencies onshore: • Circular 22/2017 (modified by Circular 23/2017) — Global FX Code. • Circular 3/2012 — among other regulates foreign exchange operations. • Ley del Sistema de Pagos — funds transfers. • Ley de Instituciones de Credito— Funds Transfers & AML. • Circular 25/2017 — Código LEI. • Circular 4/2016 — System of Interbank Payments in Dollars (SPID). Non-Resident Restrictions: Similarly to spot transactions, foreign entities are allowed to trade derivatives onshore, and local entities are permitted to trade offshore. License Requirements The Mexican Central Bank imposes no foreign exchange controls and no documentation requirements, allowing the free conversion and flow of funds. Requirements to open a foreign currency account Corporate clients are allowed to have local checking or savings accounts in MXN or USD in any region of the country. Foreign investors are allowed to hold cash accounts denominated in Mexican pesos. According to Mexican regulation (Article 65 of the Ley de Instituciones de Crédito and Article 15 of Disposiciones de Caracter General Aplicables a las Instituticiones de Credito — CUB), cash accounts cannot be overdrawn without a credit facility in place. Deal Management Rollover: Rollovers are possible with no restrictions and can be either gross settled or net settled. Unwinding: Unwinding is possible in all instruments. Early Maturity: Early maturity is possible and can be either gross settled or net settled. Trade Flows There are no restrictions to trading in FX spot or forward markets. Banks need to report all FX trades to the