Understanding Gauging with Negotiable Securities

GAUGING WITH NEGOTIABLE SECURITIES

CONTENT Definition and benefits Participants Margins Capacity Quotas Substitutions Eligible assets

DEFINITION AND BENEFITS It is the taking or placement of pesos or dollars in the market leaving as collateral an eligible asset. Benefits: It is an operation guaranteed by BYMA The benefit for the investor is the interest rate For the policy holder, the coverage of liquidity requires putting as collateral financial assets that they have in their portfolio Short term: you can place or take bonds from 1 business day guaranteed by BYMA Terms: from 1 to 120 working days Currencies enabled: Argentine peso and US dollar

PARTICIPANTS BYMA Member Agents and their respective principals Participants conducting arbitration Investors Investment Mutual Funds Corporate Strategy Funding

EVOLUTION OF THE OPERATIONS On Exchange Repo (outstanding amount) - USD Million 1,400 1,186 1,200 1,000 908 800 722 674 672 672 632 596 600 547 400 200 0 6-30-19 12-31-19 6-30-20 12-31-20 6-30-21 12-31-21 6-30-22 12-31-22 6-30-23

MARGINS Margin is the amount required to cover the risks associated with closing a position on an operational basis. In Surety Bond, the objective is to cover the future amount of the bond. In addition, there are concepts such as replacement threshold, which is the tolerance we have in the value of the guarantees assuming constant margin requirement. And consequently, there is the Initial Margin Replenishment (RMI) that is requested once this threshold is exceeded.

GAUGING They mitigate the Market Risk since they allow the absorption of negative fluctuations in the prices of those securities integrated in guarantee. The amount integrated in guarantee must be greater than the amount to be covered to contemplate potential price decreases: Monto Integrado en Garant a Monto a Cubrir Monto a Cubrir P.VN The Graduated Amount is the value at which the securities integrated in guarantee are taken. Monto Aforado = Monto a Cubrir P.VN.Aforo = Monto a Cubrir The greater the potential price decrease of the title, the lower its associated capacity. VN =Monto a Cubrir P.Aforo To quantify the potential decline, the returns of the species are modelled and a risk metric is calculated accordingly. 0 < Aforo < 1

QUOTAS They mitigate Market Liquidity Risk as they limit the amount that an Agent can integrate into collateral of a particular species. In the event of a default by a principal, BYMA may initiate the liquidation/dismantling process of integrated hedges. But the market can absorb a certain volume of each species. A high concentration of integrated safeguards can make disarmament difficult. The Quotas per species ensure that the quantity integrated in guarantee can be absorbed by the market within the stipulated dismantling period without the need to reduce the price of the species during the sale process. The disarmament guidelines considered are: Disarmament period: 5 consecutive cycles Daily amount to be disassembled: 20% of the daily effective volume of the species Trading channels: PPT and SENEBI in all terms and all currencies

QUOTAS Estimated amount of disarmament in the standard time frame Effective volume that the market can absorb in the standard timeframe Quota of the Species To determine the limit assignable to each species, we calculated the daily disarmament amounts of the last 3 months and took as reference the 5th percentile and the median of the sample:

QUOTAS MEMBER AGENTS T B Agents that are not financial institutions. Agents that are Commercial Banks entities adhere to liquidity, solvency and credit policies, low regulation and supervision of the BCRA. Surety quota in pesos The consumption of Global Surety Quota in Pesos is made by adding the future net taker amounts of the principals, but also their consumption of Surety in Dollars is added by weighing it at the MEP exchange rate. Surety quota in dollars The consumption of Surety Quota in Dollars is made by adding the net future taker amounts of each of its principals in each maturity, that is, adding the difference between what is taken and placed future by each principal in each maturity in case of being positive.

SUBSTITUTIONS These are additional guarantees that the Risk area of BYMA requires from the Agents in order to mitigate different types of risks that escape the coverage of the Initial Margins. GLOBAL EXCESS SURETY AT AGENT LEVEL Global Excess = Global Consumption Global Quota Global ?????????? = Global Excess Factor EXCESS BY SPECIES AT AGENT LEVEL Excess Speciei= Consumption Speciei Quota Speciei Supletoria Speciei= Excess Speciei Factori + Global Adjustment

SUBSTITUTIONS HEDGING PORTFOLIO Concentration vs Diversification Concentrated portfolio It is composed of a single species or several that have a high correlation with each other. This implies that price fluctuations tend to be synchronized and, as a consequence, all species receive a negative shock simultaneously. Diversified portfolio It is composed of 2 or more species that correlation with Therefore, their price variations tend to be outdated and, as a consequence, negative shocks do not simultaneously affect the entire portfolio, being cushioned. have a low each other. and end up

ELIGIBLE ASSETS Fixed income: Government Securities, National Treasury Bills, Negotiable Bonds Equities: Local stocks and cedears Shares of Mutual Funds Treasuries (Bill, Note, Bond)

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