MEXICO Trends and Developments Contributed by: Pablo Perezalonso Eguía, Isabel Ortiz-Monasterio Borbolla and Alejandro Mosqueda Pérez, Ritch, Mueller y Nicolau, S.C.
repos with foreign financial institutions. Under Article 1093 of the Mexican Commerce Code ( Código de Comercio ), two Mexican parties cannot validly use the GMRA unless there is a foreign connection (eg, foreign accounts). (ii) Structure: Both agreements serve as master agreements with non-negotiable general terms, supplemented by annexes for specific terms and confirmations. However, in practice, confirma - tions under the Local Reporto Master Agreement tend to be less sophisticated. (iii) Industry associations: The GMRA is drafted by the Securities Industry and Financial Markets Association (SIFMA) and the International Capi - tal Market Association (ICMA), while the Local Reporto Master Agreement is drafted by the AMIB and ABM. (b) Differences between the GMRA and the Local Reporto Master Agreement (i) Collateral management: The Local Reporto Master Agreement does not provide for margin exchange or net exposure elimination by col - lateral replacement. It only mandates margin exchange in reportos with a term of three days or more. In contrast, the GMRA allows either party to request a margin transfer to eliminate net exposure at any time. In the GMRA, securities serve as collateral, while in the Local Reporto Master Agreement they are not treated as such. (ii) Corporate rights and agency transactions: Under the Local Reporto Master Agreement, the Seller retains corporate rights unless otherwise specified. The GMRA does not allow the Seller to exercise these rights unless expressly stated in Annex I. On the other hand, the Local Reporto Master Agreement lacks provisions for agency transactions.
(iii) Events of Default and automatic early ter - mination: The Local Reporto Master Agreement addresses both Events of Default and Termina - tion Events, while the GMRA includes Events of Default and Tax Events. While the Local Reporto Master Agreement does not provide for auto - matic early termination without notification in the case of insolvency; Section 10(a)(vi) of the GMRA allows for automatic early termination without notice in certain insolvency scenarios. (iv) Process agent, documents, and jurisdiction: The Local Reporto Master Agreement does not require a process agent for a Mexican counter - party as Mexico is the governing law. Addition - ally, both agreements require documents like powers of attorney, tax information, and corpo - rate authorisations, but the GMRA also requires a process agent designation in addition to the issuance of a power of attorney. Lastly, while the GMRA prescribes English law and non-exclu - sive jurisdiction, it often requires modification to exclusive jurisdiction. (v) Given these differences, Mexican industry associations have initiated a project to update the Local Reporto Master Agreement. This new version aims to incorporate the changes man - dated by Circular 7/2024 while aligning more closely with the GMRA. Enhancing the structure of confirmations to accommodate more com - plex repo transactions is also anticipated. Conclusion: new opportunities on the horizon In conclusion, although reportos initially emerged in Mexico as intraday transactions for liquidity purposes, the landscape has evolved. Recent developments, such as Banco de México’s Cir - cular 7/2024 and the ongoing revisions to the Local Reporto Master Agreement, are helping to enhance the Mexican repo market and align it more closely with international standards. Look -
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