The Order of 19 June 1997 ("Official State Gazette" of 20) regulating the segregation operations of principal and coupons of the debt securities of the State and its subsequent reconstitution provides that these operations may only be carried out by entities authorised by the Directorate-General of the Treasury and Financial Policy.

It is also foreseen that the granting of the said authorisation will lead to the assumption, by the entity concerned, of some of the ones purchased by the Directorate General of the Treasury and Financial Policy.

By virtue of the above, I have arranged:

First. The condition of an entity authorized for the segregation and reconstitution of the debt securities of the State (hereinafter authorized entity) may be granted to those managing entities of the Public Debt Market in Full-capacity annotations that, belonging to the Debt Negotiating Association and having maintained an adequate level of activity in the State Debt market, formalize their application by crediting the necessary technical and human resources. to carry out its role and declare its commitment to actively participate in the market Segregated State securities and segregated State securities.

Second. -Applications will be submitted in duplicate in the Directorate General of the Treasury and Financial Policy, based in Calle Cedaceros, 11, third floor, in Madrid, within ten calendar days, to be counted from the day of the publication of this Resolution. Also, annually, by Resolution of this Directorate General, a period will be opened for the submission of new requests to obtain the status of authorized entity. The granting of the authorization or, where appropriate, the refusal of the authorization shall be the responsibility of the Director General of the Treasury and Financial Policy, after the Bank of Spain's report, and shall be issued within a maximum period of one calendar month, to be counted from the date of of the submission of the application.

Third. -The request to obtain the authorized entity condition will be accompanied by:

(a) An explanatory memory of the technical and human resources with which the requesting entity counts for the development of this activity.

(b) A statement in which the entity expressly undertakes to participate actively in the segregation of State Debt securities, permanently listing segregated securities of at least 35 per 100 of the live references at any time and actively negotiate with those securities in both the wholesale and the end-investors segment; agree to submit to the assessment procedure described in this Resolution and undertake to provide how much information could be requested by the Directorate-General of the Treasury and Financial Policy or the Bank of Spain in relation to its activity in the market for segregated State securities.

Fourth.-The fulfillment of the commitments assumed by the authorized entities will be periodically evaluated according to the criteria and weights for each type of operation, negotiated asset and residual maturity of the same which are set out below:

(a) The General Directorate of the Treasury and Financial Policy, on the basis of the information provided by the Banco de España, will assign values between 0 and 100 to each entity according to its contribution to the liquidity of the bond market. segregated through operations of segregation or reconstitution of debt securities of the State. This activity will receive a weight of 15 per 100.

b) The entity's participation in the total monthly trading of segregated securities in the Network of Mediators between Negotiating Public Debt Annotated will receive a weighting of 50 per 100. Simple, spot or forward transactions shall be considered exclusively. In turn, the aggressions received shall be weighted by a coefficient of 0,8 and those made by a coefficient of 0,2.

c) The entity's participation in the total monthly trading of segregated securities held among market members through the Money Market Telephone Service, excluding transactions made through the Network of Mediators between Negotiators of Public Debt Annotated, will have a weighting of 15 per 100. Simple spot or term transactions shall be considered exclusively.

d) The entity's participation in the trading of segregated securities made by market members with entities that are not account holders in the Annotation Central will receive a weighting of 20 per 100. Simple operations-either spot or forward-as well as simultaneous operations shall be considered.

All the above transactions-segregation, reconstitution or purchase-will be weighted in advance on the basis of the asset type and the residual maturity of the asset. Thus, transactions with segregated coupons will be weighted to 100 per 100 of the nominal amount and those of principal segregated to 75 per 100 of their respective nominal amount.

For their part, the multiplying coefficients corresponding to the residual maturity of the applicable asset on the values resulting from the application of the above weights shall be as follows:

Residual life:

Less than twelve months: 0.

Between twelve and eighteen months: 0.5.

Between eighteen months and three years: 1.

Between three and seven years: 2.

Between seven and ten years: 3.

Between ten and thirteen years: 4.

Over thirteen years: 5.

In the case of simultaneous operations, the relevant time limit shall be that of the transaction and not the residual life of the securities to which it affects. For the purposes of calculating these operations, a coefficient of 0,25 shall be applied in addition, after the time limit has been applied.

Fifth. The assessment referred to in the preceding number will be annual, although the first of these will be carried out at the end of the first semester of market activity. The annual evaluation of each institution shall be the simple arithmetic mean of its monthly evaluations, which are eliminated for the two months of highest score and the two lowest scoring months-with the exception of the first evaluation. the first half of the market, in which only two months will be eliminated: the highest and the lowest.

Annually the average evaluation of the set of authorised entities will be obtained, which will be the average of the annual assessments of each entity. This information will be of use and knowledge of the General Directorate of the Treasury and the Bank of Spain. Its usefulness shall be that of assessing the possibility of withdrawing the status of an authorised entity from an entity, in accordance with paragraphs 7 (b) and 7 (c), and never the establishment of a classification among the authorised entities. Consequently, no classification of authorised entities shall be obtained or published. The Directorate-General of the Treasury and Financial Policy shall inform the authorised entities whose assessments are clearly below the average of the group on their situation. The Directorate-General may also inform authorised entities to request it on its particular position in relation to the average.

Sixth. -Authorized entities will also be required to publicly list, permanently, through the Network of Mediators between Debt Negotiators, supply and demand returns of at least 35 percent of the Segregated securities references that exist at any time, with a maximum spread that will depend on the residual life term of the underlying asset based on the following scale:

Up to five years: 3 basis points.

Five years ahead: 5 basis points.

This obligation is understood to be met when the quotations with the indicated maximum differentials are kept on the screen of at least one of the Mediators between Debt Negotiators during the 60 per 100 session of the market for nominal amounts exceeding 200 million pesetas in the case of major segregated or 100 million pesetas in the case of segregated coupons.

Seventh.-The Directorate-General of the Treasury and Financial Policy, after reporting by the Bank of Spain, may agree to withdraw the authorization granted to an entity in the following cases:

(a) Where the result of the institution's annual assessment is less than 60 per 100 of the simple arithmetic average of the annual assessments of all authorised entities.

(b) Where the monthly assessment of the institution is less than 50 per 100 of the simple arithmetic average of the monthly assessments of all entities authorised for three consecutive months or five alternate months in a period of twelve months.

(c) When the entity systematically fails to meet the contribution obligations referred to in the sixth paragraph of this Resolution. For these purposes, the Directorate-General of the Treasury and Financial Policy will monitor these obligations on a daily basis.

Eighth. However, the condition of an authorized entity shall be provisional during the first six calendar months after its granting. At the end of that period, its activity and the fulfilment of the quotation commitments shall be assessed in accordance with the criteria set out above, in order to extend the authorisation granted until the end of the calendar year or to proceed to be withdrawn.

Ninth. -In order to avoid problems of lack of liquidity, the condition of authorized entity will be granted to the Banco de España, which will be free of all the commitments and obligations established for the rest of the institutions. authorized. For the same purpose, the Directorate-General of the Treasury and Financial Policy may issue segregated securities in periods between ordinary auctions at the request of one or more public debt market management entities.

Madrid, November 14, 1997. -Director General, Jaime Caruana Lacorte.