Banco de México's Policies and Functions Regarding Financial Market Infrastructures

BancodeMxico
BancodeMxicosPoliciesandFunctionsRegarding
FinancialMarketInfrastructures
August2016
BancodeMxicosPoliciesandFunctionsRegardingFinancialMarketInfrastructures 1
BancodeMxico

NOTE
Thistextisprovidedforreadersconvenienceonly.Discrepanciesmaypossiblyarisebetweenthe
originaldocumentanditstranslationtoEnglish.TheoriginalandunabridgeddocumentinSpanish
istheonlyofficialdocument.
BancodeMxico
Contents
Contents..............................................................................................................................................3
1. Introduction................................................................................................................................5
1.1. BancodeMxicosgeneralobjectiveswithregardtoFMIs................................................6
1.2. Contentandstructureofthedocument.............................................................................6
2. OverviewofFMIs........................................................................................................................7
2.1. TypesofFMIs......................................................................................................................7
2.2. PrinciplesthatapplytoFMIs.............................................................................................10
3. LandscapeofFMIsinMexico....................................................................................................12
3.1. Paymentsystems...............................................................................................................12
3.2. Centralsecuritiesdepositoriesandsecuritiessettlementsystems..................................13
3.3. Centralcounterparties......................................................................................................14
3.4. Traderepositories.............................................................................................................14
3.5. Crossborderpaymentsystemsandforeigncurrencypaymentsystems.........................14
4. BancodeMxicoanditsrelationshipwithFMIs......................................................................16
4.1. ThecentralbanksmultiplerolesinFMIs.........................................................................16
4.2. BancodeMxicospoliciesandobjectivesconcerningFMIs............................................17
4.3. Intradayliquidityprovision...............................................................................................19
4.4. Supervision........................................................................................................................20
5. SystemicallyimportantFMIsinMexico....................................................................................22
5.1. SPEI....................................................................................................................................22
5.2. SIAC...................................................................................................................................27
5.3. DALI...................................................................................................................................31
5.4. CCV....................................................................................................................................35
5.5 Asigna................................................................................................................................40
5.6. BancodeMxicosDerivativesTradeRepository.............................................................45
6. RetailpaymentinfrastructuresinMexico.................................................................................48
6.1. NationalElectronicClearinghouse(CCEN)........................................................................48
6.2. Clearinghousesforcardpayments....................................................................................52
6.3. Clearinghousesformobilepayments................................................................................56
6.4. Paymenttechnologies.......................................................................................................59
7. Crossborderandforeigncurrencydenominatedpayments...................................................61
7.1. BancodeMxicospolicyregardingcrossborderandforeigncurrencydenominated
payments.......................................................................................................................................61
7.2. DomesticU.S.dollarinterbankpaymentsystem(SPID)...................................................62
BancodeMxico
7.3. DirectoaMxico...............................................................................................................66
7.4. ContinuousLinkedSettlement..........................................................................................69
7.5. Foreigncorrespondentbanking........................................................................................72
8. Informationtechnologysecurity...............................................................................................73
8.1. Background........................................................................................................................73
8.2. Riskstocybersecurity........................................................................................................73
8.3. BancodeMxicospolicyregardingcybersecurity...........................................................74
9. Finalconsiderations..................................................................................................................74
Statisticalappendix...........................................................................................................................75
Annex................................................................................................................................................79
Listofacronyms................................................................................................................................80
BancodeMxico
1. Introduction
In order to make better use of a societys resources, payment mechanisms that allow its
memberstocompletefinancialtransactionsinasimple,safe,inexpensiveandfastwayshould
beavailable.Consideringthissocialnecessity,theBancodeMxicoLawestablishesastwoof
the central banks purposes fostering the proper functioning of payment systems, and
promoting the financial systems sound development, implying that Banco de Mxico must
ensure that financial market infrastructures (FMIs) function properly. FMIs are multilateral
arrangementsamongparticipatinginstitutions,includingtheoperatorsoftheinfrastructures
used for clearing, settlement and registering of payments, securities operations, derivatives
contracts,andotherfinancialtransactions.FMIsusuallyestablishasetofcommonrulesand
procedures, a technological infrastructure, and a suitable and specialized risk management
framework.FMIsarecomposedofpaymentsystems,centralsecuritiesdepositories,securities
settlementsystems,centralcounterparties,andtraderegisters.

This document describes the Mexican FMIs, their interrelationships and the type of
transactionstheycarryout.Additionally,thedifferentrolesofthecentralbankwithrespectto
FMIs are described, and the objectives of Banco de Mxico for each FMI are detailed. This
informationallowsauthorities,participants,andthegeneralpublictobecomefamiliarwiththe
structure of the systems used to process financial transactions, thereby contributing to the
properfunctioningoffinancialsystemsandtheeconomyingeneral.

Inordertocomplywithitsmandate,BancodeMxicoadherestoanoverallpolicyguidingits
functionsasregulator,supervisor,user,andoperatorofFMIs.Thesefunctionsinvolveagreat
numberanddiversityofactionsduetothevarietyofFMIsandtheirparticipants.Asaregulator,
the central bank implements rules that apply to FMIs and their participants, analyzes new
technologies that could be used to improve the efficiency and safety of FMIs, and analyzes
statisticalinformationconcerningthetransactionsexecutedinFMIsinordertodetectrisksand
identifypotentialimprovements.Theseactivitiesinvolvecoordinationwithotherauthorities,
mainly for those cases in which the infrastructure is regulated in conjunction with several
authorities. As a supervisor, Banco de Mxico ascertains whether or not FMIs and their
participants comply with established rules. Finally, Banco de Mxico performs the role of
operatorofthemostimportantpaymentsysteminthecountry,SPEI.

Economic activity depends on the proper operation of FMIs, both for processing financial
system transactions and for operations carried out by individuals. This document aims to
describeBancodeMxicospolicyaswellasitsregulatoryandsupervisoryfunctionstoachieve
properlyfunctioningFMIs.Inaddition,bypublishingthisdocument,BancodeMxicocomplies
withitsobligationsof:
Accountability,bydescribingthewayBancodeMxicotriestoachievetheaimoffostering
theproperfunctioningofpaymentsystems
Publicdisclosureofpolicies,inordertoincreasetrustinthepaymentsystems
Improved transparency with regard to regulated entities, in order to facilitate the risk
management of FMIs and their participants, and to help them comply with regulation
comprehensively.
BancodeMxico
1.1. BancodeMxicosgeneralobjectiveswithregardtoFMIs
Article2oftheBancodeMxicoLawestablishesthatthecentralbank'spurposeistoprovide
thecountry'seconomywithdomesticcurrency,inthepursuitofthestabilityofthepurchasing
powerofthatcurrency.Additionally,thecentralbankhasthepurposeofpromotingthesound
development of the financial system and fostering the proper functioning of the payment
systems.

Accordingly, the proper functioning of FMIs is present in several of Banco de Mxicos key
responsibilities.MonetarypolicyisinstrumentedbymeansofsomeofthemostimportantFMIs
inthecountry,namelySPEI,SIACandDALI;theissuanceofregulationandsupervisoryactivities
withregardtoFMIscontributestothedevelopmentoffinancialstability;regulatingtheuseof
electronic payment systems promotes their efficiency and competition; and finally, the
disclosureoftimelyandrelevantinformationonFMIsprovidescertaintyandtransparencyto
financialinstitutionsandthegeneralpublic.

1.2. Contentandstructureofthedocument

This document defines Banco de Mxicos objectives, policies and functions with respect to
FMIs,andprovidesdescriptionsofthemainFMIsthatoperateinMxico.Thisdocumentaims
tofacilitateadeeperknowledgeoftheinteractionbetweenthecentralbankandtheFMIs.
Thus,thedocumentisnotaperiodicreportontheMexicanFMIsuptoaspecificdate,norisit
areportonBancodeMxicosparticularactionsduringagiventimeperiod.

Therestofthedocumentisorganizedasfollows:OverviewofFMIscontainsamorecomplete
definition of the different types of FMIs. Additionally, it includes an introduction to the
Principles for Financial Market Infrastructures (PFMIs), which are highlevel standard
recommendationsforthepropermanagementofriskinherentinFMIs.

LandscapeofFMIsinMexicopresentsageneraldescriptionofMexicanFMIs,includingtheir
interrelationships.

BancodeMxicoanditsrelationshipwithFMIscontainsadescriptionofthedifferentrolesthe
centralbankplaysinrelationtoFMIs.Italsoincludesexplanationsoftheobjectivesandpolicy
foreachFMI.Additionally,thissectiondescribesBancodeMxicospolicyforintradayliquidity
provision.Thisintradayliquidityprovisionisafacilitythatallowsparticipantstomaintainthe
resources needed to pay the liabilities they incur in FMIs. Finally, the section includes the
supervisoryobjectivesandtaskscarriedoutbyBancodeMxicoaimedatbothparticipants
andinfrastructures.

SystemicallyimportantFMIsarethosethat,intheeventofagravedesignoroperationalfailure,
canaffectthestabilityofthefinancialsysteminoneormorejurisdictionsand,consequently,
their economic activity. Systemically important financial market infrastructures in Mexico
containsasubsectionforeachofMexicossystemicallyimportantFMIs:SPEI,DALI,CCV,Asigna,
and SIAC. Each subsection includes the description of the infrastructure, the relevant
regulation,theapplicablePFMIs,theroleplayedbyBancodeMxico,andthetoolsusedto
regulateandsupervisetheinfrastructure.

BancodeMxico
Similarly, Retail payment infrastructures in Mexico contains a description of these

infrastructures, their regulation, the best practices that apply to them, the roles played by
BancodeMxico,andthetoolsusedtoregulateandsupervisethem.Additionally,asubsection
hasbeenincludedfornewpaymenttechnologies.

Crossborder and foreigncurrencydenominated payments deals with three infrastructures:
DirectoaMxico,thesystemthatprocessescrossborderpaymentsfromtheUnitedStatesto
Mexico; the CLS, which settles foreign exchange transactions; and the SPID, which started
operationsinApril2016.Finally,thesectionincludesasubsectionforBancodeMxicospolicy
onforeigncorrespondentservices.

Lastly, Information technology security describes the risks related to the safe and efficient
operationofFMIs,aswellastheimportanceofmitigating,preventing,and,whennecessary,
rapidlyrecoveringfromaneventinwhichaninformationsecurityriskmaterializes.Lastly,it
describesBancodeMxicospolicyonthisissue.
2. OverviewofFMIs
This section provides definitions and a classification of financial market infrastructures.
Additionally,itdescribesasetofrecommendationsthatguidetheregulationandsupervisionof
some of the FMIs. These recommendations, known as the Principles for Financial Market
Infrastructures1(PFMIs),areasetofhighlevelguidelinesforthepropermanagementofrisks
inherentinFMIs.

According to the Committee for Payments and Market Infrastructures (CPMI)2 definition, a
financial market infrastructure is a multilateral system among participating institutions,
includingtheoperatorofthesystem,usedforthepurposesofclearing,settling,orrecording
payments,securities,derivatives,orotherfinancialtransactions.

2.1. TypesofFMIs
FMIs are classified as payment systems, central securities depositories, securities settlement
systems,centralcounterparties,andtraderepositories.

2.1.1. PaymentSystems
Apaymentsystemisasetofinstruments,proceduresandrulesfortransferringfundsamong
two or more participants. The system includes the participants and the operator. Payment
systemstypicallybasetheiroperationonagreementsamongtwoormoreparticipantsandthe
1
The Principles were published by the Bank for International Settlements Committee on Payment and
Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO), in April
2012.
2
The CPMI is one of the permanent committees of the Bank for International Settlements (BIS). This
committeewasestablishedin1980astheCommitteeofPaymentandSettlementSystems.Themainobjective
ofCPMIistopromotethesafetyandefficiencyofFMIs,andtoserveasaforumforcooperationamongcentral
banksinoversight,policyandoperationalmatters.TheCPMIissuesstandardsofglobalscopeintheseareas.
BancodeMxicoisoneofthe25CPMImemberinstitutions.
BancodeMxico
operator of the mechanism; funds are transferred through an agreed operational

infrastructure.Paymentsystemscanbecategorized,accordingtotheirsettlementstructure,
intothosethatperformaclearingprocessbeforethesettlementandthosethatperformgross
settlement.

Inordertooperateaclearingsystem,anautomatedclearinghouseisneeded.Anautomated
clearinghouseisacentralentityoracentralizedprocessingmechanismbymeansofwhich
financialinstitutionsagreetoprocesspaymentsorotherfinancialliabilitiesfortheirsettlement
onanetbasis.Thisresultsinbenefitsfromtheperspectiveofmanagingtheliquidityofthe
assetsthatthesystemoperates;thatis,itdiminishestheamountofliquidityneededforagiven
operational level. Some automated clearinghouses take on important risk management
responsibilitiesforthewholesystem,since,aspartoftheiroperation,financialliabilitiesarise
thatarenotimmediatelypaid.Atypicalexampleofanautomatedclearinghouseisthesystem
forinterbankcheckprocessing.

Anothercommontypeofpaymentsystemisarealtimegrosssettlement(RTGS)system.These
systems settle payments in a continuous way, one by one, in the order they are received,
assumingthatthepayerpossessestherequiredfunds.Duetothecharacteristicsofthisform
ofsettlement,participantsliquidityneedsaregenerallyhighcomparedtothoseinautomated
clearinghouses. However, one of the advantages of these systems is that credit risk is
eliminated,since,duringthesettlementprocess,thepayeraccountisdebitedandthereceiver
accountiscreditedsimultaneously.Nowadays,alargenumberofcountrieshaveatleastone
systemofthistype,usuallyoperatedbythecentralbank.

From the perspective of final users, who are the clients of the direct participants, payment
systemscanbecategorizedintothosethatprocesstransactionsinrealtime,andthosethat
processtransactionsinadeferredway.Bothnettingsettlementsystemsandgrosssettlement
systemscanoperateunderanyofthesestructures.3Thedecisionofwhichstructureshouldbe
useddependsonbusinessmodelsandriskmanagementplans.InanRTGSsystem,finalusers
typicallyreceiverealtimeservices,sincethisdoesnotposeanyrisk;incontrast,providingreal
timeservicesunderadeferredsettlementsystemmakesrisk managementmoredifficultin
caseofparticipantdefault.Thisriskcanbeattenuatedbyexecutingtheclearingprocessvery
frequently and by implementing control procedures for eliminating credit risk among
participants.

Itisimportanttonotethatpaymentsystemshavetraditionallybeenclassifiedbythevalueof
thepaymentstheyprocess;thatis,aslargevaluepaymentsystemsandretailpaymentsystems.
Largevalue payment systems describe those in charge of settling transactions produced by
financial institutions and firms which, given their importance to the financial system, are
consideredurgent;thus,exclusiveRTGSsystemswereusedforthispurposeinordertoavoid
risks.Retailpaymentsystemsrefertothosededicatedtoprocessingpaymentscarriedoutby
thegeneralpublic,usuallybymeansofadeferredsettlementsystem,sincethosepayments
arenotconsideredurgent.Thisclassificationofpaymentsystemswasimportantinthepast,
buttechnologicaladvanceshaveallowedoperatingriskstobecontrolledinjustonesystem
processingbothlargevalueandretailpayments.SPEI,theRTGSsystemoperatedbyBancode
Mxico,benefitsthegeneralpublicthroughthesecurityandefficiencyofrealtimeprocessing.
3
Clearingsystemscanhaveveryfrequentclearingandsettlementcyclesthatoccurnearlyinrealtime.
BancodeMxico

2.1.2. Securitiessettlementsystems
A securities settlement system (SSS) is a system that allows the transfer, clearing and
settlementoftransactionswithsecuritiesbetweenparticipantsaccounts,basedonasetof
predetermined multilateral rules. In addition, SSSs usually perform other functions, such as
confirmationoftradeinstructionsandconfirmationofsettlementinstructions.

2.1.3. Centralsecuritiesdepositories
Acentralsecuritiesdepository(CSD)isasystemthatcreatesandmanagessecuritiesaccounts
andprovidescentralizedsafekeepingservicesandotherservicesrelatedtosecurities,suchas
managing securities amortizations. CSDs help to guarantee the integrity of the securities
issued;thatis,theyguaranteethatsecuritiesarenotcreatedimproperlyordestroyed,norare
theirdetailsmodifiedbyaccidentorforthepurposesoffraud.Inmanycountries,theentities
thatoperateaCSDalsooperateanSSS.

BothSSSsandCSDsusuallyoperatethroughoneormorecentralentities.However,itispossible
forthemtooperatebymeansofdecentralizedstructuresthroughnewtechnologiesinwhich
both registry and settlement can be made among the participants without the use of any
centralstructure.4

2.1.4. Centralcounterparties
Acentralcounterparty(CCP)isanentitythatstandsbetweenthecounterpartiesofcontracts
tradedinafinancialmarket,andsobecomesthebuyerforeachsellerandthesellerforeach
buyer.Inthisway,thecounterpartyrisksinthatmarketareconcentratedinasingleentity,
simplifyingriskanalysisandallowingforbettermanagementfromasystemicperspective,since
by concentrating the risks, some risk factors may compensate for others. Since the main
functionofaCCPistomanagecounterpartyrisk,thisentityshouldhavesoundstructuresto
measure,limit,oversee,andcontrolthistypeofrisk,aswellasanyotherrisksthatmayarise
duringoperation.AnydisruptioncouldbeextendedtothewholemarkettheCCPserves,and
potentiallytotheentirefinancialsystem.Inthisway,CCPscanreducerisks,butattheexpense
ofconcentratingtheminsystemicallyimportantentities;thatiswhyitisessentialtohavestrict
riskcontrolsinplace.

2.1.5. Traderepositories
Atraderepository(TR)isanentitythatmaintainsacentralelectronicregistryoftradedata.A
TRcanhelptoimprovetransparencywithrespecttotransactionalinformationfortherelevant
authorities and the general public as well. In this way, TRs promote financial stability and
contributetodetectingandavertingrisksinthemarkettheyserve.TRshavebecomemore
significantintheOvertheCounter(OTC)derivativesmarket.

4
Onesuchrecenttechnologyisthedistributedledger,whichconsistsofashareddatabasestoredinvarious
locations.Eachlocationmayhaveitsownidenticalcopyoftheledger,andthechangesmadetoitarereflected
inallcopiesoftheledgerswithinmomentsofbeingexecuted.Forexample,assetscanbefinancialorlegalin
nature.Permissionsregardingtheassetsontheledgerarebasedoncryptographickeysandsignatures.
BancodeMxico
2.2. PrinciplesthatapplytoFMIs
ThePrinciplesforFinancialMarketInfrastructures(PFMIs)areasetof24recommendations
issuedjointlyin2012bytheCPMIandtheInternationalOrganizationofSecuritiesCommissions
(IOSCO).5 These highlevel recommendations for FMIs aim to improve their security and
efficiency,promoteadequateriskmanagement,limitsystemicrisk,andpromotetransparency
andfinancialstability.SomeoftheprinciplesareapplicabletoalltypesofFMIs,whereasother
principlesapplyonlytospecifictypes.6

BancodeMxico,asapermanentmemberoftheCPMI,participatedinthecreationofthese
principlesandconsidersthemanimportantbasisfortheachievementofitsobjectives;thus,
thiscentralbankhassoughttoreflecttheminregulationsitissuesandinitspoliciesonFMIs.

Whatfollowsarebriefdescriptionsofeachprinciple,groupedbythetopictheycover(CPMI
IOSCO,PrinciplesforFinancialMarketInfrastructures,April2012).

2.2.1. Generalorganization
Principle 1, legal basis: An FMI should have a wellfounded, clear, transparent, and
enforceablelegalbasisforeachmaterialaspectofitsactivitiesinallrelevantjurisdictions.
Principle2,governance:AnFMIshouldhavegovernancearrangementsthatareclearand
transparent,promotethesafetyandefficiencyoftheFMI,andsupportthestabilityofthe
broaderfinancialsystem.
Principle3,frameworkforthecomprehensivemanagementofrisks:AnFMIshouldhavea
soundriskmanagementframeworkforcomprehensivelymanaginglegal,credit,liquidity,
operational,andotherrisks.

2.2.2. Creditandliquidityriskmanagement
Principle4,creditrisk:AnFMIshouldeffectivelymeasure,monitor,andmanageitscredit
exposures to participants and those arising from its payment, clearing, and settlement
processes.
Principle5,collateral:AnFMIthatrequirescollateraltomanageitsoritsparticipantscredit
exposureshouldacceptcollateralwithlowcredit,liquidity,andmarketrisks.
Principle 6, margin: A CCP should cover its credit exposures to its participants for all
productsthroughaneffectivemarginsystemthatisriskbasedandregularlyreviewed.This
principleappliesonlytoCCPs.
Principle 7, liquidity risk: An FMI should effectively measure, monitor, and manage its
liquidityrisk.

2.2.3. Settlement
Principle8,settlementfinality:AnFMIshouldprovideclearandcertainfinalsettlement,at
aminimumbytheendofthevaluedate.
Principle9,moneysettlements:AnFMIshouldconductitsmoneysettlementsincentral
bankmoneywherepracticalandavailable.Ifcentralbankmoneyisnotused,anFMIshould
5
TheIOSCOisanorganizationofsecuritiesandfuturesmarketsregulatorybodies.Itsmemberscoverover
100countries,anditisrecognizedastheglobalstandardsetterforthesecuritiessector.MexicosNational
BankingandSecuritiesCommission(CNBV),isamemberoftheIOSCO.
6
ThelistofPrinciplesthatapplytoeachtypeofFMIcanbefoundintheAnnex.
BancodeMxico
minimizeandstrictlycontrolthecreditandliquidityriskarisingfromtheuseofcommercial
bankmoney.
Principle10,physicaldeliveries:AnFMIshouldclearlystateitsobligationswithrespectto
the delivery of physical instruments or commodities and should identify, monitor, and
managetherisksassociatedwithsuchphysicaldeliveries.
2.2.4. Centralsecuritiesdepositoriesandexchangeofvaluesettlementsystems
Principle 11: central securities depositories: A CSD should have appropriate rules and
procedurestohelpensuretheintegrityofsecuritiesissuesandminimizeandmanagethe
risks associated with the safekeeping and transfer of securities. A CSD should maintain
securitiesinanimmobilizedordematerializedformfortheirtransferbybookentry.
Principle 12: exchangeofvalue settlement systems: If an FMI settles transactions that
involve the settlement of two linked obligations (for example, securities or foreign
exchange transactions), it should eliminate principal risk by conditioning the final
settlement of one obligation upon the final settlement of the other, for example by
applyingadeliveryversuspaymentmechanisminsecuritiestransactions.
2.2.5. Defaultmanagement
Principle13,participantdefaultrulesandprocedures:AnFMIshouldhaveeffectiveand
clearly defined rules and procedures to manage a participant default. These rules and
proceduresshouldbedesignedtoensurethattheFMIcantaketimelyactiontocontain
lossesandliquiditypressuresandcontinuetomeetitsobligations.
Principle 14, segregation and portability: A CCP should have rules and procedures that
enable the segregation and portability of positions of a participants customers and the
collateralprovidedtotheCCPwithrespecttothosepositions.

2.2.6. Generalbusinessandoperationalriskmanagement
Principle15,generalbusinessrisk:AnFMIshouldidentify,monitor,andmanageitsgeneral
business risk and hold sufficient liquid net assets funded by equity to cover potential
generalbusinesslossessothatitcancontinueoperationsandservicesasagoingconcern
ifthoselossesmaterialize.
Principle 16, custody and investment risks: An FMI should safeguard its own and its
participantsassetsandminimizetheriskoflossonanddelayinaccesstotheseassets.An
FMIsinvestmentsshouldbeininstrumentswithminimalcredit,market,andliquidityrisks.
Principle17,operationalrisk:AnFMIshouldidentifytheplausiblesourcesofoperational
risk,bothinternalandexternal,andmitigatetheirimpactthroughtheuseofappropriate
systems,policies,procedures,andcontrols.Systemsshouldbedesignedtoensureahigh
degreeofsecurityandoperationalreliabilityandshouldhaveadequate,scalablecapacity.
Business continuity management should aim for timely recovery of operations and
fulfilment of the FMIs obligations, including in the event of a widescale or major
disruption.
2.2.7. Access
Principle 18, access and participation requirements: An FMI should have objective, risk
based,andpubliclydisclosedcriteriaforparticipation,whichpermitfairandopenaccess.
Principle 19, tiered participation arrangements: An FMI should identify, monitor, and
managethematerialriskstotheFMIarisingfromtieredparticipationarrangements.
BancodeMxico
Principle20,FMIlinks:AnFMIthatestablishesalinkwithoneormoreFMIsshouldidentify,
monitor,andmanagelinkrelatedrisks.
2.2.8. Efficiencyandeffectiveness
Principle 21, efficiency and effectiveness: An FMI should be efficient and effective in
meetingtherequirementsofitsparticipantsandthemarketsitserves.
Principle 22, communication procedures and standards: An FMI should use, or at a
minimum accommodate, relevant internationally accepted communication procedures
andstandardsinordertofacilitateefficientpayment,clearing,settlement,andrecording.

2.2.9. Transparency
Principle23,disclosureofrules,keyprocedures,andmarketdata:AnFMIshouldhaveclear
and comprehensive rules and procedures and should provide sufficient information to
enableparticipantstohaveanaccurateunderstandingoftherisks,fees,andothermaterial
coststheyincurbyparticipatingintheFMI.Allrelevantrulesandkeyproceduresshould
bepubliclydisclosed.
Principle24:disclosureofmarketdatabytraderepositories:ATRshouldprovidetimely
andaccuratedatatorelevantauthoritiesandthepublicinlinewiththeirrespectiveneeds.
3. LandscapeofFMIsinMexico
Mexicopossessesanextensiveandwelldevelopedfinancialsystem,inwhichmultipleFMIsof
thedifferenttypesdescribedintheprevioussectionoperate.Thissectiondescribesthegeneral
characteristicsofthemainFMIsinMexicoasofJanuary2016.

3.1. Paymentsystems
3.1.1. Interbankelectronicpaymentsystem(SPEI)
SPEIismanagedbyBancodeMxico,anditsparticipantsconsistmainlyofbanks,nonbank
financialinstitutionsandBancodeMxico.7

SPEI is the countrys main payment system. It processes both the highvalue payments of
financial institutions and treasuries of large companies, as well the retail payments of the
general public. SPEI implements the vast majority of the interbank funds transfers of the
country,bothinnumberandvalue.

SPEIhasextensiveoperatinghours,allowingittohandlepaymentrequirementsfromfinancial
marketparticipantsaswellasthoseofthegeneralpublic.Forretailpayments,SPEIwillbegin
operating24hoursaday,7daysaweek,inNovember2016.SPEIsettlespaymentsveryquickly,
nearlyinrealtime,usingmoneymaintainedbyparticipantsatthecentralbank.

7
TheFederalTreasurysendspaymentorderstoSPEI,throughBancodeMxico,topaypensionsandsalaries,
andtopayprovidersofservicestogovernmentagencies.
BancodeMxico
3.1.2. AccountHoldersServiceSystem(SIAC)
SIACisthesystemusedbyBancodeMxicotomanagetheaccountsthatbanks,otherfinancial
institutions,andpublicsectorentitiesmaintainatthecentralbank.AlthoughSIACwasinitially
usedasapaymentsystem,nowadaysthisfunctionhasbeenalmostentirelytransferredtoSPEI,
which is better suited to this task. The main function of SIAC in relation to FMIs is liquidity
provisiontobanks,therebyfacilitatingtheprocessingoftransactionsinthefinancialsystem.
The liquidity Banco de Mxico provides through SIAC, both intraday and longer term, is
completelyguaranteedwithhighqualityassetsfromdebtorbanks(seeSection4c).

Atanytimeduringoperatinghours,participantscantransfertheliquiditytheyobtainfromSIAC
toSPEI,ortotheaccountthattheSSS(DALI)maintainsinSPEI.

3.1.3. NationalElectronicClearinghouse(CCEN)
TheCCEN,theacronymbywhichtheNationalElectronicClearinghouseisknowninSpanish,is
a clearinghouse owned and operated by Cecoban, a private company held by a group of
commercialbanks.TheCCENclearsinterbankchecks,directdebits,deferredcredittransfers,
andinterbankcashpurchases.AnybankinMexicocanbeaparticipantintheCCEN,aslongas
ithasbeenpreviouslycertifiedbyCecoban.ThefinalCCENsettlementismadeintheaccounts
thebankshaveinSIAC.

3.1.4. Interbankcardtransactionssystem(processors)
Processors of interbank card transactions are responsible for handling card payment
transactions.Inthissense,interbanktransactionsarethoseinwhichtheissuingbankofthe
cardisnotthesamebankthatmanagesthepointofsaleterminal(POS).Interbanktransactions
areprocessed,cleared,andsettledbyprocessorsProsaandEGlobal,privateentitieswhose
ownersarecommercialbanks.

Settlement of the interbank card transaction processors takes place in commercial banks
accounts.

3.1.5. Paymentsystemsforinterbanktransfersbymeansofmobiledevices
(clearinghouses)
Clearinghouses for interbank payments made through mobile devices are responsible for
processinginterbanktransactionsrequestedthroughmobiledevices.InDecember2013,the
regulationissuedbyBancodeMxicoforauthorizingclearinghousesforinterbankpayments
madethroughmobiledevicescameintoeffect.Thisregulationestablishesrulesconcerningthe
organization, functioning and operation these clearinghouses must observe. Currently, one
suchauthorizedentityisTransfer.

3.2. Centralsecuritiesdepositoriesandsecuritiessettlementsystems
SecuritiesDeposit,AdministrationandSettlementSystem(DALI)
DALIisasecuritiessettlementsystemrunbythecompanyS.D.Indeval,thecentralsecurities
depository. DALIs main functions are the custody of equity and debt instruments issued in
Mexico, and settlement of securities transactions. Among its participants are pension fund
administrators, banks, brokerdealers, insurance companies, surety companies, Banco de
BancodeMxico
Mxico,andforeignbanks.ParticipantsinDALIcanprocessoperationswiththeirownsecurities
aswellastheirclients.

Participants can keep the liquidity they need to operate in DALI in SPEI. Additionally,
participants can transfer funds from accounts in DALI to those in SPEI, and subsequently
requestaliquiditytransferfromSPEIbacktoSIAC.

3.3. Centralcounterparties
3.3.1. CentralSecuritiesCounterparty(CCV)
TheCCV,theacronymbywhichthecentralsecuritiescounterpartyisknowninSpanish,isthe
entityinchargeofclearingandsettlingallequitiesoperationstradedontheMexicanStock
Exchange (BMV). As a CCP, its main function is to position itself between the original
counterpartiesofanytransactiontobecomethebuyerforeverysellerandthesellerforevery
buyer.TheCCVispartoftheBMVGroup.CCVdirectparticipants(settlementagents)8include
banksandbrokerdealers,whichconductoperationsintheirownnameoronbehalfoftheir
clients.

3.3.2. Asigna
AsignaisthecentralcounterpartyforoperationstradedontheMexicanDerivativesExchange
(MexDer),aswellasforoperationsitacceptsviaelectronicplatformsforderivativestrading.
AsignaispartoftheBMVGroup.AswiththeCCV,Asignasmainfunctionistostandbetween
theoriginalcounterpartiesoftransactionstobecomethebuyerforeverysellerandtheseller
foreverybuyerofderivativescontracts.

3.4. Traderepositories
3.4.1. BancodeMxicosDerivativesTradeRepository
Bancode Mxicomaintainsarepositoryofinformationofderivativetransactionstradedby
Mexican counterparties at brokerdealers and banks. The purpose of this repository is to
maintaintimelyandaccurateinformationonthoseoperationstradedinthederivativesmarket.
Thisrepositoryprovidesinformationtootherfinancialauthoritiesandthegeneralpublic.
3.5. Crossborderpaymentsystemsandforeigncurrencypaymentsystems
3.5.1. DirectoaMxico
In2004,BancodeMxicoandtheUnitedStatesFederalReservesetupamechanismtotransfer
moneyfromtheUnitedStatestoMexico.Bymeansofthissystem,anybankorcreditunionin
theUnitedStatesparticipatinginDirectoaMxicocansendpaymentstoanyindividualwitha
bankaccountinMexico.

8
SettlementagentsareCCVstockholdersthat,inadditiontocarryingouttheirownoperations,cansetup
arrangementswithnonsettlementagentstobecomeresponsiblefortheoperationscarriedoutbythelatter,
uptoalimitedamount.Creditsanddebitsresultingfromthesettlementprocess,bothincashandsecurities,
takeplaceinthesettlementagentsaccounts.
BancodeMxico
Settlement in dollars takes place in a payment system in the United States (FedACH), while
settlementinpesosoccursinSPEI.TheforeignexchangeoperationtakesplaceataMexican
development bank, using contracts that minimize foreignexchange risk under conditions of
marketvolatility.

3.5.2. ContinuousLinkedSettlementsystem(CLS)
TheCLSisaninternationalforeignexchangesettlementsystem.ItisoperatedbytheCLSBank,
whichisbasedinNewYork.CLSsettlestransactionsin17ofthemostimportantcurrencies
tradingonforeignexchangemarkets.

Thesettlementofeachtransactionscurrencylegtakesplaceinaccountsheldintherespective
currencysissuingcentralbank,bymeansofthecorrespondingpaymentsystem.Inthisway,
settlementofpesosoccursinSPEI.

3.5.3. U.S.DollarInterbankPaymentSystem(SPID)
TheSPIDisapaymentsystemwhichstartedoperatinginApril2016.Thissystemisoperatedby
BancodeMxicoandallowsbanksinMexicotosendelectronictransfersbetweenU.S.dollar
accountswithinMexicowhichthesebanksmaintainonbehalfoffirms.

ParticipationintheSPIDisexclusivetobanksinMexico.TheSPIDhasstringentcontrolsfor
antimoneylaunderingandcombatingthefinancingofterrorism(AML/CFT).Itoperatesfrom
8:00a.m.to2:00p.m.everybusinessdayinMexico.IntheSPID,paymentsaresettledusing
U.S.dollarsthathavebeendepositedincentralbankaccountsbywayofcorrespondentbanks
intheUnitedStates.

ThefollowingchartshowsthemainFMIsinMexicoandtheirinterrelationships.

BancodeMxico
4. BancodeMxicoanditsrelationshipwithFMIs
ThissectiondescribesBancodeMxicosvariousroleswithrespecttoFMIs,themainpolicy
issuesfortheFMIs,andthecentralbanksobjectivesforFMIs.Italsodescribestheprovision
ofintradayliquidityandthecentralbankssupervisionofFMIsandtheirparticipants.

4.1. ThecentralbanksmultiplerolesinFMIs
BancodeMexicoperformsthefollowingmainroleswithrespecttoFMIs:regulator,supervisor,
operator,anduser.
BancodeMxicoasaregulator
AllthenationalFMIsareregulatedbythecentralbank.Insomecases,theregulatoryrole
lies entirely with Banco de Mexico, whereas in others, the central bank shares its
responsibilitiesasaregulatorwithanotherauthority.Asaregulator,thecentralbankboth
proposesandissuesregulation.Additionally,itauthorizestheinternalrulesgoverningthe
operation of FMIs and their participants. The details concerning Banco de Mexicos
regulatoryactivitiesaredescribedinthefollowingsections.

BancodeMxicoasasupervisor
BancodeMxicotakesmeasurestomonitorcompliancewithregulationrelatedtoFMIs,
bothbyoperatorsandparticipatingfinancialinstitutions.ThedetailsconcerningBancode
Mexicossupervisoryactivitiesarepresentedinthefollowingsections.
BancodeMxico

BancodeMxicoasanoperator
Banco de Mxico is the administrator and operator of SPEI and SIAC. The central bank
provideselectronicfundstransferservicesthroughSPEI.Additionally,itprovidesliquidity
to banks and access to central bank accounts for financial institutions and some public
entitiesthroughSIAC.Furthermore,thecentralbankandtheUnitedStatesFederalReserve
jointlymanageandoperatethesystemthatallowsuserstosendmoneytoMexico,namely,
DirectoaMxico.Lastly,BancodeMxicooperatestheDerivativesTradeRepository.

BancodeMxicoasauser
ThecentralbankimplementsmonetarypolicythroughthenationalFMIs.Theresultsofthe
openmarketoperationsthroughwhichliquidityisprovidedareformalizedascollateralized
loans;theresourcesarecreditedtobanksthroughSIAC,oralternatively,reposaresettled
in DALI. Liquidity withdrawal operations are formalized as deposits with resources from
banksSIACaccounts.

BancodeMxico,initsroleasthefinancialagentofthefederalgovernment,managesand
placesfederalgovernmentbondsindomesticcurrency.Additionally,itactsasaplacement
agentfortheInstitutefortheProtectionofBankSavings(knownbyitsacronyminSpanish
astheIPAB).Toconducttheseactivities,BancodeMxicousestheDALIsystem.Inthesame
role,thecentralbanksendstheFederalTreasuryspaymentsthroughSPEI.Furthermore,
thecentralbanksendsitsownpaymentsthroughSPEItoemployeesandsuppliers.

Additionally,BancodeMxicoisinvolvedininternationalcommitteesconcerningFMIsandit
isaboardmemberofthenationalCSDandSSS.Inthefirstcase,participationallowsthecentral
banktobeabreastofthelatestissuesandtohaveavoiceinanydecisionstobemade,seeking
themostbeneficialoutcomeforMexico.Themaingroupinwhichthecentralbankparticipates
asamemberistheCommitteeonPaymentsandMarketInfrastructures(CPMI)oftheBankfor
International Settlements (BIS). Banco de Mxico is a shareholder and board member of
Indeval,thecompanythatmanagesandoperatesthenationalSSS,DALI.Moreover,thecentral
bankhastherighttoavetoonCecobansboardofdirectors.

4.2. BancodeMxicospoliciesandobjectivesconcerningFMIs
4.2.1. PolicieswithrespecttosystemicallyimportantFMIs
SystemicallyimportantFMIsarethosethatmayaffectthestabilityofthefinancialsystemin
the event of unexpected circumstances. These FMIs must comply with the Principles for
FinancialMarketInfrastructurespublishedbytheCPSSIOSCOin2012.Thecentralbankspolicy
for determining the systemically important FMIs considers the value and nature of the
operationstheyprocess.TheseFMIsarethesecuritiessettlementsystem(DALI),thecentral
counterparty(CCVandAsigna),theDerivativesTradeRepositoryoperatedbyBancodeMxico,
andSPEI.Inparticular,theCCVisconsideredasystemicallyimportantFMIbecauseitistheonly
MexicanCCPwhichoperatesinthestockmarket.Similarly,AsignaistheonlyMexicanCCPthat
operatesinthederivativesmarket,andisthusconsideredsystemicallyimportant.

4.2.2. Policywithrespecttoretailpaymentsysteminfrastructures
Retailpaymentinfrastructuresdonothavethepotentialtodestabilizethefinancialsystemin
the face of operational problems because the settled amounts are relatively low. However,
BancodeMxico
becauseofthelargevolumeofpaymentsprocessedandtheirextensiveuseinretailtrading,
theyareimportanttoeconomicactivity.Thecentralbankspolicyonthiskindofinfrastructure
requires adopting best practices in the field, including the PFMI. Additionally, Banco de
Mxicospolicyistoencouragetheseinfrastructurestoseeksynergiesandeconomiesofscale.

4.2.3. BancodeMxicosparticularobjectivesconcerningFMIs
InaccordancewiththeprovisionsofArticle2oftheBancodeMxicoLaw,thebanksgeneral
aimwithrespecttopaymentsystemsistofostertheirproperoperationandpromotethesound
developmentofthefinancialsystemasawhole.

BancodeMxicoconsidersFMIstobeamongtheentitiesitshouldmonitorinlinewithitslegal
powers and considering the trends that led the Committee on Payment and Settlement
Systems(CPSS)tochangeitsnametotheCommitteeonPaymentsandMarketInfrastructures
(CPMI). The proper functioning of FMIs is a necessary but insufficient condition to achieve
stabilityforthefinancialsystemasawhole.

TheBancodeMxicosobjectivewithrespecttoFMIsisforthesetobesecureandefficientin
theaimofstrengtheningandpromotingfaircompetition,aswellasfosteringinnovationand
thedevelopmentofbetterservicesintheirrespectivemarketindustries,therebycontributing
to the public good through increased financial stability, economic efficiency and financial
inclusion.

BancodeMxicoalsohasthegoalofstrengtheningtheFMIsbusinesscontinuityframework
toensureahighlevelofavailabilityandtransparencywithparticipantsandthegeneralpublic
inallmattersrelatedtotheirrules,aswellasrisksandbenefitsassociatedwiththeiruse.

Additionally,thecentralbankhasparticularobjectivesforeachFMIinthecountry.

SPEI
SPEI has the purpose of settling its participants and participants customers payments in a
timely, efficient, secure and inexpensive way, considering both retail payments and those
associatedwithfinancialmarkets,withthefollowingspecificobjectives:
Thesystemanditsparticipantsshouldprocesspaymentsinrealtime
Thesystemmustnotgeneratecreditorliquidityrisks
The system should offer a high level of service to users and participants, including
businesscontinuityplansandadequateriskmanagement
The system should facilitate the provision of services and information to its clients
regardingsenttransferorders

DALI
Operationsshouldbesettledinatimelymanner
The system should implement a deliveryversuspayment structure, with the aim of
eliminatingtheprincipalrisk
Thesystemshouldnotgeneratecreditorliquidityrisks

BancodeMxico
CCVandAsigna
The central counterparty should centralize clearing and settlement in securities and
derivativefinancialinstrumentsunderacentralcounterpartyframework,inorderto
lessenthedefaultriskoftheobligationsofintermediaries.
Thecentralcounterpartyshouldhaveaclearandsolidriskmanagementframework,
which covers the central counterpartys responsibilities and the participants
responsibilities,andappropriateincentivesshouldbeinplacetomanageandcontain
therisks

BancodeMxicosDerivativesTradeRepository
The repository should register and store information regarding transactions with
derivativefinancialinstruments
Therepositoryshouldproviderelevantinformationonderivativestransactionstothe
authoritiesandthegeneralpublictoreinforcepublicpolicyobjectivesandimprovethe
transparencyofthefinancialmarket

SIAC
ThesystemshouldmanagethecurrentaccountsofdepositorsatBancodeMxico
ThesystemshouldprovideliquiditytobanksforFMIoperations
Thesystemshouldhaveasolidframeworkinordertomanage risksthatarisefrom
providingliquiditytobanks

CCEN
The system should clear and settle checks, deferred electronic transfers and direct
debits
Thesystemshouldhaveasolidcreditandliquidityriskmanagementframework
Thesystemshouldallowtoanybanktoparticipate,anditsservicesshouldbeefficient

Clearinghousesforcardtransactionsandelectronictransfersinitiatedwithamobiledevice
Theclearinghousesshouldprocesscardtransactionsandmobilepaymentsinatimely
manner
The clearinghouses should have a solid clearing and settlement structure for card
transactionsandmobilepayments
Thetermsgoverningparticipationinpaymentprocessingservicesshouldbeequitable
Clearinghousesthatprocessthesametypeoftransactionsshouldbeinteroperable

4.3. Intradayliquidityprovision
TheintradayliquidityprovisionarrangementforFMIstofunctionproperlyisdescribedinthis
section.AtthecloseofoperatinghoursfortheSIAC,DALIandSPEIsystems,thesumofthe
various systems current account balances should be zero. At the open, banks can obtain
intradayliquiditybyeitheroverdrawingtheircurrentaccountatthecentralbankforuptothe
valueofthecollateraltheypledgetothecentralbank,orthroughintradayrepotransactions
withthecentralbank.ThebankscantransferliquiditybetweentheSIAC,DALIandSPEIsystems
BancodeMxico
accordingtotheirneedsatanytimeduringtheoperatingday.Attheclose,theirbalancesin
the SPEI and DALI systems are transferred to SIAC, where banks can take the necessary
measurestoreducetheircurrentaccountbalancesoroverdrafts.

TheoverdraftmechanismallowsbankstooverdrawtheirSIACcurrentaccounts,providedthat
theseoverdraftsareguaranteedbybanksdepositswithBancodeMxico;chiefamongthese
aremonetaryregulationdeposits(DRM,astheyareknowninSpanish).Additionally,deposits
resulting from open market operations and from the process of determining the Interbank
InterestRate(theTIIE,asitisknowninSpanish)canserveascollateral.Theuseofoverdrafts
doesnotgeneratecostsforbanksexceptwhentheoverdraftremainsbeyondtheendofthe
day;inthatcase,aninterestrateoftwicetherepresentativemarketrateisapplied.

ThemechanismofintradayreposinvolvesBancodeMxicosautomaticacceptanceofintraday
repotransactionswithbanks.Intheseoperations,bankssellsecuritiestothecentralbankand
promisetorepurchasethemthesameday.ThesettlementofrepotransactionsoccursinDALI,
wheretheownershipoftheassetsistransferredtoBancodeMxicoand,inreturn,thebanks
receive the resources in their DALI account. Participants then recover their securities with
operationssettledinDALIbeforeclosingtime;banksmusthavethenecessaryliquidityinthe
system in order to do this. Banco de Mxico only accepts securities issued by the federal
government,IPABorbythecentralbankitself,whichhaveverylowcreditandliquidityriskin
thesecondarymarket.9Additionally,inordertomitigatemarketrisk,BankofMxicoappliesa
haircuttothesecuritiespurchaseprice.Thecentralbankdoesnotchargeaninterestrateto
banks for resources obtained through this mechanism, except when the bank does not
repurchasethesecuritythesameday;inthatcase,twicetherepresentativemarketrateapplies
(asisthecasewiththeoverdraftmechanism).BancodeMxicoonlychargesafixedfeeto
recovertheoperatingcostsforeachintradayrepotransaction.

4.4. Supervision
TherearefourstatutesauthorizingthecentralbanktosuperviseFMIs:
i. TheBancodeMxicoLawestablishesasoneofthecentralbankspurposestheaimof
fosteringtheproperfunctioningofthepaymentsystems,anditempowersthebankto
superviseintermediariesandfinancialinstitutionsbasedonregulationsthecentralbank
issues.
ii. The Payment Systems Law authorizes the central bank to monitor the supervisory
systemssubjecttothislaw.
iii. The Securities Market Law empowers the central bank to request information and
authorizechangestotheinternalregulationsofcentralcounterpartiesandsecurities
settlementsystemswithinthescopeofitspowers.
iv. TheTransparencyandRegulationofFinancialServicesLawempowersthecentralbank
tosuperviseclearinghouses.
9
MonetaryRegulationBondsLaresecuritiesissuedbyBancodeMxicoinordertoregulateliquidityinthe
moneymarketandimplementmonetarypolicy.ThesesecuritiesareonlynegotiablewithBancodeMxico
directly,andthereforenosecondarymarketforthemexists.
BancodeMxico
BancodeMxicosupervisesboththeadministratorsofFMIsaswellastheirparticipants.This
isanessentialtoolthecentralbankusestoachieveitsobjectives;supervisionallowsthebank
both to verify that the behavior set out in provisions and best practices is followed, and to
evaluatetheeffectivenessofregulationinordertoproposeadjustmentswhennecessary.
In the event an infringement is detected during the supervision process, the corresponding
sanctionsareimposedinordertoinhibitsuchconduct.

4.4.1. SupervisionofFMIs
The central bank supervises both existing and planned FMIs in order to ensure that their
operation adheres to the regulation and best practices required by the financial authorities
related to security and efficiency. With respect to retail payment FMIs, Banco de Mxicos
supervisionprocessalsoseekstopromotecompetitionamongpaymentserviceproviders.As
forSPEI,BancodeMxicoperformsselfassessment. Inaddition,thebankreviewstheself
assessmentsconductedbytheadministratorsofDALI,CCV,andAsignasystems.Furthermore,
onthebasisoftheresultsoftheselfassessments,BancodeMxicotakesmeasuresinSPEIand
coordinatestheactionstakenbytheadministratorsofDALI,CCV,andAsignatocomplywith
the Principles for Financial Market Infrastructures (PFMIs). Additionally, Banco de Mxico
oversees the chamber operated by Cecoban and the clearinghouses that process card
transactionsandmobilepaymentstoensurecompliancewiththeregulatoryprovisions.

Offsitesupervision
Supervision activities include the collection and analysis of qualitative and quantitative
information,monitoringofoperationsandmarketdevelopment,andauthorizationofinternal
rulesandoperatingmanualsofFMIs.Theintentionistoevaluatewhethertheoperationand
administrationofeachFMIadherestobestpracticesforitstypeandthusensureitssecureand
efficientoperation.AnimportantaspectofsupervisionbyBancodeMxicoistoensurethat
FMIscomplywiththebestpracticesestablishedinthePFMIs;toachievethis,thecentralbank
usestheassessmentmethodologydevelopedbytheCPMIandIOSCO.
Onsitesupervision
In addition to the actions described above, Banco de Mxico uses onsite visits to inspect
compliance with regulations regarding payment systems. Thus, supervision activities are
conducted in a deeper and more thorough manner. The central bank also conducts onsite
supervisionattheclearinghousesthatprocesscardoperationsandmobilepaymentsaspartof
theauthorizationprocess.

4.4.2. SupervisionofFMIparticipants
Banco de Mxico supervises FMI participants to ensure quality and transparency in the
provisionofservicestotheircustomersinorderforthemtooperatesafelyandefficiently,as
wellastoprotectthepublicinterest.

Offsitesupervision
SupervisionactivitiesincludemonitoringthebehaviorofFMIparticipantsthroughsystematic
reviewsofinformation,includinganalysisofinformationstoredbythecentralbankandthe
BancodeMxico
informationperiodicallyrequestedofinstitutions.Additionally,thecentralbankreviewsissues
thatarisefollowinganincident.Aspartofthesupervisionprocess,BancodeMxicocollects,
analyzes,andpublishesinformationonoperationsandpaymentinstrumentsofferedbythe
participants.Italsorequiresinformationinordertoverifythattheinstitutionsareoperatingin
compliancewithapplicableprovisions.

Onsitesupervision
Supervision consists of scheduled and unscheduled inspections in participants offices,
branchesorofautomatedequipment,inwhichtheexecutionofoperationsismonitored,and
the systems and records are verified. This is in order to ascertain compliance with the
regulationsissuedbythecentralbank.
5. SystemicallyimportantFMIsinMexico
5.1. SPEI
5.1.1. Function
SPEI, the most important payment system in the country, processes high value and retail
paymentsgeneratedbyfinancialinstitutions,firms,andthegeneralpublic.

5.1.2. Description
Banco de Mxico is the owner, administrator, and operator of SPEI. This system became
operationalinAugust2004andgraduallyreplaceditspredecessor,theExtendeduseElectronic
PaymentsSystem(knownbyitsSpanishacronym,SPEUA),whichceasedoperationsinAugust
2005.OnlyfinancialinstitutionsregulatedandsupervisedbyMexicanfinancialauthoritiesare
abletoparticipateinSPEI.

SPEIprocessestransferordersnearlyinrealtime:settlementcyclesoccureverythreeseconds
or every 300 payments, whichever comes first, and the results of the settlement cycle are
settledimmediatelyintheparticipantscashaccountsinSPEI.

a.Participation
AtthestartofSPEIsoperationsin2004,onlybankswereallowedtoparticipateinthesystem.
However, given the operative, technological, and riskmanagement characteristics of SPEI,
BancodeMxicohasallowednonbankfinancialinstitutionstoparticipateinitsince2006.

Currently,directparticipantsinSPEIincludebanksandotherentitiesregulatedbyBancode
Mxico, the National Banking and Securities Commission (known by its Spanish acronym,
CNBV),theNationalSavingsSystemforRetirement(knownbyitsSpanishacronym,CONSAR),
ortheNationalInsuranceandBondingCommission(knownbyitsSpanishacronym,CNSF),as
wellasanyotherentityauthorizedbyBancodeMxico.

NaturalandlegalpersonscantransferfundsthroughSPEIbyinstructingpaymentorderstothe
bankthatmanagestheiraccount.Bankswhichprovidetheseservicesreceiveinstructionsfrom
theircustomersviavariouschannelssuchasinternetwebsites,mobilebankingapplications,
BancodeMxico
andbranchoffices.ParticipantscantransferfundsinMexicanpesostoanycustomerofany
participant.

b.RelationshipwithotherFMIs
SPEIisrelatedtoseveralFMIs.ItsparticipantscantransferfundsbetweenSPEIaccountsandin
theSIACandDALIsystemsatanytimeduringtheFMIsoperatinghours.DALIisaparticipant
in SPEI, and its balance is the sum of cash balances participants have in the system. This
structure allows DALI to offer greater security and efficiency in the settlement of its
participants operations. SPEI also settles peso positions from the international currency
settlement system operated by the CLS Bank, also a SPEI participant. Additionally,
clearinghouses that process electronic transfers initiated with a mobile device, which are
authorized by Banco de Mxico, must operate in SPEI, in order to allow interoperability
betweenthesestructuresandthebankingsystem.

c.Operatinghours
SPEImaintainsacontinuousoperationstructure24hoursperday,everydayoftheyear.These
hourscoverbothsettlementofCLSoperations,whichoccurbetweenmidnightanddawn,and
retailpaymentsfromthepublicatlarge,whichbankscanoffertheircustomersoverextended
hours.SinceNovember2015,forsometypesofretailpayments,banksoffer24hourservice
yearround.

d.Recordingoperations
SPEI uses an open protocol based on messages to communicate with participants, allowing
them to connect with SPEI using their own systems and achieve complete automation of
paymentservices,therebyofferingbetterservicestotheircustomers.SPEIsparticipantsuse
digitalcertificatestoregisteroperationsandforotherimportantmessages,whichguarantees
participantsidentity,thenonrepudiationofthemessage,andtheintegrityoftheinformation.

e.Settlement
SPEIisahybridsettlementsystemforpaymentscombiningthesecuritybenefitsofarealtime
grosssettlementsystemwiththeliquidityefficiencyofadeferrednetsettlementsystem.In
eachsettlementcycle,which,asmentioned,occurseveryfewseconds,SPEIdeterminesthe
pendingoperationsthat canbesettledwith the participantsaccountbalancebywayofan
algorithmthatensurestheefficientuseofresources.Attheendofthesettlementcycle,the
participantsbalances,whicharealwayszeroorpositive,aremodifiedtoreflecttheresult.The
operations that could not be settled are left pending for the next settlement cycle. All
operations that cannot be settlement by closing time are cancelled. In accordance with the
Payment Systems Law, once SPEI settles a transfer order and sends the corresponding
settlementnoticetoboththeissuerandreceiver,theorderisconsideredaccepted,andan
acceptedorderisfinalandirrevocable.

Participants can classify transfer orders through SPEI as normal or high priority. In order to
facilitatethesettlementoftransferordersclassifiedashighpriority,participantsbalancesare
dividedintotwoparts,reservedandunreserved,whicheachparticipantmanagesaccordingto
theirneeds.SPEIattemptstosettlehighprioritypaymentordersfirst,usingtheunreserved
balance.Intheeventthisbalanceisinsufficienttosettlehighprioritytransferorders,SPEImay
usethereservedbalanceforthispurpose.Normalpriorityordersareonlysettledusingthe
unreservedbalance.
BancodeMxico

The financial resources with which operations are settled are stored in the participants
accounts in SPEI, which are denominated in Mexican pesos and do not allow overdrafts. At
SPEIs opening time, participants can obtain liquidity by means of transfers from their SIAC
account to the SPEI account. At closing time, balances in SPEI are transferred to the
participantsSIACaccountortoaconcentrationaccount.

f.Riskmanagement
FinancialrisksarelimitedinSPEI.First,thesystemdoesnotgrantcredit.Second,thesettlement
asset is central bank money, which eliminates the risk that could emerge from using assets
issuedbyanotherfinancialinstitution.Finally,thesystemusesanalgorithmwhichefficiently
usesparticipantsliquidity.Occasionallytheparticipantsmaylackthenecessaryresourcesto
settle all payments at a particular moment, which could delay some payments in SPEI.
However,BancodeMxicohasmechanismsinplacetoprovideliquiditytothebanksinthe
system,asdescribedintheliquidityprovisionsectionofthisdocument.

Asforoperationalrisks,themostsignificantforthesystem,SPEIwasdevelopedinorderto
facilitatethecompleteautomationofthepaymentsprocess(alsoknownasstraightthrough
processing),whichreducesmanualparticipationandtherisksitentails.

Additionally,paymentinstructionsaredigitallysignedbyparticipantstoensureauthenticity,
nonrepudiation by the issuer, and the integrity of the information contained in the
instructions.OtherimportantmessagessuchassettlementnoticesaredigitallysignedbyBanco
deMxico.Moreover,thecommunicationbetweenSPEIanditsparticipantsisencryptedto
protectsensitiveinformation.

SPEI has an alternate operation site, with the objective of minimizing the risks related to
potentialincidentsattheprimaryoperationsite.Additionally,businesscontinuityplanshave
beendevelopedtodescribetheprotocolstofollowintheeventofaninterruptionordelayin
thesystemsoperation.

ThemethodologyusedtomanageSPEIsoperationalrisksconsistsofacyclicprocesswhich
considersanalysis,assessment,andriskmanagement.Intheanalysisphase,risksareidentified
and quantified in terms of the estimated probability of their occurrence as well as their
impact.10 Following the analysis, risks are assessed and a judgement is made as to their
tolerability.Therisk management phaseincludesthedefinition ofcontrolsand contingency
measuresintheeventanyoperationalriskmaterializes;additionally,inordertoensurethe
functioningofthesecontrols,theirperformanceisassessed.

g.Feestructure
SPEIsfeestructureseekstofullyrecoverthecostsofdeveloping,maintainingandoperating
thesystemwhileestablishingapriceperpaymentequaltothemarginalcostofprocessingthat
payment.ThefeestructureseekstoencourageparticipantstomakeoptimaluseofSPEIwhile
not representing a barrier to entry. More concretely, Banco de Mxico determines a fixed
10
Theseestimatestakeintoaccounttheyearlyincidence,basedonthedatacollectionandanalysisregarding
internal and external events; comments and recommendations from internal and external evaluations are
alsoconsidered.
BancodeMxico
annualfeeforeachparticipantbasedonareviewofthesystemsoverallcosts,notthenumber
oftransactionsprocessedduringthatperiod.Additionally,participantspayavariablemonthly
feebasedonthenumberoftransferorderssenttotheCLS,transfersofresourcestoSIACor
DALI,returnsreceived,andtheamountofinformationthattheparticipantrequestsBancode
Mxico to retransmit. Regarding the fees structure participants offer to their customers,
regulationprohibitschargingforreceivingpayments,butotherwiseallowsparticipantstoset
pricesfreely.

5.1.3. PrinciplesthatapplytoSPEI

ThefollowingtablehighlightsthePrinciplesforFinancialMarketInfrastructuresthatapplyto
paymentsystems,11specifyingissuesrelevanttoSPEI.

Principlesthatapplytopayment Relevantaspects
systems
Principle1:Legalbasis Applicable. Fundamental to all Financial Market
Infrastructures
Principle2:Governance Partly applicable, due to the CPMI/IOSCO
exceptions for payment systems operated by
centralbanks.
Principle3:Frameworkforthe Applicable. SPEI has a comprehensive risk
comprehensivemanagementofrisks managementstructure.
Principle4:Creditrisk Notapplicable.SPEIisnotexposedtocreditrisk,it
doesnotextend credittoparticipants,nordoesit
establish procedures for participants to extend
creditamongthemselves.
Principle5:Collateral Notapplicable.SPEIdoesnotusecollateral.
Principle7:Liquidityrisk Notapplicable.SPEIisnotexposedtoliquidityrisks
since it only settles payments that do not rely on
overdrafts on participants accounts. Participants
cannotfailtocomplywiththesystembecausethey
donothavefinancialobligationstoit.
Principle8:Settlementfinality Applicable.Coveredbyregulation.
Principle9:Moneysettlements Applicable.SPEIusescentralbankmoneytosettle
itsoperations
Principle12:Exchangeofvalue Not applicable. SPEI does not process operations
settlementsystems involvingtwoassets.
Principle13:Participantdefaultrules Not applicable. SPEIs design does not generate
andprocedures financial obligations by the participants to the
system.
Principle15:Generalbusinessrisk Partly applicable, due to the CPMI/IOSCO
exceptions for payment systems operated by
centralbanks.
11
ThePrinciplesthatapplytopaymentsystemsare1to5,7to9,12,13,15to19,and21to23.
BancodeMxico
Principle16:Custodyandinvestment Notapplicable.TheassetsofBancodeMxicoand
risks itsparticipantsaresafeguardedatthecentralbank
accountandarenotsubjecttoinvestment.
Principle17:Operationalrisk Applicable.Thisisthemainrisktomanage.
Principle18:Accessandparticipation Applicable.Accesscriteriaarewellestablishedand
requirements disclosedtostakeholders.
Principle19:Tieredparticipation Not applicable. In SPEI there are only direct
arrangements participants.
Principle21:Efficiencyand Applicable. SPEI efficiently and effectively serves
effectiveness theneedsofitsparticipantsandmarket.
Principle22:Communication Applicable. SPEI incorporates communication
proceduresandstandards standardsinitscomponents.
Principle23:Disclosureofrules,key Applicable. The rules for SPEIs operation and its
procedures,andmarketdata generaloperatingdataarepubliclyavailable.
5.1.4. Legalframework
SPEI,asasystemmanagedbythecentralbank,issubjecttotheBancodeMxicoLaw,which
containsseveralprovisionsonpaymentsystems,chiefamongwhicharepromotingthesound
developmentofthefinancialsystemandtheproperfunctioningofthepaymentsystems.The
Banco de Mxico Law also empowers the central bank to regulate funds transfer services
conducted through credit institutions. Moreover, the Payment Systems Law requires that
paymentsbeirrevocable,enforceable,andbindingbeforethirdparties.SPEIsinternalrules,as
wellasitsaccessandoperationalrulesasissuedbyBancodeMxico,arecontainedinCircular
17/2010 (SPEIs Rules), SPEIs Operations Manual, the CEP Contingency Manual,12 and the
ContingencyManualforCLSBankInternational(CLS).Additionally,institutionsparticipatingin
SPEI must enter into a contract with Banco de Mxico in order to define their rights and
obligationsregardingtheprovisionofservicesrelatedtothissystem.

5.1.5. BancodeMxicosroles
ThemainrolesperformedbyBancodeMxicorelatedtoSPEIarethoseofoperator,regulator
andsupervisor.Withrespecttoitsregulatoryroleandaccordingtoitsfunctionsasaregulator
ofpaymentsystems,thePaymentSystemsLawempowersBancodeMxicotoissueprovisions
that, among other goals, promote the sound development of the financial system and the
properfunctioningofthepaymentsystems,aswellasprotectthepublicinterest.Moreover,
theBancodeMxicoLawempowersittosupervisebrokersandfinancialinstitutionssubject
toitsregulation.BancodeMxicosroleregardingsupervisionisaddressedinsection4ofthis
document.Inadditiontoitsrolesasregulatorandsupervisor,thecentralbankisSPEIsowner
andadministrator.ItisalsoauserasitsendspaymentsthroughSPEIonbehalfofthefederal
governmentasitsfinancialagent,inadditiontoitsownpayrollandsupplierpayments,among
others.

12
CEPisSpanishacronymforElectronicProofofPayment.BancodeMxicoprovidesaCEPforsendersand
beneficiariesofSPEIpaymentswiththeinformationthatthereceivingbankprovidestoBancodeMxico
uponcreditingitsclientsaccount.
BancodeMxico
5.1.6. BancodeMxicostoolsforregulatingparticipants
Banco de Mxicos main tool to regulate SPEIs participants are the rules governing
participation in the systems operations, contained in SPEIs Rules and Operations Manual.
Additionally, Banco de Mxico monitors its participants compliance with the rules and
contractsthroughsupervision.

5.2. SIAC
5.2.1. Function
The Account Holders Service System (known by its Spanish acronym as SIAC) is a system
operatedbyBancodeMxicothatmanagescurrentaccountsthatbanksandotherfinancial
andpublicsectorentitiesmaintainatthecentralbank,asmandatedbylaw.SIACsparticipants
areabletotransferresourcesamongthemselvesinnationalcurrencyandinrealtime,although
Banco de Mxico has followed a policy of not promoting this functionality since SPEI can
processtheseoperationsmoreefficiently.However,SIACcanoperateasapaymentalternative
for participants in the event that SPEI is in a contingency situation. Nevertheless, SIACs
characteristics do not allow for participants to process transfers on behalf of their clients.
ThereforeSPEI,whichisamoreadequatesystemforthispurpose,hasabsorbedmostofits
paymentfunctions.The mainfunctionsmaintainedbySIACarethe managementof current
accounts and the provision of liquidity. In this regard, SIAC contributes to the smooth
functioningofotherFMIsbyprovidingliquiditysafelyandefficiently,inadditiontofacilitating
liquiditymanagementforparticipantsthroughclearrulesandexpeditiousmechanisms.

TheprovisionofintradayliquiditytoFMIsthroughtheSIACisachievedbytwomechanisms:
intraday overdrafts on current accounts held by banks at the central bank, which must be
guaranteedatalltimes,andintradayrepotransactionswithgovernmentsecurities.13

5.2.2. Description
SIAC has operated in Mexico since 1990. At that time, it was the only real time electronic
paymentsystemandmarkedabreakthroughinthepaymentsystemsfield.However,currently,
mostpaymentsareprocessedbySPEI,whosecharacteristicsrenderitmoresuitable.

SIACisthesystemthroughwhichthecentralbankmanagesthecurrentaccountsoffinancial
institutions such as banks and brokerage firms, as well as other state entities such as the
MexicanSocialSecurityInstitute(IMSSbyitsSpanishacronym),theInstituteforSocialSecurity
and Services for State Workers (ISSSTE in Spanish), the Federal Treasury (Tesofe), Petroleos
Mexicanos (PEMEX), the Instituto del Fondo Nacional de la Vivienda para los Trabajadores
(Infonavit),amongothers.

The main function of SIAC, in addition to managing these accounts, is to enable the
implementationofmonetarypolicyandliquidityprovisiontotheMexicanfinancialsystem.In
ordertoavoidshortcomings,thecentralbankhassoughttoencouragetheuseofothersystems
toprocesstransfers,althoughSIACisabletoprovideinterbanktransferservices.SIACallows
transfers of funds without restrictions only on the amount, without identifying thirdparty
sendersorbeneficiaries. Transactions areprocessedonebyone,anddebits andcreditsare
13
Formoredetailonintradayliquidityprovisionbythecentralbank,seesection4.3ofthisdocument.
BancodeMxico
appliedimmediately.Asmentioned,thesystemisnotpromotedasameansofprocessingthese
transactions,butitretainsthisfunctionalityforextraordinarycases.

SIAC keeps balances and accounting records of operations by participants and Banco de
Mxico.Theinformationiscentralizedindatabases,andaccountholdershaveterminalsfrom
whichtheyoperateinthesystem.BancodeMxicodevelopsandmaintainsthecentralsystem
andtheterminals.

a.RelationshipwithotherFMIs
SIAChasrealtimeconnectionswithSPEIandDALItotransferresourcesbetweenaccountsof
those participating in all three FMIs. Additionally, the SIAC uses DALI to provide intraday
liquiditythroughrepooperations.Lastly,theCCENsnetresultsaresettledinbankscurrent
accountsinSIAC.

When SPEI began operating on a 24/7 schedule for certain types of retail payments in
November2015,SIACsliquidityprovisionprocedureforSPEIwasadjustedinordertoallow
banks to maintain liquidity at all times in SPEI through the current account overdraft
mechanism.

b.Operatinghours
SIACoperateseachbankbusinessdayonaschedulethatcoversmostoftheday,beginningthe
afternoon prior to the settlement date and ending the afternoon of the settlement day. At
opening time, the banks balances in SIAC are usually zero. Banks obtain intraday liquidity
throughoverdraftsontheircurrentaccountsinSIAC,whicharebackedbymonetaryregulation
deposits.ThisliquidityistransferredtoSPEIandDALItosettleoperationsintheseFMIs.Onthe
morningofthefollowingday,thenetresultsofCCENaresettledinSIAC.Duringtheday,Banco
de Mxico has operations in SIAC related to the implementation of monetary policy and
operationswithgovernmententitiesinitsroleasfinancialagentforthefederalgovernment.
Before closing time, participating banks balances in DALI and SPEI are transferred to SIAC,
whereaprocesscalledmarketlevelingisexecuted,inwhichbanksconducttransactionsamong
themselves and Banco de Mxico to reduce their balances to zero at the end of each days
operations.Atclosingtime,overdraftsinthebanksaccountsarepenalizedwithaninterest
rateoftwicetherepresentativemarketrate.

c.Recordingoperations
SIAC has an efficient and secure communication channel known as SIAC Terminals through
whichtheexchangeofoperationalinformationbetweenthesystemadministrator,Bancode
Mxico,anditsaccountholdersisperformed.BymeansofSIACTerminals,accountholders
enjoysecureoperationsandknowtheavailabilityofresourcesandthemovementsthattake
placedaily.Chiefamongtheelementsofsecurityandconfidentialityaretheauthenticationof
terminalsandoperators.

d.Settlement
SIACisarealtimegrosssettlementsystem.SIACreceivesinstructionsfromitsparticipantsto
transferfunds,includingthosesenttoDALIorSPEI.Itchecksthesendingparticipantspayment
capability and, if sufficient, it charges the senders account and credits the account of the
receivingparticipantor,asthecasemaybe,theamountissenttoSPEIorDALI.Operationsnot
settledarediscardedfromthesystem.
BancodeMxico

e.Riskmanagement
SinceSIACisarealtimegrosssettlementsystem,thereisnocreditriskforparticipantswithin
thesystem.Additionally,theexposureofBancodeMxicotocreditrisk,duetotheliquidityit
providestoparticipants,iscovered,asexplainedinsection4.3.

As for operational risk management, Banco de Mxico has a main computing center and a
contingency computing center, both of which can simultaneously process operations. The
centralbankalsohasabusinesscontinuityplaninplaceforSIACwhichistestedregularlyto
ensure proper execution. Lastly, given the importance of liquidity provision to the financial
system,SIAChasacontingencyplaninplacethatallowstheuseliquidityofparticipantshave
intheiraccountsinSIAC,SPEIandDALI,evenifSIACweretobeunavailable.

f.Feestructure
Banco de Mxico establishes the operational rules for SIAC and determines fees for
participants,seekingonlytorecoverthecostsassociatedwiththedevelopmentandoperation
ofthesystem.Tothisend,eachparticipatinginstitutionmustpayanannualfeeandamonthly
feeforeachtransactioninstructedduringtheperiod.

5.2.3. BestpracticesapplicabletoSIAC
Given that the current main function of SIAC related to FMIs is the provision of liquidity to
paymentsystemparticipantsanditsroleasapaymentsystemisverylimited,BancodeMxico
doesnotrequireittocomplywiththePrinciplesforFinancialMarketInfrastructures(PFMIs).
However,thecentralbankseeksimplementationbySIACofsomeofthebestpracticesinthose
principles.
Principlesthatapplytopayment Relevantaspects
systems
Principle1:Legalbasis Applicable. Fundamental to all Financial Market
Infrastructures.
Principle2:Governance Partly applicable. There are some exceptions for
paymentsystemsoperatedbycentralbanks,issued
bytheCPMI/IOSCO.
Principle3:Frameworkforthe Applicable.
comprehensivemanagementofrisks
Principle4:Creditrisk Notapplicable.SIACisarealtimegrosssettlement
paymentsystem.However,thisappliestoliquidity
provision, as explained in section 4.3 of this
document.
Principle5:Collateral Applicable. Liquidity provision is explained in
section4.3.
Principle7:Liquidityrisk Notapplicable.SIACisnotexposedtoliquidityrisk.
Principle8:Settlementfinality Applicable. Provided by Payments Systems Law
(LSP).
Principle9:Moneysettlements Applicable.SIACusescentralbankmoneytosettle
operations.
BancodeMxico
Principle12:Exchangeofvalue Notapplicable.
settlementsystems
Principle13:Participantdefaultrules Not applicable for transactions settlement. This is
andprocedures applicable to participants obligations with Banco
deMxicorelatedtoliquidityprovision.
Principle15:Generalbusinessrisk Not applicable. SIACs main functions are account
managementandliquidityprovision,andthereare
someexceptionsforpaymentsystemsoperatedby
centralbanks,issuedbytheCPMI/IOSCO.
Principle16:Custodyandinvestment Notapplicable.
risks
Principle17:Operationalrisk Applicable.
Principle18:Accessandparticipation Not applicable. SIACs main functions are account
requirements managementandliquidityprovision.
Principle19:Tieredparticipation Notapplicable.Thereareonlydirectparticipants.
arrangements
Principle20:FMIlinks Applicable.
Principle21:Efficiencyand Applicable.
effectiveness
Principle22:Standardsand Applicable.
communicationprocedures
Principle23:Disclosureofrules,key Applicable.
procedures,andmarketdata

AsaFMIandpaymentsystemoperatedbyBancodeMxico,SIACisgovernedbyBancode
Mxico Law and the provisions issued by Banco de Mxico. Moreover, given that SIAC is
operatedbyBancodeMxico,itissubjecttothePaymentSystemsLaw,whichensuresthe
finalityofsettledpaymentsandprotectsthemagainstjudicialandadministrativechallengesby
authorities,includingthosearisingfrominsolvencyproceedings.

Moreover, SIAC is subject to Circular 3/2012 in relation to deposit management made by
financialinstitutionsatBancodeMxico,totransfersofresourcesbetweenaccountholdersof
Banco de Mxico or transfers made to Banco de Mxico through SIAC, as well as liquidity
provision through overdrafts on banks current accounts and through intraday repo
transactions.

Circular3/2012alsoestablishesthatdeposit14andliquidity15auctions,whicharepartofthe
implementationofmonetarypolicybyBancodeMxico,shallbemadethroughtheSIACinthe
manner,termsandconditionssetforthintheabovementionedCircularandSIACsManual.

14
DepositauctionsareconductedbyBancodeMxicotoreceivedeposits.
15
LiquidityauctionsareconductedbyBancodeMxicotoendowinstitutionswithliquiditybymeansof
overdraftsorrepooperations.
BancodeMxico
Theselastdocumentsconstitutethebylawsofthesysteminwhichmembershipandoperation
rules are set. Contracts between Banco de Mxico and the participants establish rights and
obligationsregardingtheprovisionofservicesrelatedtothissystem.

5.2.5. BancodeMxicosrole
BancodeMxico,inadditiontoperformingitssupervisoryandregulatoryfunctionsintermsof
the Banco de Mxico and Payments Systems Laws, is involved in the development and
operationofthesystem.Asitsoperator,thecentralbankmanages,executes,andmonitorsthe
operationsofSIACparticipants.Furthermore,itmanagesthechargesarisingfromprocessed
transactions.BancodeMxicoisalsooneofthemainusersofSIAC,asitimplementsmonetary
policythroughopenmarketoperationsviaSIAC.

5.2.6. BancodeMxicostoolsforregulatingparticipants
Participants operations in SIAC are regulated by Banco de Mxicos issued provisions
applicable to operations of financial institutions. Additionally, the Banco de Mxico and
PaymentSystemLawsgiveBancodeMxicobroadpowerstooverseepaymentsystemsandto
sanctionparticipantsinthecaseofnoncompliancewiththerulesitdefines.

5.3. DALI
5.3.1. Function
TheSecuritiesDeposit,AdministrationandSettlementSystem(DALI)isthesettlementsystem
forsecuritiestransactionsmanagedbyS.D.Indeval.DALIregistersandsettlesdebtandequity
securitiesissuedinMexicoandsettlesdirecttradingoperations,tripartyrepotransactions,
and securities lending operations conducted by its depositors in the financial markets.
Additionally,DALIoffersservicestomanagethepropertyrightsofthesesecuritiesthatis,the
collection of interest, dividends and amortization, exchanges, conversions, subscriptions,
mergers, and the segregation and reconstitution of securities. Currently, DALI is the only
CentralSecuritiesDepository(CSD)inMexicoresponsibleforprovidingsecuritiessettlement
services.
5.3.2. Description
Indevalwascreatedin1978asagovernmentagencyresponsibleforthecustodyandtransfer
ofsecuritiesmainlypertainingtothestockmarket,inordertocontributetothedevelopment
ofmarketinfrastructureinMexico.Indevalbecameaprivateentityin1987,withthebrokerage
firms,somebanks,theMexicanStockExchange(BMV),andBancodeMxicoasshareholders.
InNovember2008,IndevalbegantheoperationofDALIinaccordancewithBancodeMxicos
requirementtorenovatethesettlementsystemoperateduntilthen,theInteractiveSystemfor
SecuritiesDepository(SIDV).
a.Participation
DALI offers settlement services to banks, brokerage firms and other domestic and foreign
financial institutions participating as depositors. To become DALI's direct participant, the
institutionmainlyrequires:i)compliancewiththerequirementsestablishedintheRulesand
Operational Manual, ii) the signing of an adhesion contract, and iii) implementation of the
systemsandoperationalandcommunicationprocessesunderDALIsbylaws.

BancodeMxico
b. RelationwithotherFMIs
DALIisaparticipantinSPEI.Thus,thecashaccountsofDALIparticipantsareguaranteedby
centralbankmoneyatalltimes.ThesumofthebalancesofparticipantsinDALIisequivalent
to the sum of the balance of DALI in SPEI. Therefore, no credit risk is associated with the
settlement asset used by DALI. Moreover, during business hours, DALIs participants can
transferfundsbetweenDALIcashaccountsandSPEIandSIACaccounts.DALIalsomaintains
linkswithSIACtoprocesstransactionsrelatingtotheliquidityprovisionmechanismthrough
intradayrepotransactionsofBancodeMxico.Attheendoftheoperatingday,DALItransfers
depositorscashaccountbalancestoSPEIaccounts,orabankaccountpreviouslyindicated.
c.Operatinghours
DALIstartsoperationsat08:00,GMT6,allowingparticipantstoobtainintradayliquidityfrom
mechanismsprovidedbyBancodeMxico,throughoverdraftsinaparticipantsSIACaccount
andthroughsamedayrepooperations.ClosingoperationsinDALIoccurafter16:00,whencash
balancesaretransferredthroughSPEItoDALIparticipants.
d.Recordingoperations
DALIusestwomechanismsofcommunicationwithitsparticipantstoaccessIndevalsservices
effectively.Thefirstmechanism,denominatedIndevalFinancialProtocol(PFI),wasdesignated
to establish communication among computers (similar to hosttohost). This protocol is
based on message exchange under the ISO15022 standard, which allows participants to
automateprocesses,andtoreducecostsandtheincidenceofoperationalerrors.Thesecond
mechanism,calledPortalDALI,isawebinterfacethatallowsdepositorstoaccessDALIservices
fromthebrowserontheircomputer.AllinstructionssenttoDALIincludedigitalsignatures,
whichincreasescommunicationssecurity.
e.Settlement
DALIcreatessettlementcyclestoprocessfreeofpaymentsecuritiestransfers,cashtransfers,
and securities trading operations. For the latter, securities transfers are subject to the
corresponding payment; in other words, the delivery versus payment (DvP) structure is
followed.Thecyclesareexecutedeverytwominutesorearlier,whenaccumulatedupacertain
number of payments, using an algorithm for settlement optimization, in order to avoid
accumulationofunprocessedoperationsandtoreducecostsassociatedwithcashorsecurities
liquidity.ThiscyclingfrequencyimpliesthatDALIoperatesalmostasarealtimesystem.The
use of the settlement optimization algorithm, combined with its highfrequency execution,
allowsparticipantstoreducecostsassociatedwith the cashandsecuritiesneededtosettle
participanttransactions.Thisisparticularlyimportantforminorparticipantswithlowtrading
volumeandreducedavailabilityofcashandsecurities.
f.Riskmanagement
DALI has rules and procedures to manage the range of risks that arise from custody and
settlement of securities. Depositors are not exposed to capital risk, because the trading of
securitiesorrepotransactionsareperformedthroughaDvPstructure,avoidingthepossibility
thatacounterpartywillnotreceivepaymentaftersecuritiesaredeliveredorviceversa.InDALI,
participantsandIndevaldonotfacecreditrisk,becausetheoperatingsystemrulesdonotallow
overdraftsondepositorsaccounts.Therefore,ifaninstructiongeneratesanaccountoverdraft,
thesystemwillnotsettleit,anditisimmediatelyqueuedforsettlementinthenextcycle.This
BancodeMxico
informationisrelayedtotherelatedpartiesthroughthesystem,indicatingthecauseoffailure
inthesettlementcycle.Attheendoftheday,remainingqueuedoperationsarecancelled.

Regarding operational risk management, DALIs bylaws establish several provisions mainly
aimedatpromotingoperationalcontinuityandrecoveryincaseofcomputersystemfailure.
g.Feestructure
ThefeeschargedbyIndevalforitsservices,includingthoseprovidedbyDALI,arecontainedin
itsbylaws.Generally,Indevalchargesitsdepositorsamonthlyfeeforcomputerservices,and
it charges each participant the services consumed (e.g., national and international custody,
securitiesmanagement,nationalandinternationalsettlement,collateralmanagement,among
others).IndevalfeesarepartofitsbylawsandrequiretheapprovalofBancodeMxicoand
theCNBV,bothofwhichmayrequestadjustmentsinaccordancewiththeirauthority.
5.3.3. BestpracticesthatapplytoDALI
ThefollowingtableshowsthePrinciplesthatapplytoDALI.

Principlesthatapplytocentral Relevantaspects
securitiesdepositoryandsecurities
settlementsystems
Principle1:Legalbasis Applicable.FundamentaltoallFMIs.
Principle2:Governance Applicable.
Principle4:Creditrisk Not applicable. DALI does not incur credit risk,
becauseitdoesnotoffercredittoparticipants,nor
doesitactasacounterparty.
Principle8:Settlementfinality Applicable. DALI settlements are final and
irrevocableaccordingtothePaymentSystemsLaw.
Principle9:Moneysettlements Applicable.DALIconductsitsmoneysettlementsin
centralbankmoney.
Principle11:Centralsecurities Applicable.
depositories
Principle12:Exchangeofvalue Applicable.DALIoperatesunderaDvPstructureto
settlementsystems mitigateprincipalrisk.
Principle15:Generalbusinessrisk Applicable.
Principle16:Custodyandinvestment Applicable.
risks
Principle18:Accessandparticipation Applicable.
requirements
Principle20:FMIlinks Applicable.DALIholdsdirectlinkswithSPEI,SIAC
andtheCCV.
BancodeMxico
effectiveness
Principle22:Communication Applicable.
proceduresandstandards

DALIs legal framework is mainly composed of the Payment Systems Law (LSP) and the
SecuritiesMarketLaw(LMV).TheLSPisapplicabletoDALI,becauseinthissystemtheaverage
monthly amount of the payment obligations accepted for settlement exceeds one hundred
investmentunits(UDIs).TheLSPrequiresDALIandIndevaltocomplywiththeprinciples of
irrevocability,enforceability,andfinalityintheoperationsitsettles.Likewise,itestablishesthe
requirementsofthesystemsbylawsandthepowersBancodeMxicohasoverthesystem
administrators.

TheLMVestablishestherequirementsunderwhichtheMinistryofFinanceandPublicCredit
(the SHCP) grants a license to an entity to operate as a Central Securities Depository. In
addition,theLMVestablishestheresponsiblebodiesforthemanagementandmainfeatures
oftheactivitiesandservicestobeprovided.TheLMVconferspowerstoBancodeMxicoand
theCNBVtoauthorize,submitcommentson,andrequestchangestoIndevalsbylaws,which,
overall,mustcontainrulesapplicabletodeposit,clearingandsettlementofsecurities,exercise
ofpropertyrights,andparticipantsrightsandobligations.

Moreover,therearesecondaryregulationsgoverningsomerelatedaspectsofDALIsactivities,
inparticular,thosecontainedintheGeneralProvisionsApplicabletoInstitutionsforSecurities
DepositoryandStockExchangeissuedbytheCNBV,andCircular3/2012issuedbyBancode
Mxico.

Banco de Mxico has multiple roles with respect to DALI. Mainly, it performs regulating and
supervisoryfunctionsresultingfromthepowersconferredbytheLSPandLMV.UndertheLSP,
Banco de Mxico can design and require implementation of forcedcompliance adjustment
programsaimedateliminatingirregularitiesinthesystem.

BancodeMxicoisalsoauserofDALI.Throughthissystem,itimplementsmonetarypolicy,
settlingoperationsofsecuritiesissuedformonetaryregulationpurposesandotherliquidity
facilities.Furthermore,BancodeMxicoservesasthefederalgovernmentsfinancialagentand
providesliquiditytothefinancialsystem(e.g.,byimplementingrepotransactionswithbanks).
5.3.6. BancodeMxicostoolsforregulationandsupervision
ThelegalframeworkgivesBancodeMxicobroadpowerstoregulateandtosuperviseDALI
and Indeval. One of its main tools is the ability to regulate internal regulations that Indeval
applies to depositors for deposit services and securities settlement. Under the LMV, these
BancodeMxico
powersarecarriedoutjointlywiththeCNBVinthecaseofthebylaws,whileintheLSPitis
expectedthatthebylawsaresubjecttoBancodeMxicosauthorization.

AccordingtoLMVprovisions,BancodeMxicoshouldparticipateasanindependentdirector,
with a representative on the Indeval Board of Directors, a body that discusses plans and
projects, appoints governing bodies, and determines the companys asset management
strategy.

Finally,BancodeMxicocancarryoutfunctionsofoversightandsupervisionregardingIndeval.
Throughsupervision,thecentralbankassessestheriskstowhichtheDALIcontrolsystemsmay
besubject,anditinstructscorrectivemeasurestoimplementpaymentsystemsandfinancial
marketsbestpractices.

5.4. CCV
5.4.1. Function
The Central Securities Counterparty (CCV) is the entity acting as a central counterparty
responsibleforclearingandsettlementofsecuritiestransactionsnegotiatedontheBMV.Inthis
sense,byactingasacentralcounterparty,theCCVbecomesthereciprocalcreditoranddebtor
of the rights and obligations arising from such transactions. Its main function is to provide
certaintytoparticipantsonthecounterpartycreditriskoftradingpartners,aswellasvariations
inpricesresultingfromthefactthatsettlementoccursthreedaysaftertradingtransactions.
CCVs activities are intended to mitigate risks arising from defaults on the obligations of
securitiestransactionsmadebystockexchangeintermediaries(enteredontheirownaccounts
oronbehalfofthirdpartiesthroughtheBMV),andtoreducethenumberandvalueofdeliveries
andpayments,aswellastransactioncosts.Thus,theCCVcontributestosafetyandefficiencyin
processingtransactionsexecutedbymarketparticipants,andreducescounterpartycreditrisk.

5.4.2. Description
In 1997, the guarantee trust for the settlement of transactions made on the BMV was
established, and in 2004, it began operations as a central counterparty for securities with a
licensegrantedbytheSHCP,inthewakeof2001amendmentstotheSecuritiesMarketLaw.
GrupoBMVisCCVsoperatorandmainshareholder.CCV,inperformingitsfunctions,provides
securitiesclearingandsettlementservices.

a. Participation
CreditinstitutionsandbrokeragefirmsareentitieswhichmaybecomeparticipantsinCCV,as
clearingmembersornonclearingmembers.Aclearingmemberisconstitutedasareciprocal
creditor and debtor of CCV with respect to the rights and obligations arising from securities
transactionsmadeontheBMVand,whereapplicable,fromthesecuritiestransactionstraded
bynonclearingmembers.

Inorderforacreditinstitutionorbrokeragefirmtobeconstitutedasaclearingmember,they
mustbeadepositoratIndevalandmaintainatleastonecashandonesecurityaccount,meet
applicable technological standards, have the systems required by CCV, and set a limit of
BancodeMxico
liability16foreachofitsnonclearingmembers.Onceaninstitutionhasobtainedauthorization
byCCVtoactasaclearingmember,itbuysarepresentativeshareofCCVscapitalstockand
contributestothecorrespondingguaranteefunds.

A nonclearing member is a financial intermediary which contracts the services of a clearing
member,sothatthelatteractsasreciprocalcreditoranddebtoroftheCCVwithrespecttothe
rightsandobligationsarisingfromsecuritiestransactionsoftheformer.Inthisregard,anon
clearingmembershall,amongotherthings,beconstitutedasabrokeragefirm,beadepositor
inIndeval,andmaintainatleastonecashaccountandonesecuritiesaccount,contributetothe
correspondingguaranteefunds,andsubmitanapplicationtobeaccreditedbytheCCV.

b. RelationshipswithotherFMIs
CCV is involved with DALI to settle its obligations in securities and cash between it and its
participants.

c. Recordingoperations
CCVhasadirectlinktotheBMV.Throughthislink,theBMVconductsthetransactionsthrough
which, in CCV, one liability is substituted for another (novation). Once CCV has received the
transactions, it estimates the credit risk and determines the necessary amount of collateral
needed,commonlyknownasinitialmargin.Tothatextent,clearingmemberstransactionsmust
maintainsufficientcollateral.

d. Clearingandsettlement
CCVclearsdeliveryandreceiptobligationsofsecuritiesandcashforeachclearingmembers
account.Ifcollateralisinsufficienttocoverthecreditexposureinclearingmembersaccounts,
CCVrequiresthemtodeliverthenecessaryfunds,whichshouldbecoveredinaperiodnolonger
than30minutes.

CCVsettlestransactionsthreedaysaftertheirrecordingandnovation.Tothisend,CCVexecutes
onthatdayperiodicsettlementcyclesintheformofdeliveryversuspayment(DvP).17OnceCCV
verifiesthetransferofsecuritiesandcashinitsaccounts,itinstructsmovementsofsecurities
andcashtotheclearingmembersaccounts,accordingly.

e. Riskmanagement
WhenCCVnovatestransactionsand,therefore,becomesthereciprocalcreditoranddebtorof
therightsandobligationsarisingfromthepurchaseandsaletransactions,itfacesmainlycredit
andmarketrisks.Regardingmarketrisk,CCVcouldbeaffectedbyanincreaseordecreaseof
the security price over the original traded price. Concerning credit risk, CCV might not fully
satisfyitsobligationsontimeduetothepossibledefaultofacounterparty.

Inordertomanagethecreditriskstowhichitisexposed,CCVhasaseriesofproceduresand
resourcesknownasfinancialsafeguards.Generally,financialsafeguardsareconstitutedbythe
contributionfund,thedefaultfund,thereservefund,andCCVscapital.
16
Theliabilitylimitisthemaximumamountaclearingmembersetstocoverthedeficitanonclearingmembercanhave
inrequiredcollateraltoregisteranewtransaction.TheamountisfixedaccordingtothecriteriaissuedbytheCCVRisk
Committee.
17Theobligationsaresettledinstrictchronologicalorder,givingpreferencetotheoldest.
BancodeMxico
Thecontributionfundcontainsinitialmargins.18Securitiesorcashcanconstitutethisfund.The
resourcesarecalculatedbasedontheestablishedsingletailedconfidencelevelofatleast99
percent of the estimated distribution of the future exposure. Initial margins cannot be
mutualized, that is, they can only be used to cover the default of the clearing member who
deliversthem.

CCV uses the default fund to protect itself from unconventional events not covered by the
contribution fund. Its main feature is that CCV can access resources provided by all other
clearing members in addition to those of the defaulted clearing member; however, the
resourcesprovidedbyallotherclearingmembersmaybeonlyaccessediftheresourcesofthe
defaultingclearingmemberareexhausted.

The reserve fund is integrated by contractual penalties and penalties applied to clearing
members. On the other hand, clearing members contribute to CCV capital. More than 99
percentofthecapitalbelongstotheBMVandtheresttotheclearingmembers.

Inthecaseofdefaultofanyclearingmember,CCV,ingeneraltermsandinaccordancewiththe
provisionsofitsfinancialsafeguards,willuseitsfinancialresourcesinthefollowingorder:
1. Initialmarginsofthedefaultingclearingmember
2. Resourcesdepositedinthedefaultfundbythedefaultingclearingmember
3. 20%ofCCVscapital.
4. Resourcesdepositedinthedefaultfundbyallotherclearingmembers
5. 80%ofCCVscapital.
It is worth noting that, in step 4, CCV may require clearing members to reconstitute the
resourcesofthedefaultfund,butonlyonceandnomore.

f. Feestructure
ClearingmembersandnonclearingmembersmustpayCCVfortheprovisionofservicesrelated
to clearing and settlement of transactions, the annual rent of the system, and collateral
management. Regarding clearing and settlement transaction services, fees depend on the
monthlycumulativeamountoftransactionsrecordedbyCCVandclearedorsettledthroughits
systems.

5.4.3. PrinciplesapplicabletoCCV
ThefollowingtableshowstheprinciplesapplicabletoCCV.
Principlesapplicableto Relevantaspects
centralcounterparties
Principle1:Legalbasis Applicable.
Principle3:Frameworkforthe
Applicable.
Principle4:Creditrisk Applicable. Given its characteristics, CCV requires
fulfilment of the cover 1 criteria (i.e., CCV should
18
Thevariationmarginactsasasettlementmethodbyusingthedailyvaluationofthecontractatmarketprices.
BancodeMxico
maintain sufficient financial resources to meet its

obligations in a timely manner upon default of the
participant that would cause the largest aggregate
creditexposure).
Principle5:Collateral Applicable.
Principle6:Margin Applicable.
Principle7:Liquidityrisk Applicable. Given its characteristics, CCV requires
fulfilment of the cover 1 criteria (i.e., CCV should
maintain sufficient financial resources to meet its
obligations in a timely manner upon default of the
participant that would cause the largest aggregate
liquidityobligation).
Principle8:Settlementfinality Applicable.
Principle9:Moneysettlements Applicable.Moneysettlementsareconductedusing
DALI.
Principle10:Physicaldeliveries
Principle12:Exchangeofvalue Applicable. CCV uses the deliveryversuspayment
settlementsystems serviceprovidedbyDALI.
Principle13:Participantdefaultrules
Applicable.
andprocedures
Principle14:Segregationandportability Applicable.
Principle16:Custodyandinvestment
Applicable.
risks
Principle18:Accessandparticipation
Applicable.
requirements
Principle19:Tieredparticipation
Applicable.
arrangements
Principle20:FMIlinks Applicable.
Principle21:Efficiencyand
Applicable.
effectiveness
Principle22:Communication
Applicable.
Principle23:Disclosureofrules,key
Applicable.
5.4.4. LegalFramework
The Securities Market Law (LMV) provides the legal framework for central securities
counterparties.ThislawestablishestherequirementsusedbytheMinistryofFinanceandPublic
Credit(SHCP)tograntlicensestocorporationstooperateascentralsecuritiescounterparties;
moreover,itestablishesthepurposeandminimumcapitalrequirements,thebodiesresponsible
formanagement,andtheactivitiesandservicestobeprovidedbyCCVasacentralsecurities
counterparty.TheGeneralCorporationsLaw(LGSM)andBusinessBankruptcyLaw(LCM)govern
the resolution and liquidation processes, as well as the bankruptcy of central securities
counterparties.

BancodeMxico
ThebylawsofCCVderivefromtheLMVandcontain,amongothers,rulesapplicableto:
Proceduresandsystemsthroughwhichtransactionsareclearedandsettled,aswellas
therightsandobligationsofthecompanyanditsparticipants.
Proceduresforriskmanagement.
Mechanismstoraisefinancialresourcesallowingittocomplywithitsobligations.
Operationalandprudentialrules.
Processesforadoptionandsupervisionofsuchrules.
Selfregulationrules.
Disciplinaryandcorrectivemeasures,aswellasprocedurestoenforcesuchmeasures.

Moreover, as an appendix to the bylaws, the operational manual describes obligations and
rightsbetweenCCVanditsparticipants,procedures,deadlines,thedefaultofparticipants,and
othermattersrelatedtoservices,aswellaspublishedschedules.

Regarding the provisions of Banco de Mxico, the Provisions applicable to Central
Counterparties of Securities related to Credits, Loans and Information to Banco de Mxico
(Circular14/2008)containtherulesforcentralsecuritiescounterpartiestocontractcreditsand
loanstoachieveitscorporatepurpose,andtoprovideinformationtoBancodeMxico.
BancodeMxico,inaccordancewiththepowersconferredbytheLMV,actsasregulatorfor
centralsecuritiescounterparties.Essentially,BancodeMxico,jointlywiththeCNBV,canissue
regulationsonthematter.

5.4.6. BancodeMxicostoolsforregulationandoperation
TheLMVprovidesseveralregulatorypowerstoBancodeMxicorelatedtocentralsecurities
counterparties,whichitjointlyexerciseswiththeCNBV,notably,thefollowing:
To order modifications to risk management procedures and to the manner in which
fundsareallocatedinordertocomplywithobligations.
Toissuethenecessaryregulationinordertopromotetheproperoperationandrisk
managementofCCV,thefulfilmentofthetransactionsinwhichitisareciprocaldebtor
and creditor, efficiency in clearing and settlement procedures and systems, and the
adequateinvestmentofresources.
Regardinginformationrequirements,boththeCNBVandBancodeMxicohavepowers
to request any information and documents they see fit, within the scope of their
authority, through general provisions. In relation to selfregulatory standards, these
authoritieshavevetopowers.

Inaddition,bylawsandamendmentsmustbesubmittedforpriorauthorizationtoBancode
MxicoandtheCNBV,which maymakeobservationsandamendmentswhentheyconclude
that the bylaws do not abide by the provisions of the LMV or to sound market practices.
Moreover,BancodeMxicomayissueprovisionstoallowcentralsecuritiescounterpartiesto
contractcreditsandloanstocorrectlypursueitscorporatepurpose.
BancodeMxico
AtthebehestofBancodeMxicoortheCNBV,orprioropinionofsuchauthoritiesandgranting
oftherighttobeheard,theSHCPundercertaincriteriamayrevokeCCVslicensetooperateas
acentralsecuritiescounterparty.19
5.5 Asigna
5.5.1. Function
AsignaTrustforSettlementandClearing(Asigna)operatesasaclearinghouseforderivatives;
itspurposeistoactasacentralcounterpartyforderivativecontractstradedontheMexican
DerivativesExchange(MexDer),aswellasderivativecontractsreceivedfromtradingplatforms.
Asigna settles and clears credit exposures from derivative transactions it receives, through
differentpolicies,proceduresandmethodologiesthatallowAsignatoidentify,measure,and
managerisksassumedthroughitsroleasacentralcounterparty.

5.5.2. Description
Asigna was established as a trust in 1998 in BBVA Bancomer, S.A., part of the commercial
bankinggroup,GrupoFinancieroBBVABancomer,andauthorizedbytheSHCP.UntilAugust
2014, the law allowed Asigna only to settle and clear transactions executed on MexDer.
Afterwards,itwasallowedtoreceivederivativetransactionstradedonothertradingplatforms.

a. Participation
Asignasdirectparticipantsareclearingmembers,whichmustbeconstitutedasmanagement
andpaymenttrustsandobtaintheapprovalofthederivativesclearinghouse.Itshouldbenoted
thattheSHCP,afterreceivingtheopinionoftheCNBVandBancodeMxico,reservestheright
to veto the approvals. Anyone may be constituted as a clearing member, as long as this is
throughcommercialbanksorbrokeragefirmsastrustees.Clearingmembersarecoobligors
withAsignaoncontractedresponsibilitiesontheirownaccountsoronbehalfofcustomers.

b. Recordingoperations
Asignahastwomechanismsforactingasacentralcounterpartyforatransaction.Inthecase
of transactions negotiated through MexDer, Asigna automatically becomes a central
counterpartyafterthesaleandpurchaseagreementofaderivativetransaction.Subsequently,
theoperationisassigneddirectlytotheaccountsofeachclientkeptbytheclearingmemberin
Asigna.ThedirectassignationinAsignaoperationsdependsonthecomplianceriskcontrols
establishedbytheclearingmember,whichareexecutedbeforethetransactiononMexDer.On
theotherhand,inthecaseoftransactionsonothertradingplatforms,Asignainterposesitself
asacentralcounterpartythroughthenovationofthepreviouslyexecutedcontracts.Through
novation,theoriginalagreementbetweenthepartiesisextinguishedandreplacedbytwonew
contracts,onebetweenAsignaandtheseller,andanotherbetweenAsignaandthebuyer.To
carryoutthenovationofanexecutedtransactiononplatforms,theparticipantsmustmeetthe
risk control requirements established by Asigna for all participants. Under the applicable
regulations,pretransactionalriskcontrolrequirementsmustconsidertheexposurelimitsof
clearingmembers,andtheoperationallimitsestablishedbytheclearingmembersapplicable
totheirclients.

19
InthecasesreferredtoinArticle320oftheLMV.
BancodeMxico
c. Clearingandsettlement
Theclearingstructureconsistsofgroupingandoffsettingtherisksofcontractsaccordingtothe
correlationbetweenthemandtheirunderlyingrisks.Thisisdoneforeachclearingmember
accountand,inturn,foreachsubaccountmaintainedforeachcustomer.Theresultsofthe
clearingdeterminethefinancialresourcesthatclearingmembersmusttransfertoAsigna,for
the management and risk mitigation services performed, both, on behalf of the clearing
memberandonbehalfofitscustomers.Clearingisperformedevery10minutesduringtheday,
and for each execution, Asigna conducts a valuation of the positions of every account and
subaccountheldbytheclearingmember,anddeterminestherequirementsforthefinancial
resources to be transferred. At the end of the operating day, Asigna informs the clearing
membersofthefinancialresourcestobetransferredthenextdayandthussettletheircurrent
riskexposures.Thisprocessoccursthroughdailysettlements20.However,Asignamayrequire
thetransferoftheseresourcesduringtheoperationaldayintheeventthattheexposurelimits
permitted by the clearinghouse are exceeded, or if specific market conditions present
themselves.Thisprocessisknownasextraordinarysettlement.

d. Riskmanagement
Asigna establishes rules, procedures and methodologies to identify, measure, monitor and
managetherisksassumedinitsroleasacentralcounterparty.OnceAsignainterposesitselfas
acentralcounterpartyinaderivativecontract,itrequeststhedeliveryofpostedcollateralfrom
the clearing members as initial margin to cover future credit exposure from derivative
contracts. To accomplish this, Asigna estimates the economic loss that the default of a
participantcontractorcontractswouldrepresenttoit,giventhetimeitwouldtaketoclose
thedefaulted contracts. Particularly, the initial marginis calculatedbasedontheestimated
distributionoffutureexposureandassumingaconfidencelevelforasingletailof99percent.21
Clearingmembersmayrequireahigherinitialmarginfromtheirclientsbasedontheircredit
riskprofile.EligiblecollateralisaccountedforinthecontributionsfundestablishedbyAsigna
and is identified through segregation at the client and clearingmember level. In order to
includemarketpricevariationsonthecurrentexposure,Asignadebitsandcreditsthevariation
marginamongparticipantaccounts.Asignaevaluatesopenpositionsthataremarkedtomarket
and transfers the corresponding amounts to a counterparty to settle any loss (or gain)
generated by these positions. At the end of the derivative contract, on the due date, and
accordingtotheexerciseofthederivativecontract(e.g.,deliveryoftheunderlyingcontracts),
Asignamayrequireitsparticipantstotransferadditionalmargintomitigateliquidityriskand
defaultrisk,inthecaseofdeliveryoftheobligatedpartysunderlyingcontract,throughthe
alreadymentionedguarantees.Thus,Asignamitigatestheriskstowhichitisexposedalongside
thelifeofthederivativecontractsinwhichitactsasacentralcounterparty.

Asignamustensure,withahighdegreeofcertainty,thatitmaintainsthenecessaryfinancial
resourcestocoveritscurrentandfuturecreditriskexposuresagainstitsclearingmembersand
20
Corresponds to the net amount of all financial resources requested by Asigna. The net amount covers
variationmargins(marktomarket)oftheswapcontractsandcollateralheldinAsigna.Thedailysettlement
includes,butisnotbelimitedto:i)optionpremiums;ii)optionexercise;iii)initialmargin;iv)defaultfund
contributions;v)interests,yieldsandfees;vi)swapcoupons;vii)variationmargins;viii)deliverymargins;ix)
paymentoftheunderlyingassets;andviii)pricealignmentinterest.
21
Asigna clears and reduces initial margin contributions based on the Theoretical Intermarket Margining
System(TIMS)usedbyinternationalderivativesmarkets.Thissystemcalculatesmarginatsubportfoliolevel
andaccountsforrelevantproductriskfactorsandportfolioeffectsacrossproducts.
BancodeMxico
their clients. Asigna has a compelling framework for stress testing under a broad range of
scenarios, including at least the default of the clearing member with the largest aggregate
creditexposure.Inaccordancewithinternationalbestpractices,alsoknownascover1,Asigna
has established rules, procedures, and a methodology for performing these tests and
communicatingtheresultstoseniormanagementandtheresultsthatdeterminetheresources
requirement.Asignamutualizesthefinancialresourcesrequiredforsuchtests,whichmustbe
transferredbyallclearingmemberstothecompensationfund.AccordingtoAsignaspolicies,
rules,andprocedures,thisfundwillmutualizelossesgeneratedfromthemanagementofthe
defaultofaparticipant,inordertoallowAsignatofulfilitsobligationsasacentralcounterparty.
Theresourcesprovidedbyclearingmemberstothecompensationfundshouldbeonlyincash
anddenominatedinMexicanpesos.

Additionally, Asigna must have a minimum amount of equity equivalent to 15 million
investmentunits(UDIs).BancodeMxicomayrequireAsignatomaintainagreateramount,
takingintoaccounttherisksthatAsignaincurs,consideringtheinternationalstandardsinthis
regard.Ontheotherhand,theclearingmembersmustalsomaintainaminimumamountof
equity,whichwouldbeadministeredbyitstrustee.Iftheclearingmemberonlyoperateswith
Asignaonitsown,itmusthaveatalltimesanequivalentamountofequityover2.5million
UDIsortheamountdeterminedintermsofthemethodologyestablishedbyAsigna.Ifaclearing
memberoperatesonbehalfofathirdparty,orbothonitsownandonbehalfofthirdparties,
Asignamusthaveatalltimesanequivalentamountofequityover5millionUDIs,ortheamount
determinedintermsofthemethodologyestablishedbyAsigna.Themethodologyinquestion
mustbeapprovedbyBancodeMxico.

Incaseofdefaultofanyoftheclearingmembers,Asigna,ingeneralterms,andinaccordance
withitsfinancialsafeguards,usesitsfinancialresourcesinthefollowingorder:
1.Initialmarginofthedefaultedclient.
2.Fundsdepositedbytheclearingmemberinthecompensationfund.
3.Minimumamountofequityoftheclearingmember.
4.50%oftheAsignaminimumamountofequity.22
5.Resourcesprovidedbyotherclearingmemberstothecompensationfund.
6.Theremaining50%ofAsignaminimumamountofequity.

Inthefifthstepofthepreviouslist,Asignamayrequiretheclearingmembertoreconstitute
the financial resources of the compensation fund, on up to two occasions. Subsequently,
clearing members may exert their option to retire from Asigna, according to the terms and
conditionsestablishedbyit.Asignawillusetheremainderofitsminimumamountofequityto
coveritspaymentobligationsinordertoreducetheexposureoftheclearinghouse.Forthis
potentiality,Asignahasestablishedmechanismsofcloseoutpositionsandtheliquidationand
terminationofcontractsrelatedtothepositionsindefault.

Additionally, Asigna maintains a collateral risk management framework for the financial
resourcesitoperates,therisksthatcomefromthemanagementofeligiblecollateral,andthe
settlement of its operations. In the case of eligible collateral, the regulation establishes the
22
TheequityofAsignaisthesumoftheminimumequityestablishedinTripartiteRules(15millionofUDIS),
anysurplusandanyrequirementthatcentralbankmayrequesttoAsigna.TheequityofAsignaispartofits
financialsafeguardincaseofadefaultevent.
BancodeMxico
typesofcollateralAsignacanaccept,includingcashandgovernmentsecuritieswithlowcredit
risk,liquidityrisk,andmarketrisk.BancodeMxicomayauthorizecollateraldifferentfrom
thosetypessetoutintheregulation.Asignahasestablishedprudentialmeasuresforvaluation
practicesandthedevelopmentofhaircuts,whichareregularlytestedandtakeintoaccount
stressedmarketconditions.Similarly,inordertoreducetheneedforprocyclicaladjustments,
Asignaestablishespoliciesandprocedurestoreviewandcalibratethehaircuts.Thecollateral
amounts are settled through commercial banks, including cash, securities and currencies.
Asignahasrulesandprocedurestoclearlydefinethepointatwhichthesettlementisfinal.
Securities settlements occur through a credit institution depositor in DALI; and cash
settlements,byacreditinstitutionparticipantthroughSPEI.

e. Feestructure
ThechargesmadebyAsignaforservicesrenderedaredeterminedbythetechnicalcommittee
ofthetrustofthecentralcounterparty.Inordertoestablishfees,thecommitteeshouldtake
intoconsiderationtheadministrativecostsoftheclearinghouseand,whennecessary,increase
the equity of Asigna. Asigna publishes clearing and settlement fees on its website. In
accordancewiththeTripartiteRules,Asignamustnotifytheauthorities(theSHCP,CNBVand
BancodeMxico)ofintendedamendmentstothefeestructure.Theauthoritiesmayobjectto
theseamendments.

5.5.3. BestpracticesapplicabletoAsigna
ThefollowingtableshowsthePrinciplesthatapplytoAsigna.

Principlesthatapplytocentral Relevantaspects
counterparties
Principle1:Legalbasis Applicable.
Principle4:Creditrisk Applicable.Duetoitscharacteristics,Asignaisrequired
to fulfill cover 1 criteria (i.e., it must have sufficient
resources to comply with its obligations in a timely
manner upon the default of the participant with the
largestcreditriskexposure).
Principle6:Margin Applicable.
Principle7:Liquidityrisk Applicable.Duetoitscharacteristics,Asignaisrequired
to fulfill cover 1 criteria (i.e., Asigna must have
sufficientresourcestocomplywithitsobligationsina
timelymanneruponthedefaultoftheparticipantwith
thelargestliquidityriskexposure).
BancodeMxico
Principle9:Moneysettlements Applicable.ImplementedviaSPEIthroughan
intermediarybank.
Principle10:Physicaldeliveries Applicable.
Principle12:Exchangeofvalue Applicable.AsignausestheDvPserviceprovidedby
settlementsystems DALI,throughanintermediarybank.
Principle13:Participantdefaultrules Applicable.
andprocedures
Principle14:Segregationandportability Applicable.
Principle16:Custodyandinvestment Applicable.Investmentassetsaresetattheregulation
risks level.
Principle17:Operationalrisk Applicable.Theobjectiverecoverytimeissetatthe
levelofCNBVregulation,or2hours,tobereducedto
30minutes.
requirements
Principle19:Tieredparticipation Applicable.
arrangements
Principle20:FMIlinks Notapplicable.Asignadoesnotmaintaindirectlinks
tootherFMIs,onlyindirectlinkswithSPEIandDALI,
andthesedonotgeneratecreditandliquidityrisk.
effectiveness

ThelegalframeworkfortheoperationofAsignaisestablishedmainlyintheRulesApplicable
toParticipantsofDerivativeMarkets(TripartiteRules),jointlyissuedbytheSHCP,CNBV,and
BancodeMxico.TheTripartiteRulessetoutthecriteriaforbecomingacentralcounterparty,
theobligationsassumedfortheservicesprovided,andtheriskmanagementmethodologiesto
befollowed.

Additionally,AsignaissubjecttothePrudentialProvisionsApplicabletoParticipantsofFutures
andOptionsExchangesissuedbytheCNBV,whichtakeintoaccounttheopinionsofBancode
Mxico and the SHCP, and aim to establish guidelines for the operation of central
counterparties,suchasminimumstandardsfortheintegrationofthetechnicalcommitteeof
the central counterparty and the establishment of internal control systems and transaction
monitoringfeatures.

BancodeMxico
TheTripartiteRulesconferonBancodeMxico,withinthescopeofitspowers,supervisory
authorityoverderivativeclearinghousesandclearingmembers.Inaddition,thecentralbank
has various powers to promote the proper operation and risk management of the central
counterparty,andcomplianceinoperationsinwhichAsignaisareciprocalcreditoranddebtor.

5.5.6. BancodeMxicostoolsforregulation
The Tripartite Rules confer on Banco de Mxico various powers, jointly with the CNBV,
regarding the regulation of derivatives clearinghouses established in Mexico. In this order,
Banco de Mxico has several regulatory tools applicable to Asigna, among which are the
following: the approval of the methodology to set the amount of the minimum initial
contributionstobetransferredbyeachclearingmembertoAsigna,themethodologytodefine
thecreationofthecompensationfundandaclearingmembersminimumamountofequity,
and the clearinghouses liquidity plan. Furthermore, as mentioned, Banco de Mxico may
requireahigherminimumamountofequityoftheclearinghouseandapprovetheassetsthat
inwhichitcanbeinvested.

Overall,BancodeMxicohaspowerstorequestamendmentstotheclearinghouseandclearing
membersbylawswhenitconcludestheyareunsuitableormaydeterhealthypracticesinthe
market.

5.6. BancodeMxicosDerivativesTradeRepository
5.6.1. Function
Inaccordancewiththetaskofpromotingboththesounddevelopmentofthefinancialsystem
and the optimal functioning of the payment systems, Banco de Mxico provides trade data
registration and repository services for derivate transactions conducted by national
counterparties. Specifically, the report on the derivative transactions main economic terms
aims to provide accurate and timely information on the derivative market, for different
proposes. These may include systemic risk analysis, market regulation and surveillance,
prudential supervision and crisis management. Moreover, the Banco de Mxico trade
repositoryprovidesotherfinancialauthorities23withreliable,complete,andtimelyaccessto
itsdata,intheaimofsupportingpublicpolicyprojects,improvingtheauthoritiesresourcesfor
fulfilling their mandates, and improving market transparency for derivative financial
instruments.BancodeMxicopublishesonitswebpageaggregatedataonopenpositionsand
transaction volumes on a daily basis. Due to its powers of informationsharing with foreign
authorities and in order to access information held in foreign trade repositories, Banco de
Mxicos trade repository is considered to be a key instrument for enhancing market
transparency,aswellasaprudentialpolicytoolforsystemicriskassessment.

5.6.2. Description
Traderepositoriesareentitiescharacterizedbythemaintenanceofanelectronicdatabaseof
derivatives market transactions, mainly with the aim of obtaining information on derivative
financialtransactionsintheOTCmarket.TraderepositorieshaveemergedasanewtypeofFMI
23
BancodeMxicohasthecapacitytosharetradederivativesinformationwithforeignfinancialauthorities
providedaninformationexchangeagreementsignedbyBancodeMxicoexistswiththerequestingforeign
financialauthority.
BancodeMxico
and have grown in importance because of the severe lack of transparency in the OTC
derivatives markets faced by authorities during the global financial crisis of 2008. In this
context, this infrastructure has gained importance, especially due to its data dissemination
functionsamongfinancialauthoritiesinvariousjurisdictions.

Currently,thereexistsomeprovisionswithrespecttothereportingofderivativestransactions
inMexico.TheRulesforderivativetransactions(Circular4/2012),issuedbyBancodeMxico,
requires credit institutions, securities firms, investment companies, limitedscope financial
institutions,andtheRuralFinancialInstitutiontoreporttheirderivativestransactionstoBanco
deMxico.Since2005,BancodeMxicohasprovidedtradedataregistrationandrepository
services.Themaincharacteristicsofthereporteddataareestablishedinstandardreporting
forms.

Foreachtransaction,BancodeMxicotraderepositoryinformationcomprisesthefollowing:
unique product identifier; unique legal identifier or a unique identification for the
counterparties not subject to the reporting requirement; product identification; asset class;
producttype;notionaltradedamount;valuationmethodology;andexchangecurrency,among
othercontractterms.
BancodeMxicoisresponsibleforcreatingandmaintainingthestandardsanddefinitionsused
forthereporteddata.Inthecaseofaderivativetransactiontradedbetweentwoentitiesto
whichthereportingrequirementapply,bothcounterpartiesmustreportthetransactionand
maketheconfirmationreport.24BancodeMxicoqualitychecksonthederivativesinformation
reportsareperformedviaavalidationprocessconsistingoffourmajorstages.First,abatchof
fieldvalidationisperformed,inwhichthesystemverifiesthatthedatasubmittedineachfield
iscompatiblewiththeallowablevaluesforeachfield.Thesecondprocessistheconsistency
validation,referringtothevalidationperformedoncetheinformationissubmitted,including
thecomparisonofconsistencybetweencounterparties(onlyforinterbanktransactions);each
transaction heldbetween themhasto beconsistentinallfields. The third phaseinvolvesa
widervalidationprocedurecarriedoutbytheendofthemonth,usingaggregatedinformation
obtainedbyBancodeMxicothroughdifferentrequirements,suchasaccountingstatements,
capitalizationandsteeringliquidityforms,aswellasotheraggregatedinformation;withthis
information certain reported fields are verified. Finally, also by the end of each month, the
reporting institutions have to recognize and review the economic terms of all outstanding
transactions,viatheconfirmationofeachoftheirtransactionsinthedatabase.

AmongthemechanismsusedtoidentifyreportingerrorsandensurethequalityoftheOTC
derivatives transactions data at the Trade Repository is the format, content and syntax
validationprocess.Ifreportingerrorsaredetectedafterthereporthasbeenmade,Bancode
Mxicostraderepositorynotifiesthereportingcounterpartyinorderforthemtoreportthe
transactionsagainwithintwobusinessdays.

24
The reporting information system has a mechanism to avoid double counting. Banco de Mxicos trade
reporting system is capable of identifying each unique transaction (considering the transaction date, the
uniqueidentifier,andothereconomiccontractterms,anddefinedbyauniquetransactionnumber).
BancodeMxico
Accessto TR dataenablesauthorities todetectfinancialmarket riskexposures.The market

aggregateinformationdisclosureanditsavailabilityforpublicconsultationthroughtheBanco
deMexicowebsitebenefitthegeneralpublicandprovideformarkettransparency.

SeveralMexicanlawsempowerdifferentfinancialinstitutionstotradederivativetransactions
anddelegateBancodeMxicotheauthoritytoregulateandsupervisetheconditionsunder
whichthosetransactionswillbecarriedout.Forthatreason,BancodeMxicopublishedits
Rulesforderivativetransactions,Circular4/2012;thisregulationrequiresbanksandbrokerage
firms to report their derivatives transactions to the central bank. Moreover, regarding
exchangeofinformation,theCreditInstitutionsLawstatesthattheinformationcollectedby
Banco de Mexico and protected by confidentiality provisions can be shared with foreign
financial authorities provided they sign an informationsharing agreement with Banco de
Mexico.

5.6.4. PrinciplesthatapplytoBancodeMxicosDerivativesTradeRepository.
Principlesapplicabletotrade RelevantIssues
repositories
Principle1:LegalFramework Applicable.
Applicable.
comprehensivemanagementofrisk
Principle15:Generalbusinessand Applicable. But not significant as operations are
operationalriskmanagement conductedbyBancodeMxico.
requirements
Principle19:Tiredparticipation Notapplicableduetooperationalstructure.
arrangements
Principle20:FMIlinks Notapplicable.NolinkswithotherFMIs.
Principle21:Efficiency Applicable.
Principle24:Disclosureofmarketdata Applicable. This is the most important principle
bytraderepositories applicabletoTRs,giventhatitisrelatedtoinformation
sharingwithMexicanandforeignfinancialauthorities
and public dissemination of aggregated derivative
transactionsinformation.
BancodeMxico
BancodeMxicoitselfoperatestheBancodeMxicoderivativestraderepositoryandactsas
itsregulator.25BancodeMxicohastwocommitteesinchargeofsupervisingandpromoting
the central banks proper functioning, including the management of reporting systems and
informationstorage.ThosecommitteesaretheInternalControlSystemMonitoringandAudit
Committees.
BancodeMxicosoversightpowersareapplicabletoforeigntraderepositoriesregisteredin
Mexico and central counterparties that provide trade reporting services. Circular 4/2012
enables Banco de Mxico to apply supervisory powers to the foreign trade repositories
registered in Mexico. The Tripartite Rules define Banco de Mxico supervisory powers
regarding central derivatives counterparties that provide trade repository services, as
authorizedbyBancodeMxico,theCNBVandtheSHCP.

BancodeMxicoisalsoauserofthetradereportingsystemandasourceofinformation,not
onlyfornationalbutalsoforinternationalauthorities,intheaimofsupervisingandcontrolling
financialmarketrisks.

6. RetailpaymentinfrastructuresinMexico
6.1. NationalElectronicClearinghouse(CCEN)
6.1.1. Role
CecobanistheoperatorofCCEN26andistheonlycompanyauthorizedbyBancodeMxicoto
provide clearing services for interbank operations for checks, deferred electronic funds
transfers (TEFs), and direct debits. On day 1, CCEN concentrates and processes information
fromtheamountsoperatedinthethreeservicestogeneratefilesforclearing27.Thenextday,
Cecoban transmits the files to Banco de Mxico. The central bank calculates the difference
betweenthecreditoranddebtorpositionsforeachparticipantinordertoestablishthevalue
ofthefinalobligationstobesettledinSIAC.

In this regard, the importance of CCEN in the economy is that it facilitates electronic funds
transfersanddeferreddebitsbetweenclientsofdifferentbanksanddecreasesthetransaction
costsforsystemparticipants.

25
AccordingtotheTripartiteRules,BancodeMxicohasonlythesupervisoryrolewithrespecttothetrade
repositoriesinformationservicesissuedbythecentralderivativescounterparties.
26
CmaradeCompensacinElectrnicaNacional,astheNationalElectronicClearinghouseisknownin
Spanish.
27
Alongwithadjustmentsandreturns.
BancodeMxico
6.1.2. Description
In1982,BancodeMxicoandcommercialbankscreatedtheBankingComputerCentertrust,
or Cecoban. In 1997, the trust was extinguished, and Cecoban became a private company
ownedby37financialinstitutions,whichownandoperateCCEN.

a.Participation
To participate in CCEN, commercial banks and development banks must be Cecoban
shareholdersthroughcontributiontoCecobanscapital.Allshareholdersmustownthesame
number of shares. In this sense, Cecoban should allow entry to shareholders and provide
clearingservicesonequaltermstoallbanksthatmeetthestandards,technicalrequirements,
andobtainauthorizationbythecompetentauthorities.

b.RelationshipwithotherFMIs
SettlementismadewithcashaccountskeptbyparticipantsinSIAC.

c.Registeringoperations
ParticipatingbankssendCCENamountsfortransactionswithpaymentinstruments:
Interbank checks, which are physical documents received by a bank and issued by
anotherbank.
Deferredelectronicfundstransfers,inwhichthecustomerinstructshisbanktocharge
hisaccountandsendthefundstoanaccountinanotherbank.Thatpaymentwillbe
creditedatleastonebusinessdayafterinstruction.
Directdebits,inwhichtheownerofadepositaccountauthorizesathirdparty(e.g.,a
telephonyserviceprovider)todebitthataccount.

d.Clearingandsettlement
Withtheinformationreceived,CCENrunsaprocesstodeterminebilateralpositionsbetween
eachpairofparticipantsforeachpaymentinstrumentandsendsthatinformationtoBancode
MxicosClearinghousesSystem(SICAM),whichisresponsibleforclearinganddeterminesthe
finalnetpositionofeveryparticipantinordertosettlethosepositionsinthecurrentaccounts
participatingbanksmaintaininSIAC.

Onanormaltradingday,thebankssendtheinformationonpaymentsprocessedwitheach
payment instrument to CCEN. Cecoban validates the information and notifies banks of the
resultsbefore8:30p.m.

ThroughtheSICAMandaccordingtothefilesreturnedbythebanks,CecobandeliverstoBanco
de Mxico, at 7:30 the following day, the information on payment instruments that each
institutionpresented,aswellasinformationconcerningrefundsandadjustments.Basedon
thisinformation,theSICAMcalculatesnetpositionsforeachinstitution.28
28
Thenetpositionsconsiderexchangefeesforinterbanktransactions.
BancodeMxico

For participants with a net debit position calculated by the SICAM, instructions are sent to
chargethevaluetotheaccountsthattheseentitieshaveintheSIAC.Subsequently,through
thesamesystem,instructionsareissuedtocreditthecorrespondingamountsontheaccounts
ofparticipantswithanetcreditbalance.

Whenanentityhasanetdebtposition,BancodeMxicoverifiesthatitsresources(theaccount
balanceintheSIACorunusedcollateralwithBancodeMxico)meettherequiredobligations.

e.RiskManagement
Tominimizefinancialrisks,institutionsmaygrantcreditlinestoeachother,whichmaybeused
up to the amount that is required according to the results of the clearing process and the
payment capability of the lending bank in the SIAC. The credit line granted to any other
institutionmaynotexceed30%ofthenetcapitaloftheborrowerinstitution.

Tomitigateoperationalrisks,Cecobanhastwooperatingsites,oneprimaryandonealternate.
Thesesiteshavethenecessaryinfrastructuretoprovideservicewithoutinterruptionincaseof
contingency.Also,theinfrastructurehasaprivatenetworkthatsupportscommunicationwith
eachparticipant.

F.Fees
ThefeeschargedbyCecobanfortheservicesofferedaretieredanddependonthenumberof
transactionspresentedbyeachparticipant.Inaccordancewithmonthlytradingvolume,each
bankischargedthesumofitstransactionfees,whichconsistoftwoparts:afixedfeeanda
progressivelytieredfee.

6.1.3. BestpracticesthatapplytoCCEN
Due to the value of the payments processed by CCEN, it is not considered a systemically
important FMI, so Banco de Mxico does not require compliance with PFMIs. However, the
centralbankencouragesCCENtoimplementsomeofthePFMIbestpractices.
PFMIsthatapplytotheCCEN Keyaspects
Principle3:Frameworkforthe Partiallyapplicable.Therequirementistoidentifyand
comprehensivemanagementofrisks managerelevantrisks.
Principle4:Creditrisk Partiallyapplicable.Therequirementistomanagerisk,
but not to meet the coverage requirements for the
failureofoneortwoparticipants.
Principle5:Collateral NotapplicableduetoCCENsoperatingstructure.
Principle7:Liquidityrisk Partiallyapplicable.Therequirementistomanagerisk,
but not to meet the coverage requirements for the
failureofoneortwoparticipants.
BancodeMxico
Principle8:Settlementfinality Not applicable. The amount is settled according to

level, and finality is not considered indispensable.
However, settlement is made in the SIAC, where
transactionsarefirmandirrevocablebylaw.
Principle9:Moneysettlements Not applicable. The amount is settled according to
level, and money settlements are not considered
indispensable. However, settlement is made in the
SIAC,withmoneyfromtheparticipantsincentralbank
accounts.
andprocedures
Principle15:Generalbusinessrisk Not applicable. Due to the amounts involved, this
principledoesnotapplytoCCEN.
Principle16:Custodyandinvestment Not applicable. Because of operating structure, this
risks principledoesnotapplytoCCEN.
requirements
Principio19:Mechanismsof Not applicable. Due to operating structure, this
participationwithseverallevels principledoesnotapplytoCCEN.
Principle20:ConnectionwithFMI Applicable.
Principio21:Efficiencyand Applicable.
effectiveness
Principle22:Rulesandcommunication Applicable.
procedures
proceduresandmarketdata
Circular3/2012(DisposicionesAplicablesalasOperacionesdelasInstitucionesdeCrditoyde
la Financiera Rural), establishes, among other things, the characteristics that a potential
clearinghouse must submit to Banco de Mxico to act as such. Some of them are: the
establishmentofanadministrativeboardandamanualthatdefinestheoperationalrulesand
implementation procedures consistent with sound banking practices; the obligations of the
participants to engage the services of a clearinghouse; and the characteristics, limits, and
executionofthecreditlineswhichparticipantscangranteachotheruponthesettlementof
thedocumentsinquestion.Theprovisionsmentionedinthemanualandamendmentstoit
requireapprovalbyBancodeMxicobeforebecomingeffective.

In conjunction with Circular 3/2012, there is an operating manual for each of the payment
instrumentsforwhichCecobanprovidesservice.Theseoperatingmanualsdescribetherules
andoperatingproceduresofCCEN,participants,andsettlementinstitutions.

BancodeMxicoregulatesCCEN.ThroughCircular3/2012,thecentralbankestablishesthe
rulesfortheconformationandoperationoftheclearinghousesofchecks,deferredelectronic
fundtransfers,anddirectdebits.
BancodeMxico

In accordance with Cecobans statutes, Banco de Mxico is also a member of CCENs
administrativeboard.Thecentralbankholdsthispositionwithavoicebutnovote,andwith
theauthoritytovetointendedresolutions.

6.1.6. BancodeMxicostoolsforregulation
Banco de Mxico authorizes changes to Cecobans internal rules, operation manuals, and
statutes.Moreover,the bankmay induce changes intheoperationofthis clearinghouse by
issuingregulations.
6.2. Clearinghousesforcardpayments
6.2.1. Role
Currently,therearetwoclearinghousesthatproviderouting,clearingandsettlementservices
fordomesticinterbankcardtransactions:ProsaandEGlobal.Theseclearinghousestransmit
information on card payments and cash withdrawals, and compute the difference between
creditanddebitpositionsforeachparticipant,inordertoestablishthevalueoffinalobligations
sotheycanbesettledatasettlementbankviaSPEIpaymentinstructions.

TheimportanceofProsaandEGlobalasclearinghousesisthattheyfacilitatetheoperations
with payment cards of different banks customers and reduce transactional costs among
systemparticipants.

6.2.2. Description
According to Banco de Mxicos Circular 4/2014 (Reglas Aplicables a las Cmaras de
Compensacin para Pagos con Tarjeta), these clearinghouses are operators of centralized
processing mechanisms through which are implemented the actions corresponding to the
exchange, between acquirers and issuers, of requests for payment authorization, payment
authorizations,paymentrejections,returns,adjustmentsorotherfinancialobligationsrelated
topaymentcards,includingclearing.

a. Participation
Prosa and EGlobal provide the routing services required for payment authorization and
paymentrequestmessagesforfurtherclearingandsettlement.Inthissense,foranentityto
receive services from these clearinghouses, it must sign a provisionofservices contract, in
whichthecharacteristicsoftheservicesprovidedandsubsequentconsiderationsaredetailed.

b. RelationwithotherFMIs
ThesettlementofthenetbalancesoftheoperationsprocessedinProsaandEGlobalismade
viaSPEIthroughasettlementbank.Theclearinghousesdonothaveadirectconnectionwith
SPEI.

c. Registeringoperations
Theprocessbywhichinformationinaninterbanktransactionistransmitted,anddebitsand
creditstothecardholderandthepaymentsreceiveraremade,isasfollows:
1. Theuseruseshiscardtomakeapurchase.
BancodeMxico
2. Fromthedeviceusedforthatoperation(pointofsale),arequestforauthorizationof
the transaction is sent to the acquirer bank, which in turn transmits it to the
clearinghouse.
3. Theclearinghousesendstheinformationtotheissuerbankofthecardholder,either
directly or through another clearinghouse when the issuer does not have a contract
withthefirstclearinghouse.
4. Theissuerbankcheckstheaccountbalanceorthecreditlineofthecardholderandruns
processestoverifythatthetransactionisauthentic.
5. Theissuersendsananswertotheacquirerbankindicatingiftheoperationproceedsor
not. Subsequently, the issuer banks transmits the answer to the device used for the
operation.
6. Providedtheoperationwasaccepted,theuserreceivesthegoodsorservices,whilethe
issuer bank retains (provides) the amount of the operation from the cardholders
accountorcreditline.
7. At the end of the operating day, merchants perform a cutoff of the card payments
chargedduringtheday,andtheysendtheresultstotheclearinghousesthroughtheir
acquiringbanks,sothattheclearingandsettlementprocessestakeplace.
8. Once the issuer bank receives the resulting figures from the authorizedpayments
clearingprocess,itchargesthecorrespondingamount(previouslyprovided)fromthe
cardholdersaccount.
9. Finally,oncetheoperationissettledbytheissuerbank,theacquiringbankcreditsthe
beneficiarysaccountwiththecorrespondingamount.

CashwithdrawalsmadeatATMsareprocessedinasimilarwaybytheclearinghouses.

Regardingtheclearingprocess,everybankingday,ProsaandEGlobaldeterminethepositions
ofeachparticipantoncardpaymentsandcashwithdrawals.Subsequently,theyinstructthe
settlementoftheresultingbalancesthroughtherespectivesettlementbanks.

Overdrawninstitutionsmustsendcorrespondingcreditstothesettlementbankbymeansof
SPEIpaymentinstructions.Throughthesamepaymentsystem,eachsettlementbankmakes
the corresponding credits to the accounts of the participants with a credit balance. The
settlementendsnolaterthan3:30p.m.

e. Riskmanagement
Inordertomitigatefinancialrisk,paymentcardstructuresarefinanciallyresponsibleinthe
eventofafailureinthesettlementbyanyoftheparticipants;inotherwords,theymustvouch
for missing amounts if necessary.29 Currently, there are three card structures operating in
Mexico:MasterCard,VisaandCarnet.

Regardingoperationalriskmanagement,theCondicionesparaelIntercambioentreCmaras
deCompensacinparaPagosconTarjetadescribesthesecuritystructuresandstandardsthat
ProsaandEGlobal,aswellasanypotentialnewclearinghouse,mustmeet.Theyemphasize
29
In the rare event that the amount provided by the card company is not sufficient for settlement, the
settlementagentshallallocatetheavailableresourcesamongtheaffectedparticipants,inproportiontothe
bilateralamountgeneratedagainstthedefaultingparticipant.
BancodeMxico
communication protocol requirements, measures for the confidentiality of sensitive

information,andbusinesscontinuityplanning.
f. Feestructure
WhenCircular4/2014wentintoeffect,theclearinghousesceasedtoapplyfeestructuresthat
generated some price distortions, such as the bundling of services and volume discounts.
Additionally, charges between clearinghouses for transmitting information or connection to
eachotherwereeliminated.
6.2.3. Bestpracticesappliedtocardpaymentclearinghouses
Duetothevalueofthetransactionsprocessed,ProsaandEGlobalarenotconsideredtobe
systemicallyimportantFMIs,soBancodeMxicodoesnotrequirecompliancewiththePFMIs.
However, the central bank seeks implementation of some of the best practices within the
PFMIsintheseclearinghouses.

Principlesthatapplytocard Keyaspects
paymentsclearinghouses
comprehensivemanagementofrisk managerelevantrisks.
butnotnecessarilytomeetthehedgerequirementsfor
thefailureofoneortwoparticipants.
Principle5:Collateral Notapplicableduetooperatingstructure.
butnotnecessarilytomeetthehedgerequirementsfor
thefailureofoneortwoparticipants.
Principle8:Settlementfinality Not applicable. The range of amounts that settle are
notconsideredessential.
Principle9:Moneysettlements Not applicable. The range of amounts that settle are
Principle12:Exchangeofvalue Not applicable. Operations that settle two assets are
settlementsystems notconducted.
andprocedures
Principle15:Generalbusinessrisk Not applicable. The range of amounts that settle are
Principle16:Custodyandinvestment Notapplicableduetooperatingstructure.
risks
requirements
Principle19:Mechanismsof Notapplicableduetooperatingstructure.
participationwithseverallevels
Principle20:ConnectionwithFMI Notapplicable.NointeractionwithotherFMIs.
BancodeMxico
effectiveness
Principle22:Rulesandcommunication Applicable.
procedures
TheTransparencyandFinancialServicesArrangementAct(orLTOSF,asitisknowninSpanish)
defines a clearinghouse, sets out Banco de Mxico powers on these infrastructures, and
establishessomeoperationalandratecharacteristicsthatmustbeaccomplished.

OnthebasisoftheLTOSF,Circular4/2014establishesthetermsandconditionsapplicableto
clearinghouse functioning and operations where the purpose is to process card payment
instructions, and also establishes the requirements with which such clearinghouses must
comply and the procedures to be followed to request Banco de Mxico authorization to
organizeandoperateinthatcapacity.Inaddition,Circular4/2014establishestheobligationof
theparticipantsinthecardpaymentnetworktodefineanddelivertoBancodeMxicoforits
authorization a document that integrates the conditions for the exchange between card
paymentsclearinghouses.

Finally,theCondicionesparaelIntercambioentreCmarasdeCompensacinparaPagoscon
Tarjeta establishes the operating procedures related to clearinghouse interconnections,
payments processing, and the procedures to pay obligations arising from the transactions
processed.

BancodeMxicoisthecardpaymentsclearinghousesregulator.Generally,theLTOSFregulates
clearinghouses.BancodeMxicoissuedCircular4/2014,whichsetstherulestoorganizeand
operateasacardpaymentsclearinghouse.

As a result of the application of the clearinghouse regulations, various benefits have been
achievedintermsofcompetition,30efficiency,security,andtransparencyinthesystem.

6.2.6. BancodeMxicostoolstoregulatecardpaymentsclearinghouses
BancodeMxicohasthepowertoauthorizeclearinghousestoactassuch,andtoauthorize
and request changes to a clearinghouses internal rules. In addition, Banco de Mxico may
requiresuchclearinghousestoprovideinformation,carryoutinspectionsandsupervisions,as
wellaspenalizecasesofnoncompliance.

TheCondicionesparaelIntercambioentreCmarasdeCompensacinparaPagosconTarjeta,
authorizedbyBancodeMxico,establishesthecardtransactionsoperatingprocedures.They
instructparticipantsinthecardpaymentsnetworktocreateanexecutivecommitteemadeup
ofrepresentativesofthedifferenttypesofmarketparticipantsinthecardpaymentsnetwork
30
Mitigationofdistortionsinpriceschargedclearingcardpaymentsresultedinthereductionoffees
chargedtosmallerscaleparticipants,whichpromotesamoreprogressiveandcompetitivestructure.
BancodeMxico
(e.g., issuers, acquirers, clearinghouses, trademarks and payment facilitators), which should
serve as an organism that regulates operating structure, proposes modifications to the
exchangeconditionsbetweenclearinghouses,andrequestsBancodeMxicoauthorizations.

6.3. Clearinghousesformobilepayments
6.3.1. Role
In March 2015, Banco de Mxico authorized the first mobilepayment clearinghouse, the
Mobile Payments Operator Society of Mexico (or OPM, as it is known in Spanish).31 Among
otherfunctions,theOPMprocessesinformationontransfersinitiatedthroughmobiledevices
andcalculatesthedifferencebetweentheassetanddebtorpositionsforeachparticipant,in
ordertoestablishthevalueofthefinalobligationstobesettledbypaymentinstructionsvia
SPEI.

Inthisregard,theOPMsimportanceasamobilepaymentclearinghouseisthatitfacilitates
paymentswithpaymentinstrumentstocustomersfromdifferentbanksandlowerstransaction
costsbetweensystemparticipants.

6.3.2. Description
Currently,severalbanksofferservicesintheMexicanmobiletransfermarket.However,most
ofthemuseSPEItosendtransferstootherbankaccounts.Therefore,thisexplanationwillfocus
ontheOPM,sincethisinfrastructureallowstheroutingofinterbanktransferapplicationsand
authorizationsthroughmobiledevicesfortheirsubsequentclearingandsettlementbetween
differentparticipants.

InaccordancewiththeReglasparaCmarasdeCompensacindeTransferenciasatravsde
DispositivosMviles(Circular3/2013)issuedbyBancodeMxico,theOPMisacentralentity
through which payment instructions are exchanged to complete electronic funds transfers
betweendepositaccountsinitiatedfromamobiledevice.Inthissense,theOPMsendsand
receives messages related to transfers made by participants through mobile devices,
determinesthedebitandcreditbalancesamongitsparticipantsresultingfromtheexchanges
oftheordersinquestion,andinstructsparticipantstoliquidatethecorrespondingpositions
throughtransfersinSPEI.

a. Participation
ForalegallyconstitutedcorporationtoreceiveOPMservices,itmustsignaservicesprovision
contractestablishingthegeneraltermsandconditionsgoverningtheprovisionofservices.

Inaddition,theOPMshouldallowaccessbypotentialparticipants,onequalterms,fromany
creditinstitutionoranyclearinghouseauthorizedbyBancodeMxico.

b. RelationshipwithotherFMIs
ParticipantssettlenettransferbalancesthroughSPEIonmobiledevicesthathavebeencleared
bytheclearinghouse.

c. Registeringoperations
31
Twobanksandatelephoneoperatorconstitutedthatsociety.
BancodeMxico
What follows is a description of the process of registration, clearing and settlement of

transactionsbetweenaccountswhicharenothostedbyTransfer,amobilepaymentclearing
house.Forthispurpose,thereceiverhasanaccountthatisnotassociatedwithTransfer,while
theoriginatordoeshaveanassociatedaccount.

Theprocessbeginswhentheoriginatorsends(atanytimeofdayandanydayoftheweek)a
text message (SMS) with the receivers cell phone number and the amount of the transfer.
Uponreceivingtheoperationinstruction,thetransferringentitydeterminesitsviability.Ifthe
validationsarecorrect,theoriginatorreceivesanSMStoenterthePINandconfirmationofthe
transaction.Theclearinghousemakesthechargetotheoriginatorinrealtimeandinstructs
thereceiverbanktomakethepaymentforitsaccountholder.32

Regardingclearing,theOPMdeterminestwiceduringeachbankingdaythenetpositionsof
eachparticipantresultingfromthetransferordersexchangeandsendsacompensationfileto
eachparticipant.Thefirstclearingfileisgeneratedat8:00a.m.,andthesecondat4:00p.m.
Eachclearingfileincludesthegenerationdateandtime,thetotalnumberoftransfersandthe
detailsoneach,andthedebitorcreditbalanceofeachparticipant.Bysubmittingtheclearing
file,theclearinghouseinstructsparticipantstosettlebalanceswitheachotherwithin24hours
throughSPEIfundtransfers.Inthisway,theuseofSPEIforpaymentssettlementfacilitates
systeminteroperability.33

e. RiskManagement
In order to reduce financial risks, the clearinghouse imposes collateral requirements on its
participantstoaddresstheobligationsderivedfromparticipationintheinfrastructure.

In addition, to reduce operational risks, the OPM stores all information related to its own
accountsandtransactionprocessinginamaindatacomputercenterandinabackupthathosts
acopyofthisinformation.

f. Fees
Finally,withregardtothefeeschargedbytheOPMtoinstitutionsforservicesrendered,two
rate structures are followed. In the first, the participant pays a fee to the OPM for clearing
servicesforeachtransaction.Inthesecond,theparticipantpaysahigherfeetotheOPMfor
clearing services and the hosting of accounts for each transaction carried out. 34 Thus, the
contractingofservicesisnotconditionedontheacquisitionofotherservices,norarediscounts
applieddependingonoperationvolumeorparticipantcharacteristics.

In addition, the OPM should allow access to potential participants, including any credit
institutionsorclearinghousesauthorizedbyBancodeMxico,onequalterms.

32
Transferreceptionismadefrom6:00a.m.to5:30p.m.duringbankingdays.
33
TheOPMallowsinteroperabilitybetweendifferentbanks,butnotbetweentelephoneoperators.
34
Inadditiontotheabove,thereisafeeforinstallation,integration,andplatformdevelopment,whichispaid
onceanewparticipantobtainsaccesstotheplatformindependentlyofhiringahostingservice.
BancodeMxico
6.3.3. Bestpracticesthatapplytomobilepaymentclearinghouses

Becauseofthevalueofthetransactionsprocessed,theOPMisnotconsideredasystemically
important FMI, and thus Banco de Mxico does not require compliance with the PFMIs.
However,thecentralbankencouragestheOPMtoimplementsomeofthebestpractices.

Principlesthatapplyto Relevantaspects
mobilepaymentsclearinghouses
Principle2:Governance Notapplicable.
comprehensivemanagementofrisk managerelevantrisks.
butnottomeetthehedgerequirementsforthefailure
ofoneortwoparticipants.
Principle5:Collateral Notapplicableduetooperatingstructure.
butnottomeetthehedgerequirementsforthefailure
ofoneortwoparticipants.
Principle8:Settlementfinality Not applicable. The range of settled amounts is not
consideredessential.
Principle9:Moneysettlements Not applicable. The range of settled amounts is not
Principle12:Exchangeofvalue Does not apply. Does not perform operations that
settlementsystems settletwoassets.
andprocedures
Principle15:Generalbusinessrisk Not applicable. The range of settled amounts is not
Principle16:Custodyandinvestment Notapplicableduetooperatingstructure.
risks
requirements
Principle19:Tieredparticipation Notapplicableduetooperatingstructure.
arrangements
Principle20:FMIlinks Notapplicable.DoesnotinteractwithotherFMIs.
effectiveness

BancodeMxico
The LTOSF defines a clearinghouse, sets out the Banco de Mxico powers over these
infrastructures, and establishes some operational and fee characteristics that must be
accomplished.

Based on the LTOSF, Circular 3/2013 establishes the terms and conditions applicable to the
functioningandoperationoftheseclearinghouses,aswellastherequirementstomeetand
the procedures to be followed to request Banco de Mxico authorization to organize and
operateinthatcapacity.
Finally,theManualdeOperacionesparaCmarasdeCompensacindeTransferenciasatravs
deDispositivosMvilesestablishestheOPMoperatingprocess,aswellasinternalstandardsto
whichtheclearinghouseanditsparticipantsadhere.

Banco de Mxico is the regulator of the OPM, a mobilepayment clearinghouse. The LTOSF
regulates clearinghouses. Banco de Mxico issued Circular 3/2013, which sets the rules for
mobilepaymentclearinghouses.

6.3.6. BancodeMxicostoolstoregulatemobilepaymentclearinghouses
Circular 3/2013 establishes that mobilepayment clearinghouses must provide Banco de
Mxicowithinformationanddocumentationrelatedto:(i)participantsintheclearinghouse;
(ii) the volume and transfer amounts made through mobile payments by each of the
clearinghouseparticipants;(iii)thevolumeandrefundamountsofmobilepaymentsexchanged
foreachoftheclearinghouseparticipants;and(iv)contingencyeventsrecorded.

ItalsoestablishesthatiftheOPMintendstomakeanychangestoitsbylawsorinternalrules,
itmustobtainpriorwrittenauthorizationfromBancodeMxico,whileitsinternalrulesmust
adheretocentralbankregulationissuedonthematter.

6.4. Paymenttechnologies
6.4.1. Descriptionandscope
Technologicalinnovationhasgivenrisetonewwaystomakepaymentselectronically,inmost
cases more efficiently. In particular, the development of the market for electronic payment
funds(electronicmoney)isnoteworthy.Electronicmoneyisdefinedasamonetaryvaluethat
isdigitallystoredviaelectronicormagneticmeansandisdenominatedinlegaltendercurrency
andissuedagainstfundsreceivedinthesamecurrencywiththepurposeoftransferringfunds,
potentiallyunitsofthesamemonetaryvalue,amongthirdparties.Electronicmoneyoffersthe
possibility of making payments to entities different from the issuer or exchanged for legal
tender funds. Access to bank account services and personal savings are excluded from
electronicmoneyproducts.Inthisregard,BancodeMxicoismonitoringthedevelopmentof
thismarketinordertoidentifythebenefitsassociatedwiththistypeofproductaswellasany
potentialriskfortheusers.

Inadditiontoelectronicmoney,virtualwalletsandvirtualassetsareotherinnovationsseenin
recentyears.
BancodeMxico

Anelectronicwallet(ewallet)isaservicethatmainlyallowsuserstomakepaymentsusing
softwareexecutedfromanelectronicdevice(e.g.,smartphone,tablet,orcomputer).Tomake
thetransaction,anelectronicwalletservesasapseudonymofafinancialproduct(e.g.,bank
account,creditordebitcard,prepaidorgiftcard).Thatis,theconsumerentersinformationon
thefinancialproductintheelectronicwalletwhichcanbeusedtomakepaymentsinshops.

Becausevirtualwalletsareameansofaccesstoalreadyregulatedfinancialproducts,theydo
notrepresentachallengetomonetarypolicyorfinancialstability,providedtheycomplywith
measuresthatensureuserinformationsecurityandprivacy.Therefore,thesedevelopments
shouldhelptoreducetransactioncostsandimprovepaymentsystemefficiency,byproviding
userswithmoreconvenientaccesstofinancialproducts.

On the other hand, virtual assets are storage mechanisms, and they exchange electronic
informationtowhichcertainusersassignavalue,butwithoutthesupportofanyinstitution,
so they are not a legal tender.35 These innovations have two main characteristics: they are
assets,andsomeofthemusedistributedaccountingrecordsthatallowforelectronicvalue
exchangewithoutintermediaries.

Astothefirstcharacteristic,likeanyotherassets,valueisdeterminedonthebasisofsupply
anddemand.Fromthepointofviewofsupply,computerizedprotocolsusuallydeterminethe
rateofassetcreation.Fromthepointofviewofdemand,pricevolatilityishighbecauseuseis
morerelatedtospeculativeadoptionpurposes,whicharestilllimited.

Amongthemaindisadvantagesoftheseassets,inadditiontohighvolatility,arelackoflegal
protectionandpotentialuseinillicitactivities.Inaddition,ifadoptionbecomeswidespread,
theycouldleadtodifficultiesformonetaryandfinancialauthorities(e.g.,lossofseigniorage
revenueforcentralbanks).

The second characteristic that some virtual assets have is the use of distributed accounting
records,themaininnovation.Usersgenerallystorethecryptographicinformationthatgives
themaccesstovirtualassetvaluesindigitalwallets.Totransfervalues,userssendamessage
tothenetwork,whereanalgorithmhandlesregistryandvalidatesit.Structuresofthevirtual
assetregistrationandvalidationprocessvaryandofferdifferencesintermsofspeed,efficiency,
and safety; however, most of them have in common the elimination of a central entity to
processandvalidatethetransactions.

One of the key potential benefits of distributed accounting records is the reduction of
transactioncosts:thepossibilityofsendingapaymentwithoutacentralentityallowingcertain
transactions(e.g.,remittances),whicharemadefasterandatlowercost.

6.4.2. BancodeMxicospolicyregardingnewpaymenttechnologies
Asmentioned,virtualwalletsareameansofaccesstoregulatedfinancialproducts,sothat,to
theextentthattheproductsaresafe,BancodeMxicohasnotbeenfacedwiththeneedto
issueregulationoralertusersorfinancialinstitutionsofpotentialconsequencesoftheiruse.
35
March10,2014pressreleasebyBancodeMxico.
BancodeMxico

Virtual assets have not seen significant penetration in Mexico, and do not currently pose
greaterrisktothefinancialsystemorthepaymentsystems.However,BancodeMxicohas
warnedthepublicabouttherisksinherentintheacquisitionoftheseassetsandtheiruseas
substitutesforconventionalmeansofpayment.Someofthecharacteristicsofvirtualassetson
whichBancodeMxicohaswarnedthepublicarethefollowing:

TheseassetsarenotlegaltenderinMexico,asBancodeMxicohasnotissuedor
supported them. Similarly, they are not foreign currency, because no foreign
monetaryauthorityissuesorsupportsthem.
Theydonothavelegaltenderofpaymentobligations,sotheirfunctionasameans
of payment is not guaranteed, given that merchants and other individuals are not
requiredtoacceptthem.
BancodeMxicodoesnotregulateorsupervisethem.
The regulated institutions in the Mexican financial system are not allowed to use
themorperformoperationswiththem.
Other jurisdictions have indicated their use in illegal operations, including those
relatedtofraudandmoneylaundering.
There is no warranty or regulation to ensure that consumers or merchants that
acquiresuchassetscanrecovertheirmoney.
Becauseoftheirhighlyspeculativenature,thepriceinMexicanpesosorintermsof
other currencies set by people who accept trade with these assets shows great
volatility.

Inadditiontowarningthepublicaboutthepotentialrisksassociatedwiththeuseofvirtual
assets,BancodeMxicowillmonitortheirdevelopment,sinceinnovationsmayoccurthathelp
toincreasetheefficiencyoffinancialmarketsandthepaymentsystems.
7. Crossborderandforeigncurrencydenominatedpayments
Crossborderandforeigncurrencydenominatedpaymentsarethosethatinvolvethetransfer
orreceiptoffundsfromotherjurisdictionsorincurrenciesotherthanMexicanpesos.Banco
de Mxico is involved with three infrastructures related to this type of payment: Directo a
Mxico,36theContinuousLinkedSettlement,andthedomesticU.S.dollarinterbankpayment
system,knownbyitsSpanishacronymSPID.37Additionally,BancodeMxico,infulfillmentof
itsmandate,strivestoensurethattheglobalpaymentsystemthatinvolvestransactionswith
firmsandindividualsinMexicofunctionsproperly.

7.1. BancodeMxicospolicyregardingcrossborderandforeigncurrency
denominatedpayments

36
Meaning,DirecttoMexico.
37
SPIDistheSpanishacronymforSistemadePagosInterbancariosenDlares.
BancodeMxico
Crossborder payments are important to economic activity and the development of

internationaltrade.BancodeMxicospolicywithrespecttothesepaymentsisthattheybe
conductedsecurely,efficiently,andinaccordancewithbestpractices,whilestrictlyabidingby
theregulationsofeachjurisdictioninvolved.Additionally,thecentralbankspolicyofsecure
andefficient paymentsystemsoperatedaccordingtobestpracticesappliestosystemsthat
settleinforeigncurrencies.

7.2. DomesticU.S.dollarinterbankpaymentsystem(SPID)
7.2.1. Function
SPIDisapaymentsystemthatefficientlysettlesfundstransfersbetweenlegalpersonsU.S.
dollaraccountsinMexico.ThesystembeganoperatinginApril2016.

7.2.2. Description
ThegrowingintegrationofMexicointheglobaleconomyimpliesthatasubstantialfractionof
transactionsinmanyproductionchainsisdenominatedinU.S.dollars,evenwhentherelated
activityoccurswithinthecountry.Asaresult,itisessentialforfirmswithobligationsindollars
tohaveaccesstoasafeandefficientmechanismfordollarfundstransfers.

BeforeSPIDbeganoperating,therewerethreemechanismsthroughwhichtoconductfunds
transfers between dollar accounts with domestic banks: i) through foreign correspondent
banking services with banks in the United States, ii) with checks in dollars, through the
clearinghousethatservesthatpurpose,andiii)throughdomesticbanksdollaraccountswith
otherdomesticbanks.

SPIDallowsforreduceduseofthethreemechanismscurrentlyinplacefortransfersbetween
twodollaraccountsbelongingtolegalpersonswhoareclientsofparticipatingbanksinMexico.
Additionally, the system: i) gives authorities greater operations visibility and traceability, ii)
establishesstrictcontrolsforantimoneylaunderingandcombattingthefinancingofterrorism
(AML/CFT),towhichfirmsseekingtousethesystemaresubject,iii)providesasafe,quick,and
inexpensive electronic funds transfer alternative to dollar payments in checks and cash, iv)
reducestheliquidityneedsandcostforthissortofoperation,sincebanksandfirmscankeep
theiroperatingbalanceinoneplace,andv)enhancescompetitionintheforeignexchangeand
dollarfundstransfersmarkets.

a. Participation
Participation is limited to commercial and development banks that offer dollar accounts,
provided they offer this service only to legal persons based in Mexico that keep a deposit
accountindollarswiththebank.Additionally,participatinginstitutionsmustfulfillenhanced
duediligence requirements related to AML/CFT, as well as strict requirements concerning
business continuity, cybersecurity, and verification of information contained in their clients
files.

FundingandsettlementinSPIDareachievedthroughtheparticipantsdollaraccountsinthe
SIAC,anotherofBancodeMxicosFMIs.Theliquidityandfundingstructureisdetailedlater
inthissection.

BancodeMxico
Before SPID, dollar transfers between firms in Mexico could be conducted through the
clearinghouse operated by Cecoban and settled by Banco Monex, through foreign
correspondentbanking,orthroughdomesticbanksdollaraccountsatotherdomesticbanks.
SPIDrepresentsanalternativetoatleastpartiallysubstitutetheuseoftheseinfrastructures
with an efficient and inexpensive system that also offers more rigorous controls from an
AML/CFTstandpoint.

c. Hoursofoperation
SPIDs hours of operation are 8:00 a.m. to 2:00 p.m. every business day in Mexico, and
participantsprocesspaymentordersfromtheirclientsupto30secondsbeforeclosingtime,
having conducted the required AML/CFT checks without any time limit in which to do so.
Additionally,receivingparticipantshave15minutesafterclosingtimeduringwhichtheymay
onlyprocesspaymentreturns.

d. Registeringoperations
SPIDusesanopenprotocolbasedonmessagestocommunicatewithitsparticipants,which
allowsthemtoconnecttoSPIDwiththeirownsystems,therebycompletelyautomatingtheir
paymentservicesandallowingthemtoofferbetterservicestotheirclients.Participantsuse
digital certificates to register operations and other important messages, guaranteeing the
participantsidentity,nonrepudiationofamessagebytheparticipant,andtheintegrityofthe
information.

MessagessentthroughSPIDcontaindetailedinformationontheissuerandbeneficiaryofthe
fundstransfer.ThemessageincludesfieldsthatallowrigorousAML/CFTchecks,includingthe
issuersIPaddress,auniquefieldinpaymentsystemsthatisusefulforconductingpreventive
processes.

e. Fundingandsettlement
Dollarliquiditycanbedepositedorwithdrawnthroughthesamemechanismthatiscurrently
used to fund dollar accounts in SIAC, through participants and Banco de Mxicos
correspondentbanksintheUnitedStates.AparticipantcanaddfundstotheirSPIDaccountby
transferringdollarsfromtheiraccountinSIACandtheiraccountinSPID,aswellasthrough
transfers received in the system. Analogously, a participant can withdraw their balance by
transferringdollarstotheiraccountinSIACorthroughthesettlementofpaymentssentinSPID.

Settlementoftransferorderstakesplaceinfrequentsettlementcyclesinwhichthesystems
algorithmdetermineswhichpendingorderscanbesettledefficientlywiththeavailablecash
balanceinparticipantsaccounts.

TransfersinSPIDaresettledexclusivelyusingtheresourcesthatbankshaveinthesystem,and
nocreditisextendedbyBancodeMxicooramongbanks.Intheeventthataparticipantdoes
nothavesufficientfundstosettleaninstructedoperation,thetransferwillnotbecompleted,
andSPIDwillplaceitinaqueuetobesettledlaterintheday.If,bytheendofthehoursof
operation,anyordershavebeenqueuedduetoinsufficientresources,thesearecanceled,and
BancodeMxicokeepsarecordofthequeuedoperations.

Participants may fund their SPID accounts through Banco de Mxicos correspondent bank
between8:00a.m.and1:30p.m.,MexicoCitytime,everydaythatisbothabusinessdayin
BancodeMxico
MexicoandintheUnitedStates.Participantsthatinstructtheircorrespondentbanktomakea
transfertoBancodeMxicoscorrespondentbankmustregisterthetransferinSIACbetween
7:45p.m.and1:30p.m.onabusinessdayinMexico.Inordertowithdrawfundsfromtheir
SPIDaccount,participantsmayinstructatransfertobemadetotheirdollaraccountinSIAC
andsendthefundstotheircorrespondentbanksintheUnitedStatesfromthere.

f. Riskmanagement
FinancialrisksarelimitedinSPIDsincethesystemdoesnotextendcreditandsettlespayments
with funds kept by participants in the system. While there is a risk involved in using a
correspondent bank to maintain the systems operating balance, this type of risk is already
managed and for much larger amounts in the central banks foreign reserves operations
through the contracting of several banks correspondent banking services and the
establishmentoflimitsforeachbankaccordingtotheriskitrepresents.

As for operational risks, SPID, like SPEI, was developed with the aim of facilitating straight
through processing of payments, which minimizes manual input and the risk that entails.
Additionally,thesystemhasanalternateoperationsiteandbusinesscontinuityplansinplace
shouldoperationbeinterruptedordelayed.

AsisthecasewithSPEI,paymentinstructionsaredigitallysignedbyparticipantstoensuretheir
authenticity, nonrepudiation by the issuer, and the integrity of the information contained
therein.OtherimportantmessagessuchassettlementnoticesaredigitallysignedbyBancode
Mxico.Furthermore,allcommunicationbetweenthesystemanditsparticipantsisencrypted
toprotectconfidentialinformation.
g. Feestructure
Thefeestructureisdesignedtoencouragetheoptimaluseofthesystemandnotconstitutea
barrier to entry, while recovering SPIDs development, maintenance, and operating costs.
Banco de Mxico charges a fixed annual fee and a monthly fee based on the number of
paymentsinstructionsmadebyeachparticipant.

h. Antimoneylaunderingandcombattingthefinancingofterrorism(AML/CFT)
Banco de Mxico is committed to following the best practices regarding AML/CFT. Each of
SPIDsparticipantsmustconducttherequiredchecksbasedontheriskprofileofeachofits
clientswishingtosendpaymentsthroughthesystem,andhasuntiltheendofthehoursof
operation in which to do so. The review processes are conducted according to each
participants internal policies, following guidelines established by Banco de Mxico for the
automated monitoring of unusual behavior and screening of officially recognized lists of
personsassociatedwithillicitfunds,terrorism,orthefinancingthereof.

Additionally,SPIDsRulesestablishrequirementsforbankstoidentifytheirclientsusingthis
serviceandtoincludeinthepaymentmessageinformationtoidentifytheclientthatinstructs
thepaymentaswellasthebeneficiary.Inordertoprovidethedollarfundstransferserviceto
afirm,banksmusthavetheclientstaxidentificationnumber(knownbytheSpanishacronym
RFC, with the disambiguation code known as the homoclave), as well as a valid electronic
signature (now known as the e.firma, previously the FIEL), and must verify validity and
authenticityperiodically.

BancodeMxico
Thesystemcentralizestheinformationondollarfundstransfers,providingdetailsoneachof
these to the authorities and facilitating the use of tools to monitor, prevent, and possibly
restrictpaymentsthatmayberelatedtoillicitactivity.Inparticular,ananalysisofSPIDtransfers
can beincorporatedin theindicators andinformationmodelsthathavebeendeveloped to
analyzetransfersprocessedthroughSPEIinordertoidentifypatternsandunusualtypologies
thatmayposearisktothepreventiveprocessesoffinancialinstitutionsthatparticipateinSPID.

7.2.3. Bestpracticesthatapply
ThefollowingtableshowsthePrinciplesthatapplytoSPID.

Principlesthatapply Relevantaspects
topaymentsystems
Principle1:Legalbasis Applicable.FundamentalforallFMIs
Principle2:Governance PartiallyappliesduetoCPMI/IOSCOexceptionsfor
systemsoperatedbycentralbanks.
Principle3:Frameworkforthe Frameworkformanagingoperationalrisks.
Principle4:Creditrisk Does not apply since the central bank does not
extend credit in SPID, nor do participants do so
amongthemselvesinthesystem.
Principle5:Collateral DoesnotapplysinceSPIDdoesnotusecollateral.
Principle7:Liquidityrisk SPID is not exposed to liquidity risk since it only
settles payments that do not overdraw accounts,
ensuringthatparticipantscannotdefault.
Principle8:Settlementfinality ConsideredintheLaw.
Principle9:Moneysettlements SPIDusesfundsthatparticipantsdepositatBanco
de Mxicos correspondent bank in the United
Statestomakethemoneysettlementsderivedfrom
thesystemsoperations.
Principle12:Exchangeofvalue Does not apply since SPID does not conduct
settlementsystems operationsthatinvolvesettlingtwoassets.
Principle13:Participantdefaultrules Does not apply since, by design, SPID does not

andprocedures generatefinancialobligations.
Principle15:Generalbusinessrisk PartiallyappliesduetoCPMI/IOSCOsexceptionsfor
systemsoperatedbyacentralbank.
Principle16:Custodyandinvestment There is a risk involved in operating with a
risks correspondent bank; however, Banco de Mxico
alreadymanagesthisriskthroughforeignreserves.

Principle17:Operationalrisk Constitutesthemainriskthatmustbemanaged.
Principle18:Accessandparticipation ConsideredinSPIDsRules.
requirements
Principle19:Tieredparticipation Does not apply, since all participants are direct
arrangements participants.
BancodeMxico
effectiveness

SPID,asasystemmanagedbythecentralbank,issubjecttotheBancodeMxicoLaw,which,
inadditiontotheobjectiveofpromotingthesounddevelopmentofthefinancialsystemand
the proper functioning of payment systems, empowers the central bank to regulate funds
transfers through financial institutions. The internal rules and participation and functioning
rulesaredefinedinRegulation4/2016(SPIDsRules)aswellasisoperatingmanual,issuedby
BancodeMxico.Additionally,participatinginstitutionssignacontractwithBancodeMxico
thatdefinestherightsandobligationswithrespecttotheprovisionofservicesrelatedtothe
system.

TherequirementsrelatedtoAML/CFTarebasedonthegeneralprovisionsofarticle115ofthe
CreditInstitutionsLaw.

BancodeMxicosmainroleswithrespecttoSPIDareregulatorandsupervisor.Initsroleas
regulator, and in accordance with the central banks function of regulating the payment
systems,thePaymentsSystemsLawempowersittoissueprovisionswiththeaimofpromoting
thesounddevelopmentofthefinancialsystem,theproperfunctioningofthepaymentsystems,
andtheprotectionofthepublicinterest,amongotherthings.TheBancodeMxicoLawalso
empowers it to supervise intermediaries and financial entities subject to the regulations it
issues. In addition to its roles as regulator and supervisor, the central bank is the owner,
manager,andoperatorofSPID.

7.2.6. Toolsforregulation
BancodeMxicosmaintoolsforregulatingSPIDsparticipantsarethesystemsoperatingrules
andtheparticipationrequirementscontainedinSPIDsRules,inadditiontooperatingmanuals.
Banco de Mxico also monitors compliance with the rules and contracts by supervising
participants.

7.3. DirectoaMxico
7.3.1. Function
DirectoaMxicosfunctionistooffermoneytransferservicesfrombankaccountsintheUnited
StatestobankaccountsinMexicoonfavorabletermsforboththesendersandrecipients.

7.3.2. Description
Directo a Mxicos operators are Banco de Mxico and the United States Federal Reserve
System.InOctober2003,theseauthoritiesconnectedtheirpaymentsystemswiththeinitial
objectiveofsendingpaymentstoUnitedStatesgovernmentpensionerslivinginMexico.Asof
BancodeMxico
February2004,customersoffinancialinstitutionsregisteredwithDirectoaMxicocansend
paymentstoanybankaccountinMexico.

IndividualsintheUnitedStatescanrequesttransferstoanaccountinMexicofromabranch
officeofafinancialinstitutionregisteredwithDirectoaMxico.Inordertodoso,theymust
havethebeneficiarysname,thebeneficiarysstandardizedbankingcode(knownbyitsSpanish
acronym,CLABE),thenameofthebankwherethebeneficiaryhastheaccount,andtheamount
to be sent. The following day the corresponding amount in pesos is deposited in the
beneficiarys account. No deduction is made to the amount received by the beneficiary in
Mexico.Thecustomersendingthemoneypaysthecommissionfortheservice.Theexchange
rateappliedtoanymoneysentthroughDirectoaMxicoisoneofthebestinthemarket,Banco
deMxicosFIX38minus0.21%.

a. Participation
ParticipationinDirectoaMxicoisopentoallcommercialbanksintheUnitedStates,which
needonlyregisterfortheservice.MexicanbanksneednotregistersinceallSPEIparticipants
areabletoreceivetransferstocredittheirclientsaccounts.

DirectoaMxicoisconnectedtotheFedACHpaymentsystemintheUnitedStatesandtothe
SPEIpaymentsysteminMexico.

c. Registeringandsettlingoperations
Clients of participating banks in the United States order funds transfers. The same day, the
banks instruct the transfers to the Federal Reserve System through the FedACH payment
system.ThefollowingdaytheFederalReserveSystemsendsthetransferinstructionsanddollar
amounttoBancodeMxico,whichthenconvertsthedollarstopesosthroughanexchange
operator.Thecentralbanksubsequentlysendsthepesoamountstothebeneficiariesaccounts
through SPEI. Finally, receiving banks in Mexico credit the payments to the beneficiaries
accounts.

d. Riskmanagement
BydesigntherearenostrictlyfinancialrisksinDirectoaMxico(SPEIsrisksaredescribedin
therespectivesectionofthisdocument).TheoperationalriskscenariosforDirectoaMxico
areidentifiedandtheirmanagementisdescribedintheoperatingmanual,andinclude,among
others, the impossibility of using the normal mechanism to receive the Federal Reserve
Systemsfiles,theunavailabilityoftheexchangeoperator,aswellasprolongedunavailability
ofSPEI.

e. Feestructure
DirectoaMxicosfeestructureseekstooffercompetitivepricestoendusers.Theclient,when
usingDirectoaMxico,payslowcommissions(usuallylessthanfivedollarspertransfer)anda
convenientexchangerateisapplied;additionally,thecommissionandtheexchangerateare
thesameforeverytransferindependentlyoftheamountsent.

38
TheFIXistheinterbankreferenceexchangeratetosettleliabilitiesdenominatedinforeigncurrency
payableinMexico,whichBancodeMxicodeterminesandpublisheseverybusinessdayinMexico.
BancodeMxico
DirectoaMxicoisregulatedbyoperationalproceduresandrulesofoperation.

ThefollowingtableshowsthePrinciplesthatmayapplytoDirectoaMxico.

toDirectoaMxico
Principle1:Legalbasis Applicable.FundamentalforallFMIs
Principle4:Creditrisk Doesnotusecredit.
Principle5:Collateral Doesnotusecollateral.
Principle7:Liquidityrisk Liquidityriskdoesnotexist.
Principle9:Moneysettlements Centralbankmoneyisused.
Principle12:Exchangeofvalue Doesnotapply.
settlementsystems
Principle13:Participantdefaultrules Doesnotapplysincebydesignthesystemdoesnot
andprocedures createfinancialobligationsforparticipants.
Principle15:Generalbusinessrisk Doesnotapplysinceitisoperatedbycentralbanks.
Principle16:Custodyandinvestment Doesnotapplyduetooperationalstructure.
risks
requirements
Principle19:Tieredparticipation Doesnotapplyduetooperationalstructure.
arrangements
effectiveness
Since Banco de Mxico is the systems operator, it has ample powers to ensure its proper
functioning,gatherinformation,andconductoversightprocedures,aswellasmechanismsto
inducechangestothesystemsoperation.
BancodeMxico
7.4. ContinuousLinkedSettlement
ContinuousLinkedSettlement(CLS)isasystemthatprocessesoperationsintheglobalforeign
exchangemarket.Itsownersaresomeofthemajorfinancialinstitutionsparticipatinginthe
globalforeignexchangemarket.

7.4.1. Function
The CLSs function is to offer its participants exchange operation settlement in a payment
versuspaymentstructurethateliminatessettlementrisk(alsoknownasHerstattrisk).39CLSis
thesystemthatsettlesmostoperationsintheglobalmarketforparticipatingcurrencies.Atthe
endof2015,therewere17participatingcurrencies.

7.4.2. Description
CLS is a nonprofit entity that was born as the private sectors answer to their regulators
concerns surrounding the risks involved in exchange operations. It began operating in 2002
withsevenparticipatingcurrencies.Asof2008,itsettledMexicanpesooperationsaswell.CLS
operatesthroughCLSBank,charteredinNewYork.

a. Participation
CLSsparticipationcriteriaaredefinedinitsowninternalrules.Amongotherthings,therules
demand that a directly participating institution be a bank or the equivalent, become a
stockholder of CLS, and comply with the financial and operational requirements. Direct
participantscanoffersettlementservicesinCLStootherinstitutionsthatactasthirdparties.
CLSdoesnothavearelationshipwiththirdparties,sincetheseentitiesoperatethroughthe
directparticipantthatofferstheservice.

CLSrequiresrealtimeparticipationinpaymentsystemsforallcurrenciesthataresettledinthe
systemtoensureitsproperfunctioning.

c. Hoursofoperation
Settlementandfunding processestakeplaceinafivehourinterval,between7:00a.m.and
12:00p.m.CentralEuropeanTime.Paymentsystemsintheissuingcountriesofparticipating
currenciesmustbeopenandavailableduringthehoursofoperation.

d. Registeringoperations
Before the settlement date, participants register their operations and those of third parties
throughCLSssystems,whichauthenticate,match,andstoretheoperationsbyinfrastructure.
Participantscanrescindoperationspriortotheirsettlementdate.

e. Settlement
EverydayCLSoperatesasettlementcycle.Forthesettlementprocess,everyparticipanthasan
accountwithCLSineachparticipatingcurrency.CLSkeepsanaccountatcentralbanksandhas
39
Settlementriskinexchangeoperationsmaterializeswhenaparticipantdeliverstheagreedcurrencytothe
counterpartanddoesnotreceivethecorrespondingamountintheothercurrency.Thisriskisexacerbated
bytimedifferencebetweenthejurisdictionswheresettlementtakesplace.
BancodeMxico
access to each participating currencys issuing countrys payment system. Throughout the
settlement cycle, participants send funds to CLS in the various currencies through the
respectivepaymentsystem,whileCLSsettleseachoperationonitsbooksanddeliversfundsto
participantsthroughtherespectivepaymentsystems.

Priortothebeginningofthesettlementcycle,CLSconductsamultilateralclearingbasedon
existingoperationsforthesettlementdateandcalculatesthenetamountpercurrencythat
eachparticipantistoreceive(longposition)ordeliver(shortposition).Atthebeginningofthe
day, CLS informs each participant of these amounts and specifies the amount and times in
which to cover short positions. Participants with short positions then send, through the
respectivepaymentsystems,thenetpaymentsspecifiedbyCLS.CLSsettleseachoperationon
itsbookswiththeamountsreceivedinitsaccountsatcentralbanksanddeliversnetpayments
toparticipantswithlongpositionsthroughthecorrespondingpaymentsystem.

This infrastructure offers its participants liquidity windows. During the settlement cycle,
participantsoverdrawtheiraccounts;thiscanbeinterpretedasCLSallowingparticipantsto
settleanoperationonitsbookswhentheparticipantdoesnothavesufficientresourcesinthat
currency(participantscanincreasetheirbalancesinanaccountwhentheysendresourcesto
CLSsaccountattherespectivecentralbankorwhentheysettleoperationsintheirfavoron
CLSsbooks).Overdraftsmustbecoveredatalltimesbybalancesparticipantsmaintaininother
currenciessoastokeepanoverallnonnegativebalance.Theseoverdraftshavetwolimits,one
foreachcurrencyandoneforthesumofoverdraftsparticipantsmayhaveinallcurrencies.

f. Riskmanagement
CLSmanagesitsparticipantssettlementriskbycoordinatingbothlegsofexchangeoperations
andexecutingpaymentversuspaymentsettlements.Italsoreducesliquidityriskbyclearing
operations and only requesting or delivering net balances in each currency, as well as by
allowingoverdraftsinparticipantsaccountswithCLStofacilitatesettlement.Additionally,this
infrastructure has liquidity arrangements in place with banks in case a participant does not
coveritsoverdraftattheendofthesettlementcycle.Inthiscase,CLSandtheliquidityprovider
wouldconductanovernightswapoperationinwhichtheproviderwouldsendCLSthemissing
currencyandCLSwouldsendthecorrespondingamountinthecurrencyorcurrenciescovering
theoverdraft.Asforcreditrisk,overdraftsextendedbyCLSarecoveredatalltimesbybalances
inothercurrenciesatthesameFMI,towhichahaircutisappliedtomitigatemarketrisk.

CLS has a policy, framework, and specific procedures in place for the comprehensive
management of operational risk. The FMI considers all internal and external sources of
operational risk and manages them on an institutional foundation that has procedures to
identify, mitigate, and report these risks. Operational risk management is part of the
comprehensiveframeworkforriskmanagementinplace.

g. Feestructure
CLSsfeestructureconsidersthenumberofoperationseachparticipantprocessesinCLS,as
wellastheamountprocessed.Feesareestablishedasafunctionoftherangeofthevolume
andvalueoperatedbyeachparticipant.

BancodeMxico
CLSs regulatory framework is based on rules, operational procedures, contracts, and laws,
mainlyintheUnitedStatesandtheUnitedKingdom.CLSBankischarteredinNewYork,and
thereforeoperatesundertheregulationthatappliestobanksinthatjurisdiction.Additionally,
settlementfinalityinparticipatingcurrenciesdependsonthelegalframeworkoftherespective
issuingbank,andthus,CLSregularlyexaminesallrelevantjurisdictionsinordertoguarantee
thatsettlementremainsfinalandirrevocable.InMexico,thePaymentsSystemsLawandthe
CreditInstitutionsLawarethelegalbasisforfinalityofCLSpaymentssettledinSPEIandthe
inabilitytoseizeCLSssettlementaccount.BancodeMxicoRegulation17/2010concerning
SPEIs Rules establishes CLSs participation in SPEI, and Regulation 3/2012 specifies the
contingencymechanismtobeusedincaseswhereitisnotpossibletousetheSPEIaccountto
sendpaymentsinMexicanpesostoCLS.

ThefollowingtableshowsthePrinciplesthatapplytoCLS.

topaymentsystems
Principle1:Legalbasis Applicable.FundamentalforallFMIs.
Principle4:Creditrisk Applicable.
Principle7:Liquidityrisk Thecover1 criterionapplies,whichrequires the
FMI to settle its liabilities when faced with a
participant default creating the greatest liquidity
exposure.
Principle9:Moneysettlements Eachlegoftheexchangeoperationissettledinthe
accountwiththerespectiveissuingcentralbank.
Principle12:Exchangeofvalue Apaymentversuspaymentstructureisinplace.
settlementsystems
Principle13:Participantdefault Applicable.
rulesandprocedures
Principle16:Custodyand Applicable.
investmentrisks
Principle18:Accessand Applicable.
participationrequirements
Principle19:Tieredparticipation Applicable.
arrangements
BancodeMxico
effectiveness
CLSsmainregulatorandonlysupervisoristheUnitedStatesFederalReserve,whichpresides
over the infrastructures Oversight Committee, comprised of the central banks that issue
participating currencies.Participationon theCommitteeisBancode Mxicosmain toolfor
regulatingCLS.

7.5. Foreigncorrespondentbanking
7.5.1. Description
Foreign correspondent banking is comprised of relationships that domestic banks establish
withforeignbankstousethebankingservicestheyofferortooffertheirownbankingservices.
Ineithercase,thepurposeoftherespondentistoallowforoperationsinthecorrespondent
bankscountry.

Thegeneralwayinwhichpaymentsworkthroughcorrespondentbankingisasfollows.Ifbank
AwishestomakeapaymenttobankBinanotherjurisdictionwithwhichitdoesnothavean
account,itusestheservicesofanintermediarybankC,acorrespondent.Intheeventthatbank
CisabletosendpaymentstobankB,eitherbecauseithasanaccountwithbankBorbecause
bothbanksparticipateinthesamepaymentsystem,thechainendsthere.Otherwise,ifbank
CdoesnothaveadirectwaytosendpaymentstobankB,itcanusetheservicesofitsown
correspondentbankD,andsoonuntilthepaymentchainreachesbankB.

Amongthetypesofoperationsthatdomesticbanksuseabroadareelectronicfundstransfers,
tradedocuments,lettersofcredit,settlementofcreditanddebitcardoperations,andcash
managementservices.

The mechanisms of foreign correspondent banking consist of various elements that allow
domesticbankstoestablishcorrespondentbankingrelationshipswithforeignbanks.Among
these elements are laws and rules, trade and technological agreements, and electronic
messagingserviceproviders.

InMexico,mostbanksparticipateincorrespondentbankingrelationshipsasrespondentsand
someasprovidersofcorrespondentbankingservices.
7.5.2. BancodeMxicospolicywithrespecttoforeigncorrespondentbanking
Banco de Mxicos policy with respect to correspondent banking services is to strive for a
networkofcorrespondentsthatallowsforcrossborderoperationsandfacilitatesglobaltrade.
Additionally,itisthepolicyofthecentralbankthatthecountrysfinancialinstitutionsstrictly
abide by the regulations of the jurisdictions in which they have correspondent banking
BancodeMxico
relationships, especially regulation concerning antimoney laundering and combatting the

financingofterrorism.
8. Informationtechnologysecurity
8.1. Background
The number and severity of cybersecurity incidents that affect the operation of all types of
companieshavebeenincreasing,makinginformationtechnologysecurityapriorityissueforall
industries,especiallyforthefinancialsystem.

8.2. Riskstocybersecurity

ThesafeandefficientoperationofFMIsisessentialtomaintainandpromotefinancialstability
andeconomicgrowth.Ifnotproperlymanaged,FMIscouldcreateproblemsthataffectother
localandinternationalfinancialmarkets.Inthissense,aFMIslevelofoperationalresilience,
especiallywithregardtocomputersecurity,canbeadecisivefactorinhowreliableandrobust
afinancialsystemcanbe.

Cyberriskshaveaveryparticularnature.WhiletheseriskscanbehandledaspartofaFMIs
operationalriskstructures,theirspecialcharacteristicspresentmajorchallenges.

Persistent,motivatedattackerscarryoutsophisticatedcomputerattacks.Attackersdonot
necessarilyseektoobtainprofit,buttoprovokedisruptiveeventsthatresultinuncertainty
fortheusersoftheservicesorentitiesunderattack.Thisimpliesthat,unlikeotherrisks,
cyberattacksaredifficulttoidentifyandcompletelyeradicate,andsometimes,theextent
ofthedamageisdifficulttodetermine.
FMIsincreasinglydependontechnologytocarryouttheirdailyoperation.Thisimpliesthat
thereisawiderangeofentrypointsthroughwhichFMIscanbeattackedandcompromised.
Because of this dependency, cyberattacks and IT incidents can originate from many
sources,includingFMIparticipants,otherFMIs,orserviceandtechnologyproviders.Itis
alsopossiblethattheFMIsufferinganattackorITincidentcanspreadtheseattacksitself
tootherFMIs.
Unlikeoperationaldisruptionscausedbyphysicalevents,ITincidentsorcyberattacksare
unrelatedtohowbigorsmallanorganizationis.Asmallplayercanrepresentmoreriskfrom
theITsecuritypointofviewthanalargeorcriticalparticipant.
ITrisksfacenotonlyexternalsources.Disgruntledorcarelessemployeesarealsosources
ofpossiblecyberincidentsthatshouldbeassessedandprevented.
The nature of cyber incidents can disable the measures established to ensure business
continuity. For example, systems that maintain multiple copies of a FMIs operational
information, designed to protect sensitive information in a physical event (such as a
computerordatanetworkmalfunction)mayinsomecasesspreadmaliciousorinconsistent
informationincaseofacyberattack.
CyberattacksandITincidentscanbedifficulttodetectandcanspreadrapidlywithinan
organization. In addition, technological advances continuously create new vulnerabilities
and forms of cyberattacks. Therefore, FMIs must maintain updated protection and
BancodeMxico
monitoringstructuresthatlimittheabilityoftheattackerstocausedamagetooperations.
FMIsshouldimplementeconomicandorganizationaleffortstoachievethisgoal.

BancodeMxico,recognizingtheimportanceofcybersecurity,collaborateswithinternational
working groups to analyze the evolution of cyberattacks and IT incidents. This work can
generate general guidelines that serve as a reference for FMIs to develop security
infrastructureinlinewiththeiroperationalcharacteristics.Guidelineshelpthemtoprevent,
mitigate and, if necessary, recover operations quickly and reliably in case an event of that
naturematerializes.
8.3. BancodeMxicospolicyregardingcybersecurity
Inregardtocybersecurity,BancodeMxicoseekstheimplementationofeffectivecyberand
operationalsecuritymeasuresbyFMIsandinparticularitsownpaymentsystems,,promoting
robustmechanismsandproceduresbasedoninternationalguidelinesandstandards,inorder
to prevent and, where necessary, minimize the effects that IT incidents may have on the
operationofthoseinfrastructures.
9. Finalconsiderations
Asdescribedthroughoutthisdocument,BancodeMxicoestablishesitsobjectivesandpolicies
withrespecttoFMIsandtakesthenecessarymeasurestoexercisethosepoliciesandtofulfill
those objectives. The central bank constantly assesses the environment surrounding FMIs,
directandindirectparticipants,andthemarketstheyserveinordertoidentifytherisksand
opportunities that arise with new trends, markets, and even new FMIs, in addition to
identifyingapplicablebestpractices.Inthissense,BancodeMxicowillmakethenecessary
adjustmentstoitsobjectives,policiesandactions,andwillreflecttheminanylatereditionsof
thisdocumentthatmaybepublishedinthefuture.
BancodeMxico
Statisticalappendix
ThemainoperationalstatisticsforselectedFMIsareshownbelow(eachmonthsdailyaverage).
SPEI SIAC
Month Numberof Value Month Numberof Value
operations (millionsofpesos) operations (millionsofpesos)

Apr15 1,459,461 969,330 Apr15 216 28,135
May15 1,244,060 955,849 May15 227 33,240
Jun15 1,216,669 1,004,656 Jun15 227 29,879
Jul15 1,363,492 958,445 Jul15 227 29,828
Aug15 1,208,465 962,392 Aug15 228 24,104
Sep15 1,281,817 998,769 Sep15 219 28,568
Oct15 1,531,990 972,336 Oct15 220 24,546
Nov15 1,484,546 982,973 Nov15 225 38,698
Dec15 1,405,302 1,054,596 Dec15 209 26,741
Jan16 1,587,663 993,375 Jan16 214 27,011
Feb16 1,351,500 983,112 Feb16 222 23,514
Mar16 1,428,129 1,053,028 Mar16 231 29,657
Average 1,380,258 990,738 Average 222 28,660
Source:BancodeMxico Source:BancodeMxico
DALI
Month Numberof
Value
operations
(millionsofpesos)
(thousands)
Apr15 15 3,107,199
May15 15 3,034,257
Jun15 15 3,050,625
Jul15 15 3,093,473
Aug15 15 3,082,376
Sep15 14 2,926,209
Oct15 15 2,987,706
Nov15 15 2,947,506
Dec15 14 2,771,445
Jan16 14 2,943,325
Feb16 16 2,943,169
Mar16 16 3,024,900
Average 15 2,992,682
Source:Indeval
BancodeMxico
Clearingandsettlement Clearingandsettlement
Month operationsinAsigna Month operationsinCCV
Numberof Numberof
Value Value
operations operations
(millionsofpesos) (millionsofpesos)
(thousands) (thousands)
Apr15 45 6,422 Apr15 178 12,907
May15 113 15,892 May15 194 12,989
Jun15 63 9,694 Jun15 188 13,031
Jul15 36 5,832 Jul15 182 13,613
Aug15 51 8,700 Aug15 224 13,959
Sep15 85 13,865 Sep15 207 11,422
Oct15 50 7,194 Oct15 234 12,498
Nov15 46 6,973 Nov15 227 13,063
Dec15 90 13,951 Dec15 213 12,068
Jan16 49 7,820 Jan16 233 16,492
Feb16 79 12,016 Feb16 250 14,271
Mar16 47 9,093 Mar16 321 15,973
Average 63 9,788 Average 221 13,524
Source:Asigna Source:CCV
PaymentsprocessedbyCCEN

Transfers Directdebitpayments Checks
Month Payments Value Payments Value Payments Value
processed (millionsof processed (millionsof processed (millionsof
(thousands) pesos) (thousands) pesos) (thousands) pesos)
Apr15 91 2,795 102 378 331 9,280
May15 93 2,764 89 326 340 9,782
Jun15 90 2,691 93 354 336 9,793
Jul15 89 2,805 94 350 322 9,410
Aug15 90 2,796 92 342 309 9,245
Sep15 92 2,807 106 383 314 9,456
Oct15 90 2,883 99 361 305 9,303
Nov15 110 3,333 110 403 337 10,244
Dec15 105 3,469 107 451 338 11,678
Jan16 93 2,925 106 402 285 9,036
Feb16 98 2,945 111 414 308 9,389
Mar16 104 3,141 115 428 313 9,633
Average 95 2,946 102 383 320 9,687
Source:BancodeMxico
BancodeMxico
EGlobal Prosa
Month Numberof Month Numberof
Value Value
operations operations
(millionsofpesos) (millionsofpesos)
(thousands) (thousands)
Apr15 1,711 1,078 Apr15 3,155 1,536
May15 1,795 1,166 May15 3,305 1,654
Jun15 1,764 1,137 Jun15 3,248 1,625
Jul15 1,796 1,184 Jul15 3,272 1,657
Aug15 1,848 1,201 Aug15 3,437 1,733
Sep15 1,792 1,139 Sep15 3,280 1,635
Oct15 1,811 1,156 Oct15 3,281 1,635
Nov15 2,113 1,477 Nov15 3,634 2,000
Dec15 2,070 1,523 Dec15 3,877 2,354
Jan16 1,849 1,290 Jan16 3,481 1,901
Feb16 1,882 1,227 Feb16 3,303 1,816
Mar16 1,924 1,267 Mar16 3,461 1,794
Average 1,863 1,237 Average 3,395 1,778
Source:Eglobal Source:Prosa
DirectoaMxico
Month Numberof Value
operations (U.S.dollars)
Apr15 1,762 1,027,520
May15 1,891 1,120,997
Jun15 1,727 1,056,064
Jul15 1,850 1,137,432
Aug15 1,856 1,109,390
Sep15 1,703 1,010,897
Oct15 1,648 1,003,890
Nov15 1,788 1,065,236
Dec15 1,804 1,077,795
Jan16 1,731 1,036,951
Feb16 1,982 1,178,399
Mar16 1,734 1,058,141
Average 1,790 1,073,559
Source:BancodeMxico
BancodeMxico
CLS:Totalgrosssettlement CLS:GrosssettlementinMXN
Month Month Value
Numberof Value Numberof
(millionsofU.S.
operations (millionU.S.dollars) operations
dollars)
Jan15 900,716 5,113,789 Jan15 7,744 40,508
Feb15 823,444 4,800,682 Feb15 10,362 43,118
Mar15 976,129 5,234,361 Mar15 11,432 50,490
Apr15 793,594 4,524,142 Apr15 8,892 38,575
May15 813,456 4,621,273 May15 8,903 41,858
Jun15 918,704 5,118,660 Jun15 9,249 47,783
Jul15 823,084 4,523,186 Jul15 8,399 39,183
Aug15 881,705 4,599,090 Aug15 9,158 39,196
Sep15 847,006 4,857,706 Sep15 10,080 45,698
Oct15 Oct15
Nov15 Nov15
Dec15 Dec15
Average 864,204 4,821,432 Average 9,357 42,934
Source:CLS Source:CLS

BancodeMxico
Annex
ThePrinciplesthatapplytoeachtypeofinfrastructureareshownbelow.
PS CSD SSS CCP TR

Principle1:Legalbasis
Principle2:Governance
Principle4:Creditrisk
Principle5:Collateral
Principle6:Margin
Principle7:Liquidityrisk
Principle8:Settlementfinality
Principle9:Moneysettlements
Principle10:Physicaldeliveries
Principle11:Centralsecurities
depositories
Principle12:Exchangeofvalue
settlementsystems
Principle13:Participantdefaultrulesand
procedures
Principle14:Segregationandportability
Principle15:Generalbusinessrisk
Principle16:Custodyandinvestment
risks
Principle17:Operationalrisk
Principle18:Accessandparticipation
requirements
Principle19:Tieredparticipation
arrangements
Principle20:FMIlinks
Principle21:Efficiencyandeffectiveness
Principle22:Communicationprocedures
andstandards
Principle23:Disclosureofrules,key
Principle24:Disclosureofmarketdataby
traderepositories
BancodeMxico
Listofacronyms
BIS BankforInternationalSettlements
BMV BolsaMexicanadeValores,theMexicanStockExchange
CCEN Cmara de Compensacin Electrnica Nacional, the National Automated
Clearinghouse
CCP CentralCounterparty
CCV ContraparteCentraldeValores,theCentralSecuritiesCounterparty
CEP ComprobanteElectrnicodePagos,theElectronicProofofPayment
CLABE ClaveBancariaEstandarizada,thestandardizedbankingcode
CLS ContinuousLinkedSettlement
CNBV ComisinNacionalBancariaydeValores,theNationalBankingandSecurities
Commission
CNSF Comisin Nacional de Seguros y Fianzas, the National Insurance and Bonds
Commision
CONSAR Comisin Nacional del Sistema de Ahorro para el Retiro, the National
CommissionfortheRetirementSavingsSystem
CPMI CommitteeonPaymentsandMarketInfrastructures
CPSS CommitteeonPaymentsandSettlementsSystems
CSD CentralSecuritiesDepository
DALI Sistema de Depsito, Administracin y Liquidacin de Valores, the Securities
Deposit,AdministrationandSettlementSystem
DRM DepsitosdeRegulacinMonetaria,MonetaryRegulationDeposits
DvP DeliveryversusPayment
EGlobal ServiciosElectrnicosGlobales,S.A.deC.V.,acardpaymentclearinghouse
FedACH FederalReserveAutomatedClearinghouse
FIX Interbank reference exchange rate to settle liabilities in foreign currencies
payableinMexico.
FMI FinancialMarketInfrastructure
IMSS InstitutoMexicanodelSeguroSocial,theMexicanSocialSecurityInstitute
Infonavit InstitutodelFondoNacionaldelaViviendaparalosTrabajadores,theInstitute
fortheNationalWorkersHousingFund
IOSCO InternationalOrganizationofSecuritiesCommissions
IPAB Instituto para la Proteccin al Ahorro Bancario, the Bank Savings Protection
Institute
ISSSTE InstitutodeSeguridadyServiciosSocialesdelosTrabajadoresdelEstado,the
InstituteforStateWorkersSecurityandSocialServices
LCM LeydeConcursosMercantiles,theBusinessBankruptcyLaw
LGSM LeyGeneraldeSociedadesMercantiles,theGeneralCorporationsLaw
LMV LeydelMercadodeValores,theSecuritiesMarketLaw
LSP LeydeSistemasdePagos,thePaymentsSystemsLaw
LTOSF Ley para la Transparencia y Ordenamiento de los Servicios Financieros, the
TransparencyandFinancialServicesArrangementLaw
MexDer MercadoMexicanodeDerivados,theMexicanDerivativesMarket
BancodeMxico
OPM Sociedad Operadora de Pagos Mviles de Mxico, the Mobile Payment

Operator
PEMEX PetrleosMexicanos,Mexicanstateownedpetroleumcompany
PFI ProtocoloFinancieroIndeval,IndevalsFinancialProtocol
PFMIs PrinciplesforFinancialMarketInfrastructures
PIN PersonalIdentificationNumber
Prosa ProcesosAutomatizadosS.A.deC.V.,acardpaymentclearinghouse
PS Paymentsystem
PvP PaymentversusPayment
RTGS RealtimeGrossSettlementSystem
S.D.Indeval Instituto para el Depsito de Valores, S.A. de C.V., the Securities Depository
Institute
SHCP Secretara de Hacienda y Crdito Pblico, the Ministry of Finance and Public
Credit
SIAC SistemadeAtencinaCuentahabientes,theAccountHoldersServiceSystem
SICAM SistemaparaLiquidacindeCmaras,theClearinghouseSettlementSystem
SIDV Sistema Interactivo para el Depsito de Valores, the Interactive System for
SecuritiesDeposits
SMS ShortMessageService
SOFOMES Sociedades Financieras de Objeto Mltiple, or Multipurpose Financial
Institutions
SSS SecuritiesSettlementSystem
SPEI SistemadePagosElectrnicosInterbancarios,theInterbankElectronicPayment
System
SPEUA SistemadePagosElectrnicosdeUsoAmpliado,theExtendeduseElectronic
PaymentSystem
TD Tradedepository
Tesofe TesoreradelaFederacin,theFederalTreasury
TIIE TasadeIntersInterbancariadeEquilibrio,theinterbankinterestrate
Udis UnidadesdeInversin,orInvestmentUnits(indexedtoinflation)

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BancodeMxico

Similarly, Retail payment infrastructures in Mexico contains a description of these

operator of the mechanism; funds are transferred through an agreed operational

maintain sufficient financial resources to meet its

Accessto TR dataenablesauthorities todetectfinancialmarket riskexposures.The market

Principle8:Settlementfinality Not applicable. The amount is settled according to

communication protocol requirements, measures for the confidentiality of sensitive

What follows is a description of the process of registration, clearing and settlement of

Crossborder payments are important to economic activity and the development of

Principle13:Participantdefaultrules Does not apply since, by design, SPID does not

relationships, especially regulation concerning antimoney laundering and combatting the

PS CSD SSS CCP TR

OPM Sociedad Operadora de Pagos Mviles de Mxico, the Mobile Payment

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