Market Profiles

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Bolsa Mexicana de Valores
The Bolsa Mexicana de Valores (BMV), was established in 1933, and alongside the stock exchange for derivative products (MEXDER), the BMV is the only stock exchange in Mexico. Equities, debentures, warrants and limited fixed income instruments are traded on the BMV. Its trading system is SENTRA Capitales. The BMV website provides on-line information regarding prices, volumes, and quotations. Listed companies must inform the BMV and the CNBV immediately of any material information that may affect the price of the security. This information is automatically distributed electronically to market participants upon receipt by the CNBV. All transactions must be executed through a stock exchange participant (i.e. broker).

Mexican Derivatives Market (MexDer)
The Mexican Derivative Market (MexDer) began operating on December 15, 1998. Participants in the derivatives market include Mexican and foreign brokers and banks. MexDer was developed by the BMV as a separate legal institution and serves as the exchange for the trading of futures and options. MexDer was authorised by the Secretaria de Hacienda y Crédito Público, the Mexican Ministry of Finance, and is a self-regulated entity.

Trading on MexDer is done by telephone via electronic brokers or remote access via FIX Protocol. ASIGNA, a trust set up specifically to be the clearinghouse for MexDer, serves as the counterparty to all transactions executed on MexDer. Even though the MexDer is fully in place, the majority of trading of derivatives is performed OTC.

Bolsa Institucional de Valores (BIVA)
BIVA started operations on July 25, 2018.


Contraparte Central de Valores (CCV)
The Contraparte Central de Valores (CCV), the Mexican Clearing House for equities opened on February 4, 2004. The main purpose of the CCV is to reduce settlement and default risks between local brokers for equity transactions executed at the Mexican Stock Exchange. Several control and risk mechanisms ensure any equity trade settles thus reducing counterparty risk. 

The CCV acts as the legal counterparty for interbroker equity transactions executed on the BMV and guarantees settlement of these transactions settlement between brokers and custodians do not settle through the CCV. Along with meeting international standards, the establishment of the CCV reduces counterparty and overall systemic risk within the Mexican Equities Securities Market.

The primary trading system of the BMV is the Sistema Electrónico de Negociación, Transacción, Registro y Asignación (SENTRA) Capitales. Through this system brokers enter bids and offers for equities, warrants, and debentures. Once entered into the system, SENTRA Capitales will automatically match bids and offers based on price and time priority. The SENTRA system requires brokers to register each order executed on behalf of their customers under their customer's name.

All equity trades executed on the Bolsa Mexicana de Valores (BMV), the Mexican Stock Exchange, must be executed by a local broker through the electronic trading system SENTRA Capitales. The settlement cycle for equity transactions is T+2 and all trades between brokers settle versus the Contraparte Central de Valores de Mexico, S.A. de C.V." (CCV), the Mexican Securities Central Counterparty, Indeval transfers the net position into the receiving Clearing Agent account on settlement date. Similarly, broker to custodian settlements occur on a gross basis through Indeval's system, these do not settle through the CCV. Originally introduced as a contingency system, SENTRA Capitales replaced the open outcry trading method in 1999.

In addition to locally issued equities, the BMV introduced the Sistema Internacional de Cotizaciones (SIC), on April 14, 1997, to allow the trading of foreign issued securities. The SIC allows ordinary shares of foreign issued securities to be listed and traded on the BMV and is part of the BMV's automated trading system. In order to list foreign issued securities through the SIC, a broker must sponsor the security and is responsible for meeting all reporting and disclosure requirements for the security in compliance with Mexican regulations. Trades executed through the SIC system settle through Indeval and are subject to the same operational rules and regulations as other trades executed on the BMV.

The CCV is the clearinghouse and central counterparty for equity and warrants transactions executed on the BMV, which are compensated through Indeval's system. Indeval's system used for the clearing and settlement of all fixed income and equity transactions is called DALI. DALI offers a true DVP environment with same day funds availability. The Mexican Central Securities Depository, Indeval, implemented the new system "DALI" on November 14, 2009 with the purpose of making the market's clearing and settlement system more secure and efficient to cope with the growing complexity and volume of financial transactions.

Mexican Derivative Market (MEXDER) - Currently only futures and options are traded. Asigna, a specially designed trust, acts as the central counterparty and clearing agent for all derivative transactions executed on MexDer.

ISIN (International Securities Identification Numbering) numbers have been assigned to all Mexican securities.

Other: According to the consolidated methodology a local code based on the following characteristics (as applicable): type of security, ticker symbol (also called the clave de pizarra) series, and the coupon.

The Banco de Mexico's identification code for government bonds is composed of eight digits. The first two digits specify the type of bond. The last six digits indicate the maturity date in an YY/MM/DD format. 

Indeval has been designated as the national numbering agency for Mexican securities.

Secretaria de Hacienda y Credito Publico (SHCP) - The main regulator in the Mexican financial system is the Secretaria de Hacienda y Crédito Público (SHCP or Hacienda), the Ministry of Finance and Public Credit. The main functions of Hacienda are the preparation of the Mexican annual budget, the supervision of the financial industry, the establishment of tax policies, the collection of taxes, and external debt negotiations. 

The Comisión Nacional Bancaria y de Valores (CNBV) - The National Banking and Securities Commission, supervises and regulates the banking industry and the securities market, including the stock exchange, central depository, issuers, brokerage houses, market makers, and investors.

The Comisión Nacional de Seguros y Fianzas (CNSF) - The National Insurance and Bonding Commission, is responsible for supervising the insurance and bonding industries. 

The Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR) - the National Pension Funds and Retirement System Commission, is responsible for supervising Pension Funds.

The Banco de México (BANXICO) - The Central bank supervises and regulates Mexican macroeconomic and monetary policy.

Most securities are held in immobilised, book-entry form. Indeval holds jumbo certificates in its vault representing the book entry shares on its system. Some securities, particularly fixed income instruments, have been dematerialised. Indeval has indicated that it plans to pursue the dematerialisation of all securities in the market. However, no dates have been established.

It is possible for securities that are deposited at Indeval to be kept by the investor in physical form. However, this is not market practice.

Foreign securities traded in the Mexican Stock Exchange trade in lots of 5.

The minimum price variation criteria for Mexican securities are described in the blow table:

The minimum price variation for foreign securities traded in the Mexican Stock Exchange is: MXN .01.

MXN

Fixed income instruments are generally dematerialised at the central depository and settle through book entry transfers. Trading of fixed income instruments generally occurs over the counter. However there are a few fixed income instruments that are traded on the stock exchange (e.g. Certificado Bursatil). OTC trades of fixed income securities settle at Indeval.

While equity trading can be conducted OTC, it is not market practice due to tax implications.

As stated previously, even though the Mexican Derivatives Exchange is fully in place, the majority of trading of derivatives is performed OTC.

Trading hours: Monday to Friday: This market usually begins transactions at 08:30 and closes at 15:00.

Book Entry: Most securities are held in immobilised, book-entry form. Equities are mostly kept immobilised in jumbo certificates at the central depository and settle through book entry transfers. There are some equities that are issued in dematerialised form (e.g.financial institutions). Fixed income instruments are generally dematerialised at the central depository and settle through book entry transfers. Indeval holds jumbo certificates in its vault representing the book entry shares on its system. Indeval has indicated that it plans to pursue the dematerialisation of all securities in the market. However no dates have been established. Registration occurs upon settlement at the Central Depository.

Equities settle on T+2, and debt instruments settle on T, T+1 and T+2 through INDEVAL. Prematching, which occurs by phone on settlement date, only indicates that instructions have been agreed, not that the trade will automatically settle. Securities positions are transferred on SD via book-entry. 

Clearing Agent to CCV Clearing and Settlement
Once BMV trades are matched in the SENTRA Capitales system, they are passed through an electronic real time link to the Dali System. Once trades are in the Dali System, they are considered final and irrevocable. Processing of equity trades between Clearing Agents and the CCV occurs in cycles.

During these cycles, the Dali System will transfer the net securities position into the receiving Clearing Agent's account. For those accounts where the securities are available, the net cash proceeds are transferred into the selling Clearing Agent's cash account. If cash or securities are not available, the transaction is held for a later cycle. After the last cycle, pending transactions or pending amounts are settled as the cash/securities become available. Once the cash and securities are successfully transferred, the transaction is considered final and irrevocable.

Transactions that are not settled on the contractual settlement date (T+2) are segregated into a pending queue, triggering a "Grace Period" of a maximum of two days.

Clearing Agent to Custodian Clearing and Settlement - in August 2001, equity settlement between Clearing Agents and Custodians was migrated from the Sistema Interactivo de Depósito de Valores (SIDV), the Securities Deposit Interactive System, to the SCO system and in 2008 into the Dali system. Settlements between Custodians and Clearing Agents continue to settle on a gross basis.

Pre-matching between Clearing Agents and Custodians in Mexico has not yet been automated and is done over the phone between the parties involved on settlement date. Pre-matching will only indicate that instructions have been agreed to with the counterparty and not that the trade will automatically settle. After they are pre-matched, transactions between brokers and custodians must be inputted separately into the Dali System through a terminal entry or electronic interface. Both parties input their transactions and they are matched and settled in Indeval system. The system simultaneously moves securities and cash.

Once the movement of securities and cash has been affected, the transaction is considered complete and irrevocable.

Indeval accepts partial settlements for equities as of February, 2010, while partial settlement for fixed income securities has been in place in the market for several years. In addition participants are allowed to amend trades entered into the system. 

Banco de Mexico also penalises participants for being short or long of their overnight cash target (known as the corto mechanism). The penalty for being short of cash overnight is the amount of the short multiplied by three times the 28-day Cetes rate. The penalty for being long of cash overnight is the amount of the long position multiplied by one time the 28-day Cetes rate plus value added tax.

BANXICO maintains two cash clearing systems: the Sistema de Pago Electrónico Interbancario (SPEI) and the Sistema Interactivo de Atención a Cuentahabitentes (SIAC). Funds are available same day through both systems. 

Effective February 1, 2000, all payments through SPEI, which contain incomplete information are returned to the remitter Bank. A cancellation and a new instruction is required and a claim for use of funds is not permitted.

Physical: Not market practice.

Foreign and local investors can perform short selling transactions in the Mexican market. However, a securities lending trade must be in place before the short selling transaction is done.

Same day receive and delivery of securities are possible in Mexico. The receive side of the turnaround transaction must be fully settled (securities and cash) before securities can be delivered out.

Instituto para el Déposito de Valores (INDEVAL) Indeval currently acts the central depository, clearing agent and settlement agent for all trades executed on the BMV, BIVA and money market instruments. This includes equities, corporate bonds, bankers’ acceptances, commercial paper, debentures as well as government fixed income instruments. Indeval’s system used for the settlement of all fixed income and equity transactions is called DALI. DALI offers a true DVP environment with same day funds availability. DALI makes the market’s clearing and settlement system more secure and efficient to cope with the growing complexity and volume of financial transactions.

INDEVAL also operates a multilateral net clearing system for inter-broker settlement of equity trades on the BMV, Indeval system transfers the net securities position into the receiving Clearing Agent's account and the net cash proceeds are transferred into the selling Clearing Agent's cash account on settlement date.

Contraparte Central de Valores (CCV) - The CVV acts as a central, legal counterparty to interbroker equity transactions executed on the Bolsa Mexicana de Valores and compensated through Indeval. The main purpose of the Clearing House is to reduce settlement and default risks between local brokers for equity transactions executed at the BMV, the Mexican Stock Exchange.

ASIGNA was established on December 11, 1998, and acts as the central counterparty to transactions executed on MexDer. ASIGNA, Compensación y Liquidación is a trust established for the purpose of guaranteeing the transactions cleared through ASIGNA. ASIGNA is owned by its clearing agent members.

SD Indeval acts as the central depository, clearing agent and settlement agent for all trades executed on the BMV and money market instruments. This includes equities, corporate bonds, banker's acceptances, commercial paper, debentures as well as government fixed income instruments. For broker to broker settlements, Indeval transfers the net securities position to the receiving clearing agent/broker on settlement date. In the case of broker to custodian settlements, transactions are settled on a gross basis.

Members and participants maintain proprietary accounts for themselves at Indeval. Members and participants holding securities at Indeval on behalf of their clients must place the securities in the participant's nominee name in at least one separate account designated as belonging to third parties.

Restricted shares (e.g. certain series A shares) that are held on behalf of a Mexican national must be segregated from those held by foreign investors at Indeval in order to ensure that the final beneficiary will be able to keep voting rights for shareholder meetings. According to Mexican regulations, in the event that the Mexican authorities determine that restricted shares are not being held by a Mexican national, they may confiscate the securities. Please see the Foreign Ownership section for further details.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

Currently not applicable in Mexico.

All Mexican securities are held in registered form since the use of bearer securities was prohibited in Mexico in 1984. Shares held by Indeval are registered in the company's books in the nominee name of S.D. Indeval S.A. de C.V. Indeval participants, in turn, maintain separate accounts for proprietary holdings and holdings on behalf of third parties. Participants maintain nominee accounts on behalf of their customers, usually opening one account for their customers who are Mexican nationals and a separate account for their foreign customers. In both cases, the nominee account is clearly designated as belonging to third parties.

Indeval

Registration of securities in the participant's nominee name is done simultaneously upon settlement at Indeval.

Share holdings may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel. 

Failure to comply with reporting requirements may lead to penalties and/or other sanctions.

Disclosure on Share Acquisitions:

* There is no requirement to disclose the 2% ownership threshold of a Mexican financial institution to the BMV or to the CNBV. However, any acquisition between 10% and 30% would still be subject to the general disclosure requirements as outlined above.

In addition, special approval of the CNBV hearing the Central Bank's opinion is needed in order to acquire ordinary capital stock of a Financial Institution or grant guarantees over such percentage of stocks; whenever the acquisition or guarantee exceeds 5% of the capital stock. In these cases, the person or group of persons that pretend to acquire or grant guarantees, shall comply with additional law requirements established in the Credit Institutions Law (article 10 fraction II) and provide the CNBV with additional information.

In the event that the acquisition is carried out by a person or a group of persons [shareholders or not] special approval of the CNBV is needed hearing the Central Bank's opinion; in order to acquire ordinary capital stock or obtain Control, of a Financial Institution, whenever the acquisition exceeds 20% of the capital stock.

Tender Offers: 
Acquisition Disclosure Obligation
Acquisitions over 30% of the capital of a listed company must be done by means of a public offer.

It is prohibited to trade with securities using insider information.
Additionally, insiders can not trade with securities of the company to which they are related, during a period of three months from the date of the last transfer of shares carried out by such insider.

With the beginning of operations at the CCV on February 4, 2004, the "buy-in" procedure in T+5 ceased to exist in the equities market. Instead, a Cash Agreement and Extraordinary Cash Settlement procedure exists on T+5 between Clearing Agents and the CCV. Clearing Agents to custodian settlements are not subject to this procedure.

There is an established procedure for Clearing Agents involved in fails in which a Cash Agreement between the defaulting Clearing Agent and the CCV may be reached, and an Extraordinary Cash Settlement happens between the CCV and the affected Clearing Agent. Please note that Clearing Agent to Custodian settlements are not subject to this procedure.

If a trade is not settled by the end of settlement on T+2, and the defaulting Clearing Agent or CCV were not able to perform a stock loan during the "Grace Period" (two days), a Cash Agreement must be made with the CCV. The Cash Agreement amount must be composed by the VaR amount of the pending transaction and any incurred transactional fee. In order for the defaulting Clearing Agent to avoid a definite suspension from the CCV, the settlement of the Cash Agreement must be done before the last settlement cycle of T+5. Once the CCV receives the Cash Agreement amount from the defaulting Clearing Agent, it will compensate the affected Clearing Agent during the last settlement cycle of T+5 by extinguishing the pending transaction and executing an Extraordinary Cash Settlement. 

If there is any remaining positive balance difference between the Cash Agreement and the Extraordinary Cash Settlement, the CCV will credit that amount into the Reserve Fund.

Clearing Agents that incur penalty charges imposed by the CCV may pass these costs directly to their customers depending on the contractual relationship established between them.

Securities lending is permitted in the Mexican market. In January 1997, Indeval introduced a securities lending system known as Valores Prestables (Valpre) and in 2002 Accival introduced Accipresval, through which participant broker-dealers and banks can effect securities lending operations.

The Mexican Central Bank has published a document (CIRCULAR 1/2004) for the purpose of standardising the applicable regime to securities lending that Institutions, regulated by the Central Bank, may perform. This is mainly focused to "Local" Financial Institutions (Credit Institutions, Brokerage Houses, Mutual Funds and Pension Funds).

This publication outlines the framework in which Securities Lending practice has to be made in Mexico, and its terms and conditions (Publication is in Spanish).

In terms of Foreign Institutions ability to perform Securities Lending of Mexican Securities (off-shore), affirmation, advise or determination of eligibility and treatment (including tax treatment or interpretations), may be subject to various factors highlighting the following:

• Nature of their business (Foreign Institutions Country of Residence)
• Tax Treatment (Mexico + Country of Residence)
• Legal Framework (Mexico + Country of Residence)
• Approval or Licence given by the Mexican Stock Exchange, and Regulators such as Mexican
• Ministry of Finance, Central Bank, others.

CVV Financial Safeguard System – Background: In March 2001, Indeval changed the purpose of its Settlement Trust Fund to a Settlement Guarantee Fund that covered brokerage houses in the event of a counterparty default. Similar to what occurs today, under such structure of the fund, Indeval did not guarantee settlement nor did it assume any liability in the settlement process. The Settlement Guarantee Fund only covered interbroker equity transactions and covered the brokers that were counterparty to the trade. Custodian banks were not required to contribute to the Fund.

With the beginning of operations of the CCV (Central Counterparty), the Settlement Guarantee Fund was restructured into the Financial Safeguard System that includes a Contribution Fund, Compensation Fund and Reserve Fund. The Contribution Fund covers all the transactions made in the BMV, and are calculated with a historical VaR methodology. The Compensation Fund is used to cover unexpected losses.

Clearing Agents are required to make contributions to the Funds based on their value at risk (VAR). There is both a fixed portion and a variable portion to the broker's contribution.

Before the creation of the CCV, BMV trades were settled among brokers through Indeval's systems. In April 1997 Indeval implemented a DvP (deliver versus payment) scheme, eliminating the principal risk of delivering securities without receiving cash simultaneously. A bilateral net settlement was introduced in August 1999. Afterwards a multilateral net clearing process was established in August 2001 while the VAR (value at risk) methodology was included into the risk computation of Indeval's Settlement Guarantee Fund. Brokers were required to make contributions based on their open settlement exposure. With the creation of the CVV in February 2004, the Clearing Agent figure was introduced and the CVV began to act as the legal counterpart for all BMV executed equity transactions.

All accounts are supported by the relative Know Your Customer / AML documentation requirements. 

PAM (Parent Account Manager) / RM (Relationship Manager) certification required for its existing customers at least once a year.

None

Foreign investors have traditionally entered the Mexican market through the purchase of "B" shares (Free Subscription Series) with full voting and income rights. "A" shares, normally reserved for Mexican nationals, can be purchased by foreigners through a neutral trust managed by Nacional Financiera S.A. (NAFINSA), a Mexican development bank. Shares are purchased and then lodged in a NAFINSA account at INDEVAL. NAFINSA issues aCertificate of Participation (CPO), which is the primary ownership record and represents the right to participate in the financial interests of a company but does not confer voting rights to the holder. Please note, however, that not all issuers of restricted shares have established neutral trusts. For these cases, a foreign investor's acquisition of this type of shares is not allowed.

The number of CPOs is limited and the actual number available is not known until the end of the settlement day. Therefore, while there may have been sufficient CPOs on the trade date, there may be insufficient on the settlement date. Foreign investors are obligated to sell restricted shares if they do not have a corresponding CPO and the shares may be confiscated by the CNBV if they choose to maintain the holding.

Each corporation determines the allowable percentage of foreign ownership in each share class. 

The Mexican Foreign Investment Law and its regulations set forth areas or activities reserved exclusively for the Mexican State (such as petroleum and basic petrochemicals), areas or activities reserved exclusively to Mexican nationals (such as TV, radio services and retail gasoline stations), and specific limitations as to foreign investments participation in certain activities, for example the Mexican Foreign Investment Law limits foreign participation in companies dedicated to aero transportation activities as well as some areas of telecommunications, financial activities and maritime activities.

According to the Mexican Credit Institutions Law, the Financial Groups Law, and the Securities Market Law, foreign investors that practice any kind of governmental power are not allowed to acquire capital stock of a Mexican banking institution, nor of a Mexican financial group (together "Financial Institutions"), nor of a brokerage house.

Capital gains, income and capital can be repatriated freely. There are currently no foreign exchange repatriation restrictions in Mexico.

The Foreign Exchange Commission, made up of officials from the Ministry of Finance and Banco de México, is responsible for foreign exchange policy in Mexico. At the end of 1994, the Commission established that the exchange rate would be determined by market forces (a free float). Banxico has the right to intervene in the market on either side (buying or selling), which occasionally does occur. There are no foreign exchange restrictions in the Mexican market.

Banxico maintains two cash clearing systems, the Sistema Interactivo de Atención a Cuentahabientes (SIAC), or Account-Holders Service System, and the Sistema de Pago Electrónico Interbancario (SPEI) which replaced the Sistema de Uso Ampliado (SPEUA), or Extended-Use Electronic Payment System. 

Both payment systems are open, from 08:30 to 17:45 in the case of SPEI, and 17:00 in the case of SIAC, to effect payments during daytime. Funds transferred through either system are available immediately (i.e. same day funds).

SIAC is the primary cash system of Banxico and all cash balances from all other payment systems are automatically swept to the participants' accounts at SIAC. SIAC is open to all eligible financial institutions and can be used to effect payments of any value. Banxico establishes maximum credit lines for participants in SIAC based on various criteria, including the capitalisation of the financial institution. The credit lines are fully collateralised with the securities held in a designated account at Indeval. The system monitors intra-day overdrafts, which carry a per-minute funding cost.

In an effort to align the Mexican payment system with global standards and international practices, Banxico introduced a new payment system called SPEI, in December, 2004. The main objective of SPEI is to establish a more efficient, secure and flexible payment system with increased processing capabilities. SPEI is also a real-time system for processing payments among system participants (proprietary and on behalf of third parties) with no minimum payment threshold.

With the integration of the Mexican Peso (MXN) to the FX Global Settlement Service of Continuous Linked Settlement (CLS) on May 26, 2008, both payment systems are open, from 00:00 to 17:45 in the case of SPEI, and to 17:00 in the case of SIAC.There are two payment cycles. A first one for CLS transactions open from 0:00 to 5:00; and a second one open from 8:30 to 17:00 or 17:45. Funds transferred through either system are available immediately (i.e. same day funds).

Permitted in the market.

Indeval acts as the paying agent for almost all dividends paid by Mexican companies held at the depository. Companies can effect payment to Indeval via check or via electronic funds transfer. Indeval effects payment through an agent bank. Dividends are usually on pay date but it can take up to pay date plus one in extraordinary circumstances.

Varies by instrument

Companies can pay dividends annually, quarterly, or on a semi-annual basis. Most companies pay annual dividends, usually during the second quarter. Dividends are announced within 24 hours after being approved by a shareholders' meeting.

Varies by instrument

30/360 – day basis

Entitlements are paid on the actual settled position on record date.

Claims, while rare due to the low fail rate, can be made once a transaction settles. There is currently no market mechanism for claims.

Mexican Securities Market Law establishes several minority shareholder rights, which apply to both foreign and domestic
investors. Foreign issuers must prove to the CNBV that their bylaws include equivalent or superior minority shareholder
rights, than those specified by the law in order to list part of their capital stock in the National Securities Registry.

The minority shareholder rights provision establishes the following protections:

• Shareholders representing, at least 10% of the capital stock, may call for share holder meetings.
• Shareholders representing, at least 10% of the capital stock, including common, limited, and non-voting shares are entitled to appoint a statutory examiner (Comisario). (only in case the issuer do not adopt the administration regime of a SAB, (Sociedad Anónima Bursatil).
• Shareholders must have immediate access to all information and documents regarding the agenda of any shareholder meeting upon publication of the corresponding call.
• Shareholders may be represented in meetings through special proxies complying with the legal requirements.
• Shareholders representing at least 10% of the capital stock, including common, limited, and non-voting shares are entitled to appoint a member of the board of directors.
• Shareholders representing at least 10% of the capital stock, including common, limited, and non-voting shares are entitled to postpone shareholder's voting for three days if they consider information provided is insufficient.
• Shareholders representing at least 5% of the capital stock are entitled to demand civil liability from directors, members of the Committees, Secretary to the board of directors, CEO, and managers of the company.

Shareholders representing at least 20% of the capital stock, including common, limited, and non-voting shares are entitled to challenge or oppose to resolutions of the shareholders meeting, in such matters they have right to vote for.

The share series determines the shareholders right to vote in the meeting. Foreign investors holding restricted series A shares through a neutral trust retain economic rights but no voting rights. Foreign investors holding non-restricted shares have both economic and voting rights.

Blocking of securities is not applicable in the Mexican market.

Annual General Meetings (AGMs) are held in the first four months of the year, usually in April. Announcements are made in the Official Gazette, the Boletín Bursatil, and usually in one major newspaper. The AGM is usually 15 business days after the announcement.

It is not required by law to publish meeting results; however market practice is usually to publish 3 to 5 business days afterwards

On request, subject to availability

POAs are not required. However an issuers pass (which is given after an Indeval (Mexican CSD) securities certificate is presented certifying the holdings) and a voting letter are required both singed by a legal authorised representative from the issuing company.

In general, series "A" shares are only available for Mexican nationals, and the ones that are available to foreign investors, do not carry voting rights for foreign investors. 

A company set the voting rights of the shares it issues and, therefore, the voting rights assigned to a series of shares varies from issuer to issuer.

Cash Dividends representing Mexican issuers' profits generated in 2014 and onwards, paidto non-resident (foreign) investors and Mexican individuals will be subject to a 10% income tax withholding on distributed dividends.

Banamex will be responsible to withhold and pay the taxes to the authorities. Relief at source for investors with residency in countries with a DTT with Mexico is applicable and they can benefit from reduced rates.In order to apply the tax treaty withholding rate, instead of the 10% rate established in the Mexican Income Tax Law, the beneficiary owner will have to provide the following documentation:

• Certificate of tax residence or the document certifying the filing of the latest annual tax return; if at the time of proving residence term has not elapsed to submit tax return corresponding to the last term, then submit certification proving tax return for the latest year, issued by competent authority. Such certifications should be issued by the tax authority of the country in question, and will be in force during the calendar year of issuance, thus they should be renewed every calendar year in order to benefit from a lower tax withholding rate
• Beneficial owner letter

The issuers' paying agents withhold most taxes at source. In the event that an issuing company or a withholding agent withholds more taxes than the actual amount due, tax reclaim forms and supporting documentation can be submitted directly to the tax authorities through an independent Local Tax Counsel.

Interest is defined as the difference between the sale and acquisition price as well as the income received through coupon payments applicable to the following securities:

• Government issued securities - Foreign investors continue to be exempt for 2013 from withholding tax on income derived from Government issued securities.
• Bankers Acceptances - Foreign investors continue to be subject to a 4.9% withholding tax on interest received during the year derived from Bankers Acceptances.
• Corporate Debt securities - Foreign investors continue to be subject to a 4.9% withholding tax on interest received during the year derived from Corporate Debt securities.

Capital Gains Tax applies over the net gain of equities transactions. Net gain is the difference between sale price and acquisition price.

Equities transactions executed on Stock Exchange
Non-resident (foreign) investors and Mexican individuals will become subject to a 10% capital gains tax (CGT) over the on-exchange sale of Mexican and foreign equities.
Residents in countries with a Double Taxation Treaty (DTT) with Mexico benefit from a CGT rate of 0%, subject to providing documentation confirming their country of residence to their local brokers who are responsible for withholding and paying this tax, still to be determined by authorities.

Procedure for the CGT still under review

If a person or a group of persons that directly or indirectly owns 10% or more of the capital of a Mexican issuer sells in a single or in multiple transactions 10% or more of the capital of a listed company within a period of 24 months, or transfers control during such period, the sale will be subject to withholding. The withholding tax will be 5% over the gross income obtained, with no deduction.

Equities transactions executed OTC by foreign investors residents of a non-tax haven country will be subject to a capital gains tax of either 25% of gross proceeds or 35% of the net gain. In order to apply the 35% of the net gain option, the beneficiary needs to appoint a legal/tax representative in Mexico and file with the tax authorities an opinion of a Certified Public Accountant (CPA) that certifies the calculations.

Some countries tax treaty benefits may exclude taxation as long as the seller has owned less than 25% of the company over the last 12 months. In order to claim treaty benefits, the seller will need to complete certain requirements including (i) having a tax/legal representative in Mexico and (ii) provide a certificate of residency on an annual basis (iii) filing a notice to the tax authorities.
Equities transactions executed OTC by foreign investors residents of a tax haven with a counterparty considered as a third party will be subject to 25% tax on gross proceeds or to the option of withholding of 35% on the net gain if all the requisites mentioned above are met.
Equities transactions executed OTC by foreign investor residents, of a tax haven country with a counterparty considered as a related party and where the seller is a resident of a country which Mexico has an Agreement for the Exchange of Information with Respect to Taxes, will be subject to 25% tax on gross proceeds or 35% on the net gain if the above mention requisites are met. If the seller is a resident of a country without such agreement with Mexico the applicable withholding tax rate will be 40% of the gross proceeds.

Real Estate Public Trusts
Real Estate Public Trusts (Fideicomisos de Infraestructura y Bienes Raices "FIBRAS") are similar to the Real Estate Investment Trusts (REITS) traded in the US and other markets. A trust, which invests at least 70% of the trust fund in acquisitions of real estate, rights or credits, is incorporated and issues certificates of participation CBFIs (Certificados Bursatiles Fiduciarios Inmobliarios) such as FUNO11 ISIN MXCFFU000001.

According to Article 188 of the Mexican Income Tax Law, foreign investors holding the certificates are subject to a 30% withholding tax rate when the taxable result for the fiscal year of the revenues generated by the assets, rights, credits or securities comprising the trust is paid, regardless of the country of residence. It is important to note that the FIBRAs also pay capital redemptions, which are not subject to withholding tax.

Exemptions

1. The pension fund must be incorporated in its country of residence as a pension fund
2. Be the beneficial owners of the taxable result
3. Be exempt from income tax in its country of residence

The registration with the Mexican Ministry of Finance (SHCP) is no longer required. Starting 2014 Pension Funds must provide specific documentation to their local financial institution (Custodian). This documentation is listed below:
Exemption for certain Foreign Vehicles or Entities
The Mexican Income Tax Law provides tax exemptions to certain clients that obtain income from a Mexican source, such as interest or capital gains (not applicable to CGT on On-Exchange equities). It is important to mention that this document does not intend to include all the possible events by which nonresidents may be exempt; in order to apply any exemption, if applicable, it must be reviewed on a case-by-case basis.

In addition, foreign investors are exempt from tax on capital gains obtained from the sale of these securities on the Mexican Stock Exchange.

ISHARES
The ISHARES are a type of "Exchange Traded Fund" (ETFs) issued by a trust established in Mexico. The tax treatment of ISHARES depends on the type of securities the ISHARE is composed of:

ISHARES composed of equities
Nonresident investors are subject to a 10% CGT on the on-exchange sale of ISHARES composed of equities. Additionally, they are subject to a 10% WTH on dividends paid by these securities.

ISHARES composed of corporate bonds
Foreign Investors, regardless of country of residence, are subject to a 4.9% withholding tax rate on the interest paid by Mexican Trusts composed of corporate bonds, such as the CORPTRCISHS. Capital gains obtained through the sale of these securities executed on the Mexican Stock Exchange are also subject to a withholding tax of 4.9%.

ISHARES composed of government bonds
Foreign Investors, regardless of country of residence, are exempt from withholding tax on the interest paid by Mexican Trusts composed of Mexican government bonds or securities issued by the Central Bank of Mexico, as well as on the capital gains obtained from their sale through the Mexican Stock Exchange, provided that the fiduciary certifies the following:

• That the interest paid derives from government bonds
• That at least 97% of the monthly average of the trust property was invested in the debt securities mentioned above.

If the Fiduciary does not certify the above, the interest paid by these securities, as well as the capital gains obtained from their sale, will be subject to a 30% withholding tax rate. Tax treaty rate reductions may apply as a result of tax treaties on a case-by-case basis. Mexican trusts may also pay capital redemptions; these payments are not subject to tax.

Equities transactions executed OTC by foreign investors who are resident in a non-tax haven country will continue to be subject to a capital gains tax of either 25% of gross proceeds or 35% of the net gain. In order to apply the 35% of the net gain option, the beneficiary needs to appoint a Mexican certified accountant or a Mexican Tax Counsel to certify the gain.

Some Countries Tax Treaty benefits may exclude taxation as long as the seller has owned less than 25% of the company over the last 12 months. In order to claim treaty benefits, the seller will need to complete certain requirements including (i) having a tax/legal representative in Mexico and (ii) completion of a certificate of residency on an annual basis.

Equities transactions executed OTC by foreign investors residents of a tax haven with a counterparty considered as a third party will be subject to 25% tax on gross proceeds or to the option of withholding of 35% on the net gain if all the requisites mentioned above are met.

Equities transactions executed OTC by foreign investors residents of a tax haven country with a counterparty considered as a related party and where the seller is a resident of a country with which Mexico has an Agreement for the Exchange of Information with Respect to Taxes, will be subject to 25% tax on gross proceeds or 35% on the net gain if the above mention requisites are met. If the seller is a resident of a country without such agreement with Mexico the applicable withholding tax rate will be 40% of the gross proceeds.

Foreigners Representing Mexican Investors: the tax treatment for Mexican investors is different from that for foreign investors depending on the tax, security type and Investor (individual or company).

The updated information is available at Tax Authority Site, including applicability, please refer to:
http://www.sat.gob.mx/informacion_fiscal/normatividad/Paginas/tratados_fiscales.aspx

None

Corporate Events Tax - there may be some corporate events (public offers, exchange offers and tender offers) with a specific tax treatment that may differ from the general types of withholding tax mentioned above. Whenever applicable, each corporate event will specify its tax applicability and requirements. This may include the requirement of a COR.

While Certificates of Residence (COR) for foreign investors are not mandatory as of date, direct clients of Banamex are highly encouraged to mail an original updated Certificate of residence (i.e. Form 6166 for U.S. entities) to the local custodian.

Mexico Holiday Calendar

• Bolsa Mexicana de Valores www.bmv.com.mx
• Ministry of Finance www.shcp.gob.mx
• Central Bank of Mexico www.banxico.org.mx
• Indeval www.indeval.com.mx
• National Banking and Securities Commission www.cnbv.gob.mx
• National Insurance and Bonding Commission www.cnsf.gob.mx
• Mexder www.mexder.com.mx
• The Comisión Nacional del Sistema de Ahorro para el Retiro www.consar.gob.mx