SECURITIES AND EXCHANGE COMMISSION

~~oExc~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

~*~~~ ~?~

DIVISION OF

TRADING AND MARKETS

June 29,2017

Nicholas A. Kronfeld

Davis Polk &Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Re: Banco Santander, S.A.

File No. TP 17-09

Dear Mr. Kronfeld:

In your letter dated June 29, 2017("Letter"), you request on behalf of Banco

Santander, S.A., a bank organized under the laws ofthe Kingdom of Spain ("Santander

Spain"), an exemption from Rules 101 and 102 of Regulation M under the Securities

Exchange Act of 1934("Exchange Act"), in order for Santander Spain and its affiliates to

conduct specified "ordinary course" activities in the ordinary shares of Santander Spain

(the "Santander Spain Shares"), including in the form of American Depositary Shares (the

"Santander Spain ADSs"),in connection with a proposed rights offering by Santander

Spain (the "Rights Offering").1

You seek exemptive relief to permit Santander Spain and its affiliates to conduct

activities in the ordinary course of business outside the United States in Santander Spain

Shares and Santander Spain ADSs during the Restricted Period. Specifically, you request

that: (i) the Market Making Subsidiary be permitted to continue to engage in market

making activities as described in the Letter;(ii) the Treasury Departments be permitted to

continue to engage in derivatives market-making and hedging activities as described in the

Letter;(iii) the Asset Managers be permitted to continue to engage in asset management

activities as described in the Letter;(iv) the Insurance Companies be permitted to continue

to engage in insurance activities as described in the Letter; and (v)the Non-U.S. Brokerage

Units be permitted to continue to engage in unsolicited brokerage activities as described in

the Letter.

You also seek exemptive relief to permit certain Santander Spain affiliates to

conduct activities in the ordinary course of business in the United States in Santander

Spain Shares and Santander Spain ADSs during the Restricted Period. Specifically, you

request that: (i) the Puerto Rico Asset Manager be permitted to continue to conduct asset

management activities in Puerto Rico as described in the Letter;(ii) Banco Santander

' We have attached a copy of the Letter. Each defined term in our response has the same meaning as

defined, directly or by reference, in the Letter, unless we note otherwise.

Nicholas A. Kronfe~d

June 29,2017

Page 2 of4

International be permitted to continue to conduct asset management activities from the

Continental United States for non-U.S. clients as described in the Letter; and (iii) the U.S.

Brokerage Units(Santander Investment Securities and Santander Securities LLC)be

permitted to ca~tinue to engage in unsolicited brokerage activities as described in the

Lett~r.2

Response:

Based on the facts and representations that you have made in the Letter, but without

necessarily concurring in your analysis, tie Securities and Exchange Commission

("Commission")finds t~iat it is necessary or appropriate in the public interest, and is

consistent with the protection ofinvestors, to grant, and hereby grants, Santander Spain

and the Companies an exemption from Rules 101 and 1023 to permit them to continue to

engage in the activities described in the Letter during the Restricted Period.

This exemption is subject to the following conditions:

hione ofthe transactions for which reliefis being granted shall occur in the United

States, except transactions in connection with the unsolicited brokerage activities

by Santander Investment Securities and Santander Securities LLC,Puerto Rican

client asset management activities ofthe Puerto Rico Asset Manager, and non-U.S.

client asset management activities ofBanco Santander International, as each i~

described in the Letter;

2. All ofthe transactions for which reliefis being granted shall be effected in the

ordinary course of business, as described in the Letter, and not for the purpose of

facilitating the Rights Offering;

3. Santander Spain shall include disclosure in the prospectus supplement that will be

distributed to United States investors that participate in the Rights Offering

regarding the possibility of, or the intention to make,the transactions described in

the Letter;

4. Santander Spain shall keep records for each purchase or sale of Santander Spain

Shares or Santander Spain ADSs that Santander Spain or any ofthe Companies

2 For purposes of this letter, the Market Making Subsidiary, the Treasury Departments, the Asset Managers

(including the Puerto Rico Asset Manager and Banco Santander International), the Insurance Companies, the

Non-U.S. Brokerage Units, and the U.S. Brokerage Units(Santander Investment Securities and Santander

Securities LLC)are collectively referred to as the "Companies."

'As described in the Letter, the Companies maybe deemed to be "affiliated purchasers" of Santander

Spain, and thus subject to Rule 102 of Regulation M. As also described in your Letter, Santander Spain, the

Non-U.S. Brokerage Units, and the U.S. Brokerage Units also maybe deemed to be "distribution

participants" in connection with their participation in the Rights Offering, and thus subject to Rule 101 of

Regulation M.

Nicholas A. Kronfeld

June 29,2017

Page 3 of4

effects in the United States during the Restricted Period ("Records"}. Such

Records shall include:

(aj the date and time of execution, the broker (if any}, and the alnot~nt anc~ price

ofthe transaction;

(bJ the market or other manner in which the transaction is effected, aid

(c) whether. the transaction was made for a customer account or a principal or

proprietary account(but such Records with not include any client-s~eci tfic

data, the disclosure of which is restricted under applicable law);

5. Upon written request ofthe staff o~the Division of Trading and Mar~Cets

("Division"), Santander Spain shall make the Records(arranged in a timesequenced manner) available to the Division at its offices in Washington, D.C.,

within 30 days ofits request;

6. Santander Spain and each ofthe Companies shall retain the Records for a period of

two years following th.e completion ofthe Rights Offering;

7. Representatives of Santander Spain and each ofthe Companies shall be made

available by telephone to respond to inquiries ofthe Division relating to the

~Zecords; and

8. Except as otherwise exempted by this letter, Santander Spain and eack~ ofthe

Companies shall comply with Regulation M in connection with ~ha Rights

Offering.

Niahala~ A. Kio~ifexc~

June 29, X017

Page 4 of4

The foregoing exemption is based solely on the facts. presented and. tl~e

reps€sentations made in t~~e :Letter. Any different facts or circumstances may require a

diff~r~n+ r~sp~nse. This exeinptioi~ is subject to modification ar revocation at any time tie

Cair►n~ission deterrni?les_that such actiAn is necessary ~r ap~rapriate in fiirtherance csf the

purposes of'the Excl~~~ige Act. In addition, pet~sc~ns relying on this exeniptr..un are directed

to-tie ~nti••fr~ud-and anti-manipulation provisions of the Exchange Act, particularly

Sections 9(a} and 10(x), and Rule 1 Ub-5 thereunder. P~esponsibility for compliance with

these and any other applicable provisions ofthe federal securities haws rests with the

persons rP~ying on the exemption. We express no view with respect to any other question

that the Letter, or any activities undertaken,pursuant to this.exem}~tion, may raise,

including, but not limited tom, tl~e applicability of other federal or state securities laws or

rules,~~r other haws and rules, to the proposed activities.

For the Comrnis~sian,

by the Division of Tradirkg and Markets,

pursuant to delegated authority 4

~~~f---

Josephine J. Tao

Assistant Director

Attachment

4 17 CFR 200.30-3(a)(6).

New York

Northern California

Washington DC

Sao Paulo

London

Paris

Madrid

Tokyo

Beijing

Hong Kong

Davis Polk

Nicholas A. Kronfeld

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

212 450 4950 tel

212 701 5950 fax

June 29, 2017

Re:

Banco Santander, S.A. Request for Exemptive Relief from Rules 101 and 102 of

Regulation M

Josephine J. Tao

Assistant Director

Division- of Trading and Markets

Securities and Exchange Commission

100 F Street, N. E.

Washington, D.C. 20549

Dear Ms. Tao:

We are writing as counsel to Banco Santander, S.A. ("Santander Spain"), a bank organized

under the laws of the Kingdom of Spain, with respect to the application of Regulation M to

transactions by Santander Spain and its affiliates in the ordinary shares of Santander Spain (the

"Santander Spain Shares") during the distribution of Santander Spain Shares, including in the

form of American Depositary Shares (the "Santander Spain ADSs"), to be made by Santander

Spain in connection with a proposed rights offering by Santander Spain (the "Rights Offering").

Specifically, on behalf of Santander Spain, we ask the members of the staff (the "Staff') of the

Securities and Exchange Commission (the "SEC") to grant Santander Spain exemptive relief

from Rules 101 and 102 of Regulation M to permit Santander Spain and its affiliates to continue,

in the ordinary course of their respective businesses as described below and in accordance with

applicable local law, to engage in the activities described below during the Rights Offering. In

connection with the relief requested by Santander Spain in this letter, please note that

substantially similar exemptive relief from Rules 101 and 102 of Regulation M was granted to

Santander Spain under each of your exemptive letters dated September 10, 2004, August 18,

1

2008, November 7, 2008, December 22, 2008, September, 18, 2014 and January 6, 2015 .

Santander Spain acquired the entire share capital of Banco Popular Espanol, S.A. ("Banco

Popular," and such acquisition, the "Acquisition") on June 7, 2017, in an emergency auction

1

See Banco Santander Central Hispano, S.A., SEC No-Action Letter, File No. TP 04-70 (Sep. 10, 2004),

Banco Santander, S.A., SEC No-Action Letter, File No. TP 08-77 (Aug. 18, 2008), Banco Santander, S.A., SEC

No-Action Letter, File No. TP 09-16 (Nov. 7, 2008), Banco Santander, S.A., SEC No-Action Letter, File No. TP

09-29 (Dec. 22, 2008), Banco Santander, S.A., SEC No-Action Letter, File No. TP 14-15 (Sep. 18, 2014) and

Banco Santander, S.A., SEC No-Action Letter, File No. TP 15-07 (Jan. 6, 2015).

Josephine J. Tao

2

June 29, 2017

conducted by the European Single Resolution Board ("SRB") and the FROB, the Spanish banking

resolution authority, pursuant to their resolution powers, after the European Central Bank determined

that Banco Popular was failing or likely to fail. This transaction represents the first time the SRB has

exercised its resolution power with respect to a failing bank, including its sale of business and bail-in

tools. As part of the resolution action, (i) all of the ordinary shares (Common Equity Tier 1) of Banco

Popular outstanding at the close of the market on June 6, 2017 were cancelled, (ii) all of Banco

Popular's Additional Tier 1 capital instruments were converted into newly issued ordinary shares,

which were immediately cancelled, and (iii) all of Banco Popular's Tier 2 regulatory capital

instruments were converted into newly issued ordinary shares of Banco Popular, all of which were

acquired by Santander Spain for one euro (€1 ).

In connection with the Acquisition, Santander Spain has committed to ensure full compliance with

the regulations on supervision and discipline of credit institutions applicable to Banco Popular and,

specifically, to implement such liquidity measures as may be necessary to ensure the continuity of

Banco Popular's services and operations, the interruption of which, caused by a lack of liquidity,

could disrupt Banco Popular's ability to provide essential services, affect creditors or depositors or

jeopardize the financial stability of Banco Popular. To this end, and to compensate for the effect of

the Acquisition on Santander Spain's consolidated capital levels, Santander Spain has committed to

conduct a share capital increase of approximately €7 billion in order to cover the capital and

provisions required to strengthen Banco Popular's balance sheet and to reinforce its own capital,

which was negatively affected as a result of the Acquisition. Under Spanish corporate law,

Santander Spain must carry out this capital increase by way of the Rights Offering, granting its

existing shareholders preferential subscription rights to the new Santander Spain Shares to be

issued at a total price of approximately €7 billion. As noted above, this letter requests substantially

similar exemptive relief as past Santander Spain requests, but includes Banco Popular entities that

were not owned by Santander Spain prior to the Acquisition.

This letter sets forth data concerning the trading activity of Santander Spain and its affiliates for

periods ending May 31, 2017. Santander Spain has represented to us that it is not aware of any

material changes in the nature or volume of these activities since May 31, 2017.

Market Making Activities. As is customary in Spain for financial institutions, Santander Spain

engages in market making activities with respect to Santander Spain Shares through a subsidiary

dedicated to that function (the "Market Making Subsidiary") 2 . The Market Making Subsidiary makes

bids and offers for Santander Spain Shares on the Automated Quotation System (Sistema de

lnterconexi6n Bursatil Espanol) of the Spanish stock exchanges (the "AQS"), the centralized national

market that integrates by computer quotation the Spanish stock exchanges in Madrid, Barcelona,

Bilbao and Valencia (collectively, the "Spanish Exchanges") and purchases and sells Santander

Spain Shares on the AQS. The Market Making Subsidiary effects these transactions for its own

account in order to provide liquidity to the market.

Derivatives Market Making and Hedging. As part of its business, the Treasury department of

Santander Spain and the Treasury department of Banco Popular Spain (collectively, the "Treasury

Departments") issue, buy and sell derivatives on Santander Spain Shares or on baskets or indices

including Santander Spain Shares (the "Santander Spain Share Derivatives") for each of their own

2

Santander Spain's market making activities are carried out by Pereda Gesti6n, S.A., a corporation organized

under the laws of Spain.

Josephine J. Tao

3

June 29, 2017

accounts and for the accounts of each of their customers. All of these trades are executed outside of

the United States and the majority of these trades are for the accounts of customers outside the

United States. The derivatives traded include listed and over-the-counter options, warrants, futures,

convertible securities and other structured products relating to Santander Spain Shares. The

Treasury Departments engage in derivatives market making activities, on both solicited and

unsolicited bases, in order to provide liquidity to the derivatives market and to facilitate customers'

derivatives transactions. These transactions are effected primarily on the MEFF Renta Variable, S.A.

(the "MEFF Renta Variable") with the balance occurring on other exchanges outside the United

States and, in some cases, in the over-the-counter market outside the United States. In addition, the

Treasury Departments solicit and effect trades in Santander Spain Shares or in Santander Spain

Share Derivatives for their own accounts and for the accounts of customers of the Treasury

Departments for the purpose of hedging positions (or adjusting or liquidating existing hedge

positions) belonging to them and the customers of the Treasury Departments that are established in

connection with these derivatives market activities. The hedging transactions in Santander Spain

Shares are effected outside the United States through the AQS and the hedging transactions in

derivatives on Santander Spain Shares are effected outside the United States on the MEFF Renta

Variable, on other exchanges outside the United States and in the over-the-counter market outside

the United States. During the twelve months ended December 31, 2016 and the five months ended

May 31, 2017 these market making and hedging transactions in Santander Spain Shares and

derivatives on Santander Spain Shares amounted to approximately 1.55% and 2.26%, respectively,

of the value of average daily trading volume (the "ADTV") in Santander Spain Shares on the Spanish

Exchanges.

Trading in Santander Spain Shares by the Asset Managers. Certain affiliates of Santander Spain

manage the assets of mutual funds, pension funds and discretionary investor portfolios (such

affiliates, the "Asset Managers"; such funds and discretionary investor portfolios, the "Managed

3

Funds") . As part of their ordinary investment management activities on behalf of the Managed

Funds, the Asset Managers buy and sell Santander Spain Shares and derivatives, including listed

and over-the-counter options, warrants, convertible securities and other structured products relating

to Santander Spain Shares or baskets or indices including Santander Spain Shares, as well as index

futures on the foregoing, for the Managed Funds' accounts.

3

The Asset Managers consist of Banco Santander, S.A., Santander Private Banking Gestion, S.A., S.G.1.1.C.,

Santander Asset Management, S.A., S.G.1.1.C., Santander Pensiones, S.A., E.G.F.P., and Popular Gestion Privada,

SGllC, S.A, each a corporation organized under the laws of Spain (collectively, the "Spanish Asset Managers");

Santander Rio Asset Management Gerente de Fondos Comunes de Inversion, S.A., a corporation organized under

the laws of Argentina; Banco Santander Bahamas International Limited, a corporation organized under the laws of

Bahamas; Santander Brasil Asset Management Distribuidora de Titulos e Valores Mobiliarios S.A., and Santander

Brasil Gestao de Recurses Ltda., each a corporation organized under the laws of Brazil; Santander Asset

Management, S.A., Administradora General de Fondos, a corporation organized under the laws of Chile; SAM SGllC

S.A. (German branch), a corporation organized under the laws of Germany; Santander Asset Management

Luxembourg, S.A., a corporation organized under the laws of Luxembourg; SAM Asset Management, S.A. de C.V.,

Sociedad Operadora de Fondos de Inversion, a corporation organized under the laws of Mexico; BZ WBK

Towarzystwo Funduszy lnwestycyjnych S.A., a corporation organized under the laws of Poland; Santander Asset

Management - Sociedade Gestora de Fundos de lnvestimento Mobiliario, S.A., Santander Pensoes - Sociedade

Gestora de Fundos de Pensoes, S.A., and Popular Gestao De Actives, each a corporation organized under the laws

of Portugal; Santander Asset Management LLC, a corporation organized under the laws of Puerto Rico (the "Puerto

Rico Asset Manager"); Banco Santander (Suisse), S.A., a corporation organized under the laws of Switzerland;

Santander Asset Management UK Limited, a corporation organized under the laws of the United Kingdom; and

Banco Santander International, a banking corporation organized under U.S. laws ("Banco Santander

International").

Josephine J. Tao

4

June 29, 2017

Trading by the Insurance Company. As part of its ordinary business, certain affiliates of Santander

Spain (the "Insurance Companies") 4 , sell certain insurance products requiring the insurer to invest

the premiums paid by the purchaser of the policies within certain asset classes determined by that

purchaser (such as shares represented in the IBEX 35 Index, which includes Santander Spain

Shares) (such products, the "Asset Class Policies"). The Insurance Companies do not provide any

investment advice to purchasers with respect to the asset classes that may be selected by the

customer as part of the Asset Class Policies.

Unsolicited Brokerage. The non-U.S. brokerage units set forth in note 5 below (the "Non-U.S.

5

Brokerage Units") effect unsolicited brokerage transactions in Santander Spain Shares by placing

orders on the AQS and other overseas exchanges or effecting trades in the over-the counter

markets in Spain and elsewhere outside the United States. These transactions arise from unsolicited

buy or sell orders received by the Non-U.S. Brokerage Units from their customers, although the NonU.S. Brokerage Units may solicit the other side of these transactions. Additionally, Santander Spain

conducts a securities business through its affiliated U.S. (including Puerto Rico) broker-dealers,

Santander Securities LLC, a corporation incorporated under the laws of Puerto Rico ("Santander

Securities LLC"), and Santander Investment Securities, Inc., a corporation incorporated under the

laws of the state of Delaware ("Santander Investment Securities" and, together with Santander

Securities LLC, the "U.S. Brokerage Units"; the U.S. Brokerage Units, together with the Non-U.S.

Brokerage Units, the "Brokerage Units"), each of which may engage in unsolicited brokerage

transactions in the Santander Spain Shares and Santander Spain ADSs with its customers in the

United States. These transactions would be effected in the United States markets or in the non-U.S.

markets described above. During the twelve months ended December 31, 2016 and the five months

ended May 31, 2017, the unsolicited brokerage activities of the Brokerage Units (excluding trades

executed by the Non-U.S. Brokerage Units on behalf of the Market Making Subsidiary) as a

percentage of the worldwide value of ADTV in Santander Spain Shares was 12.09% and 19.29%,

4

Santander Seguros y Reaseguros S.A. Compafiia Aseguradora, Pastor Vida, S.A. Cia de Seguros y

Reaseguros, Santander Aegon Generales, Santander Aegon Vida, and Allianz Popular Vida, S.A.U., each a

corporation organized under the laws of Spain (collectively, the "Spanish Insurance Companies");.Zurich

Santander Seguros Argentina S.A., a corporation organized under the laws of Argentina; Zurich Santander Brasil

Seguros e Previdencia S.A., and Zurich Santander Brasil Seguros S.A., each a corporation organized under the laws

of Brasil; Zurich Santander Seguros Generales Chile S.A., and Zurich Santander Seguros Vida Chile S.A., each a

corporation organized under the laws of Chile; Santander Insurance Europe Limited, and Santander Insurance Life

Limited, each a corporation organized under the laws of Ireland; Zurich Santander Seguros Mexico S.A., a

corporation organized under the laws of Mexico; Bank Zachodni WBK AVIVA Towarzystwo Ubezpiecen Naycie S.A.,

and Bank Zachodni WBK AVIVA Towarzystwo Ubezpiecen Ogolnych S.A., each a corporation organized under the

laws of Poland; Santander Totta Seguros Portugal, Aegon Santander Portugal Nao Vida S.A., Aegon Santander

Portugal Vida S.A., Eurovida, S.A., and Popular Seguros, S.A., each a corporation organized under the laws of

Portugal; and Zurich Santander Seguros Uruguay S.A., a corporation organized under the laws of Uruguay,

5

The Non-U.S. Brokerage Units consist of Santander Investment Balsa, S.V., S.A., and Popular Balsa SV, each

a corporation organized under the laws of Spain (the "Spanish Brokerage Units"); Santander Rio Sociedad de

Balsa, S.A., a corporation organized under the laws of Argentina; Banco Santander Bahamas International Ltd., a

corporation organized under the laws of Bahamas; Santander Corretora de Cambia e Valores Mobiliarios, S.A., a

corporation organized under the laws of Brazil; Santander S.A. Corredores de Balsa Limitada and Santander Agente

de Valores Limitada, each a corporation organized under the laws of Chile; Casa de Balsa Santander, S.A. de C.V.

Grupo Financiero Santander Mexico, a corporation organized under the laws of Mexico; Bank Zachodni WBK S.A., a

corporation organized under the laws of Poland; Banco Santander Totta and Banco Popular Portugal, each a

corporation organized under the laws of Portugal; Banco Santander (Suisse), S.A., a corporation organized under the

laws of Switzerland; and Abbey Stockbrokers Limited, Abbey National Treasury Services Pie, Santander ISA

Managers Ltd., and Santander UK Pie, each a corporation organized under the laws of the United Kingdom.

Josephine J. Tao

5

June 29, 2017

respectively. During the twelve months ended December 31, 2016 and the five months ended May

31, 2017, the unsolicited brokerage activities of the U.S. Brokerage Units collectively as a

percentage of the worldwide value of ADTV in Santander Spain Shares was 0.20% and 0.16%,

respectively.

The Market Making Subsidiary, the Treasury Departments, the Spanish Asset Managers, the

Spanish Insurance Companies and the Spanish Brokerage Unit are collectively referred to herein as

the "Spanish Companies". The Spanish Companies, together with the other Asset Managers, the

other Insurance Companies and the other Brokerage Units are collectively referred to herein as the

"Companies".

The availability of the exemptions Santander Spain is requesting would be conditioned on the

disclosure and record-keeping undertakings outlined below.

The descriptions of factual matters in this letter, including the market for Santander Spain Shares

and the Companies' business and market activities, as well as the descriptions of certain matters

under Spanish law and the laws of other jurisdictions outside the United States included in this letter,

have been provided to us by Santander Spain.

The Market for Santander Spain Shares

I.

The principal trading market for Santander Spain Shares is on the Spanish Exchanges through the

AQS in Spain. The Santander Spain Shares also are listed on the New York (in the form of the

Santander Spain ADSs), Milan, Lisbon, Buenos Aires, London (in the form of Santander Spain Crest

Depositary Interests ("Santander Spain COis")), Sao Paulo (in the form of Santander Spain

Brazilian Depositary Receipts ("Santander Spain BDRs")), Warsaw and Mexico Stock Exchanges.

Each Santander Spain ADS represents one Santander Spain Share and is evidenced by an

American Depositary Receipt issued by Bank of New York Mellon, as Depositary. Santander Spain

is a foreign private issuer as defined in Rule 3b-4(c) under the U.S. Securities Exchange Act of

1934.

As of December 31, 2016, 14,582,340,701 Santander Spain Shares were outstanding, held by

3,928,950 record holders. Approximately 58.36% of the outstanding Santander Spain Shares were

held of record by non-residents of Spain and 19.00% of the outstanding Santander Spain Shares

were held by 1, 150 record holders with registered addresses in the United States (including Puerto

Rico).

As of May 31, 2017, 14,582,340,701 Santander Spain Shares were outstanding, held by 4,026,563

record holders. Approximately 60.53% of the outstanding Santander Spain Shares were held of

record by non-residents of Spain and 20.78% of the outstanding Santander Spain Shares were held

by 1, 157 record holders with registered addresses in the United States (including Puerto Rico).

Santander Spain's market capitalization at December 31, 2016 was approximately €72.3 billion

($76.1 billion) 6 , the largest of any Spanish bank and the second largest of any Spanish company,

Throughout this letter, euros have been translated to dollars at the rate of €1.00 =$1.1072, the average rate of

exchange in 2016 published by the Federal Reserve System on December 31, 2016, with regard to data as of or for

periods ended December 31, 2016; and at the rate of €1.00 = $1.0748, the average rate of exchange in 2017 (up to

6

Josephine J. Tao

6

June 29, 2017

representing 14.9% of the IBEX 35 Index. The values of ADTV in the Santander Spain Shares on

the Spanish Exchanges during the twelve months ended December 31, 2016 and the five months

ended May 31, 2017 were approximately €406 million ($449 million) and €536 million ($577 million),

or 90.1 % and 77.9%, respectively, of the global value of ADTV. The ADTV in number of shares in

the Santander Spain Shares on the Spanish Exchanges during the twelve months ended December

31, 2016 and the five months ended May 31, 2017 were approximately 101 million shares and 97

million shares, respectively. The values of ADTV of the Santander Spain ADSs on the New York

Stock Exchange (the "NYSE") during the twelve months ended December 31, 2016 and the five

months ended May 31, 2017 were approximately $28.6 million and $39.2 million, respectively. The

values of ADTV of the Santander Spain Shares on the Milan, Lisbon, Buenos Aires, London, Sao

Paulo, Warsaw and Mexico Stock Exchanges during the twelve months ended December 31, 2016

were and the five months ended May 31, 2017, in the aggregate, approximately€17.7 million ($19.5

million) and €116.4 million ($125.7 million), respectively.

The AQS links the Spanish Exchanges, providing securities listed on it with a uniform continuous

market that eliminates the differences among the Spanish Exchanges. The principal feature of the

system is the computerized matching of buy and sell orders at the time of entry of the order. Each

order is executed as soon as a matching order is entered, but can be modified or canceled until

executed. The activity of the market can be continuously monitored by investors and brokers. All

trades on the AQS must be placed through a bank, a brokerage firm, an official stock broker or a

dealer firm member of a Spanish Exchange directly. The AQS operates separate order-matching

systems for block trades (which exceed certain minimum amounts) and all other trades.

II.

Santander Spain's Market Activities

Santander Spain is one of the world's largest banking and financial services groups, and its

headquarters are in Madrid, Spain. In addition, Santander Spain has subsidiary, branch,

representative and similar offices. Santander Spain is regulated and directly supervised by the

European Central Bank under the Single Supervisory Mechanism ("SSM"), and its branches and

affiliates in the United States are subject to applicable U.S. bank regulations, among other laws and

regulations. Santander Spain has confirmed that the activities described below, for which it is

requesting relief, are permitted under and would be conducted in accordance with applicable

Spanish law and other non-U.S. laws. Assuming the requested relief is granted, Santander Spain

has confirmed that the activities described below also would be conducted in accordance with

applicable U.S. law.

In the continental United States, Santander Spain conducts a securities business through Santander

Securities LLC and Santander Investment Securities; and an asset management business for nonU.S. clients through Banco Santander International. During the period from January 1, 2016 through

May 31, 2017, purchases and sales by Banco Santander International of Santander Spain Shares

and Santander Spain ADSs totaled approximately $134.14 million. Santander Investment Securities

is registered with the SEC as a broker-dealer and is a member of the Financial Industry Regulatory

Association ("FINRA") and the NYSE. In Puerto Rico, Santander Spain conducts a securities

business through Santander Securities LLC and an asset management business through the Puerto

Rico Asset Manager. During the period from January 1, 2016 through May 31, 2017 there have been

May 31,2017) published by the Federal Reserve System on May 31, 2017, with regard to data as of or for periods

ended May 31, 2017.

Josephine J. Tao

7

June 29, 2017

no purchases or sales by the Puerto Rico Asset Manager of Santander Spain Shares and Santander

Spain ADSs and $4.42 million of purchases and sales by Santander Securities LLC of Santander

Spain Shares and Santander Spain ADSs. Santander Securities LLC is registered with the SEC as a

broker-dealer and is a member of FINRA. With respect to those activities for which Santander Spain

is seeking relief, Santander Investment Securities will only engage in unsolicited brokerage activities

in the United States, Santander Securities LLC will only engage in unsolicited brokerage activities in

Puerto Rico and the United States, the Puerto Rico Asset Manager will only engage in asset

management activities in Puerto Rico and Banco Santander International will only engage in asset

management activities from the continental United States for non-U.S. clients. The rest of the

activities for which Santander Spain is seeking relief (including unsolicited brokerage and asset

management), with the possible exception of trades made by the Spanish Asset Managers, which,

due to their fiduciary obligations as asset managers, cannot follow instructions from Santander

Spain, or by the Asset Managers not based in Spain, which may not be able to follow the instructions

to be provided by Santander Spain due to the same fiduciary duties, will be conducted by the

Spanish Companies and the other Companies outside the United States and Puerto Rico as

described below.

Market Making Activities. As is customary in Spain for financial institutions, Santander Spain

engages in market making activities with respect to Santander Spain Shares through its Market

Making Subsidiary. The Market Making Subsidiary makes bids and offers for Santander Spain

Shares and purchases and sells Santander Spain Shares on the AQS. The Market Making

Subsidiary effects these transactions for its own account in order to provide liquidity to the market.

The Market Making Subsidiary conducts its market making activities outside the United States and

manages these activities from Madrid.

As noted above, the AQS is an order-matching system, not an inter-dealer market with formal,

officially designated market makers. The Market Making Subsidiary engages in its market making

activities by placing bids and offers on the AQS, primarily through one of the Non-U.S. Brokerage

Units. However, the Market Making Subsidiary is not required to and does not maintain

independently established bid and ask prices. The Market Making Subsidiary is not required to make

a market in the Santander Spain Shares. Accordingly, the Market Making Subsidiary does not act as

a "market maker" as that term is understood in the U.S. securities markets.

Santander Spain believes that the Market Making Subsidiary is the only market maker for Santander

Spain Shares on the Spanish Exchanges and, for the twelve months ended December 31, 2016 and

the five months ended May 31, 2017, the Market Making Subsidiary's market making activities

accounted for approximately 0.60% and 0.38% of the value of ADTV in Santander Spain Shares on

the Spanish Exchanges. At times when supply has significantly exceeded demand, its share of such

value of ADTV has increased materially, but the Market Making Subsidiary's market making

activities generally do not comprise in excess of 15% of the value of ADTV in Santander Spain

Shares as measured on a daily basis, on the Spanish Exchanges. The monthly average percentage

of outstanding Santander Spain Shares held by the Market Making Subsidiary as a result of market

making activities ranged from 0.18% to 2.17% during the twelve months ended December 31, 2016

and ranged from 0.15% to 1.21 % during the five months ended May 31, 2017.

During the restricted period for the Rights Offering (the "Restricted Period"), the Market Making

Subsidiary intends to continue its market making activities in the ordinary course of business,

although the Rights Offering distribution may result in increased selling pressure and thus volumes

Josephine J. Tao

8

June 29, 2017

of transactions by the Market Making Subsidiary may be higher than average and represent a

greater than average percentage of trading volume, including in excess of 15% of such daily trading

volume.

Derivatives Market Making and Hedging. The Treasury Departments conduct their derivatives

market making and hedging activities outside the United States and manage these activities

principally from Spain. In Spain, the Treasury Departments are admitted under the MEFF Renta

Variable rules as a market maker and are significant market makers in derivatives of Santander

Spain Shares.

The Treasury department of Santander Spain is also the only market maker on the Spanish

Exchanges of securitized derivatives issued by it and based, in whole or in part, on the Santander

Spain Shares and the Treasury Department of Santander Spain is required by applicable stock

exchange rules to provide quotes for such derivatives it issues. This activity involves the issuance,

purchase and sale of derivative products for its own account and for the accounts of its customers

on both solicited and unsolicited bases, on the Spanish Exchanges, certain other non- U.S.

exchanges and in the over-the-counter market in Spain and elsewhere outside the United States.

These derivatives products include listed and over-the-counter options, warrants, futures and other

securities that are exercisable or convertible into, or the value of which is determined by reference

to, Santander Spain Shares or proprietary or third-party baskets or indices including Santander

Spain Shares. These derivatives may also include index futures on the foregoing. The Treasury

Department of Santander Spain's derivatives market making involves issuing, purchasing and selling

derivatives on Santander Spain Shares in order to facilitate customer orders and to provide liquidity

to the market.

In addition, the Treasury Departments will maintain varying positions in these derivatives and their

financial exposure to movements in the price of the Santander Spain Shares will vary from time to

time. In order to manage this financial exposure, the Treasury Departments continually enter into

hedging transactions that involve, in whole or in part, purchases and sales of Santander Spain

Shares or derivatives based on Santander Spain Shares, for their own accounts and on behalf of

customers of the Treasury Departments, as applicable, in order to assist them in hedging their own

derivatives positions. The derivatives hedging transactions in Santander Spain Shares described

above occur primarily on the AQS and on the MEFF Renta Variable, with the balance occurring on

other exchanges outside the United States and, in some cases, in the over-the-counter market

outside the United States. During the twelve months ended December 31, 2016 and the five months

ended May 31, 2017, these market making and hedging transactions in Santander Spain Shares

represented approximately 1.55% and 2.26%, respectively, of the value of ADTV in Santander Spain

Shares on the Spanish Exchanges.

Trading in Santander Spain Shares by the Asset Managers. As part of their ordinary investment

management activities, the Asset Managers buy and sell Santander Spain Shares and derivatives,

including listed and over-the-counter options, warrants, convertible securities and other structured

products related to Santander Spain Shares or baskets or indices including Santander Spain

Shares, as well as index futures on the foregoing, outside the United States for the Managed Funds'

accounts7 . Under Spanish law, the Asset Managers have a fiduciary duty to oversee the Managed

7

The Puerto Rico Asset Manager conducts such activities in Puerto Rico and Banco Santander International

conducts such activities in the continental United States for non-U.S. clients. Both entities' volume of trading in

Santander Spain Shares has historically been low.

Josephine J. Tao

9

June 29, 2017

Funds in a manner that is in the best interests of the investors of those funds 8 . The Asset Managers

are prohibited by law from taking into account any factors other than the interests of the Managed

Funds' beneficiaries in making investment decisions. Accordingly, the Asset Managers would be

prohibited by law from following a directive by Santander Spain to cease trading Santander Spain

Shares and derivatives, including listed and over-the-counter options, warrants, convertible

securities and other structured products related to Santander Spain Shares or baskets or indices

including Santander Spain Shares, as well as index futures on the foregoing, during the Restricted

Period, unless the Asset Managers believed that cessation of such trading was in the best interests

9

of the Managed Fund's beneficiaries . Similarly, the Asset Managers would be prohibited by law from

following a Santander Spain directive to bid for or purchase Santander Spain Shares and

derivatives, including listed and over-the-counter options, warrants, convertible securities and other

structured products related to Santander Spain Shares or baskets or indices including Santander

Spain Shares, as well as index futures on the foregoing, unless the Asset Managers independently

concluded that such bids or purchases were in the best interests of the Managed Fund's

beneficiaries.

Trading by the Insurance Company. The Insurance Companies purchase Santander Spain Shares in

connection with investing premiums paid on Asset Class Policies, which require investments within a

narrow class of assets, such as the IBEX 35 Index, that may include Santander Spain Shares. The

Insurance Companies conducts these activities outside the United States.

Under Spanish law, the Insurance Companies have a fiduciary duty to the purchasers of Asset Class

Policies to oversee the investments with respect to those policies in a manner that is in the best

interests of those purchasers. The Insurance Companies may not take into account any factors other

than the interests of its insureds in making investment decisions under those policies. Accordingly,

the Insurance Companies would be prohibited by law from following, with respect to the Asset Class

Policies, a directive by Santander Spain to cease trading Santander Spain Shares during the

Restricted Period, unless such a halt in trading were in the best interests of the purchasers of those

policies. Similarly, the Insurance Companies would be prohibited by law from following a Santander

8

Under Spanish law, Santander Spain cannot issue directives to the Spanish Asset Managers requesting them

to stop trading in any specific security for a specified period. This has been confirmed orally by the Spanish National

Markets Commission (the "CNMV"). As a result, prior to the commencement of the Restricted Period, Santander

Spain will instead issue advisory notices to the Spanish Asset Managers informing them that any trading by them in

Santander Spain Shares or derivatives during the Restricted Period could result in a violation of U.S. law. Prior to the

commencement of the Restricted Period, Santander Spain will issue directives to the Asset Managers not based in

Spain requesting such Asset Managers to stop trading in Santander Spain Shares or derivatives until the termination

of the Restricted Period. However, in light of the fiduciary duties that the Asset Managers have to the beneficiaries of

the Managed Funds, no assurances can be given that the Asset Managers will in fact refrain from trading in

Santander Spain Shares or derivatives during the Restricted Period. Accordingly, we are asking that the requested

relief cover the asset management activities of the Asset Managers to the extent that the Asset Managers continue to

trade in Santander Spain Shares or derivatives in the ordinary course of business during the Restricted Period.

9

Some of the pension funds managed by the Asset Managers have an "investment oversight committee"

charged with overseeing the investments made by the Asset Managers. In certain cases, representatives and/or

employees of Santander Spain or its affiliates may be members of those investment oversight committees. However,

those committees (and their members) would be unable to require the pension fund Asset Manager to stop or start

trading Santander Spain Shares or derivatives during the Restricted Period if the Asset Manager did not believe it

was in the best interests of the fund's owners to do so. The representatives and/or employees of Santander Spain

who participate on the investment oversight committees are, like the Asset Managers themselves, isolated by

Information Barriers from the areas of Santander Spain where price-sensitive information relating to Santander Spain

Shares or derivatives and where information relating to the Rights Offering would be discussed.

Josephine J. Tao

10

June 29, 2017

Spain directive to bid for or purchase Santander Spain Shares unless the Insurance Companies

independently concluded that such bids or purchases were in the best interests of its insureds under

the Asset Class Policies.

Unsolicited Brokerage. The Non-U.S. Brokerage Units effect unsolicited brokerage transactions in

the Santander Spain Shares by placing orders on the Spanish Exchanges and other overseas

exchanges or effecting trades in the over-the-counter market in Spain and elsewhere outside the

United States, in each case on behalf of customers. These transactions arise from unsolicited buy

and sell orders received from their customers. although the Non-U.S. Brokerage Units may solicit the

other side of these transactions. The unsolicited brokerage activities of the Non-U.S. Brokerage

Units (excluding trades executed by the Non-U.S. Brokerage Units on behalf of the Market Making

Subsidiary) represented approximately 11.89% and 19.12% of the value of ADTV in Santander

Spain Shares on the Spanish Exchanges during the twelve months ended December 31, 2016 and

the five months ended May 31, 2017, respectively.

Although the Non-U.S. Brokerage Units from time to time provide advice to their customers

regarding an investment in Santander Spain Shares, none of the Non-U.S. Brokerage Units,

Santander Spain or any subsidiary of Santander Spain publishes research reports concerning

Santander Spain.

The Non-U.S. Brokerage Units are required by Spanish law, as well as, in some cases, by the terms

of their contracts with customers, to facilitate the trading activity of customers as described above 10 . It

would place a substantial burden on the Non-U.S. Brokerage Units' customers to require them to

transfer their Santander Spain Shares to a securities account with another bank, or to have the NonU .S. Brokerage Units place orders with another bank, in order to make trades with respect to

Santander Spain Shares during the Restricted Period. Moreover, the Non-U.S. Brokerage Units

would likely lose a significant number of those customers if the Non-U.S. Brokerage Units were

prevented from providing them with customary facilitation services during the Restricted Period.

As noted above, the U.S. Brokerage Units may also engage in unsolicited brokerage transactions in

the Santander Spain Shares with their customers in the United States. These transactions would be

effected on the NYSE, in the over-the-counter markets in the United States or in the non-U.S.

markets described above.

Significance to Market. As noted above, the Market Making Subsidiary's market making activities

accounted for 0.60% and 0.38% of the values of ADTV in Santander Spain Shares on the Spanish

Exchanges during the twelve months ended December 31, 2016 and the five months ended May 31,

2017, respectively, while the derivatives market making and hedging activities of the Treasury

Departments and the unsolicited brokerage activities of the Non-U.S. Brokerage Units (excluding

trades executed on behalf of the Market Making Subsidiary) represented approximately 1.55% and

11.89%, respectively, of such 2016 value of ADTV and approximately 2.26% and 19.12%,

respectively, of such 2017 value of ADTV. In the aggregate, these market activities represented

approximately 14.05% and 21.76% of the values of ADTV in Santander Spain Shares on the

Spanish Exchanges during the twelve months ended December 31, 2016 and the five months ended

May 31, 2017, respectively.

10

The Brokerage Units are not required, however, to buy or sell Santander Spain Shares as principal for the

benefit of their clients.

Josephine J. Tao

11

June 29, 2017

Information Barriers. Santander Spain maintains and enforces written "Information Barrier" policies

and procedures to prevent material non-public information from passing between the sales/trading

areas and other sensitive areas of Santander Spain (including any investment oversight committee).

Accordingly, during restricted periods prior to announcements of earnings results or other material

developments that have not yet become public, most market making and all other ordinary course

market activities of Santander Spain are permitted to continue. Under these policies and procedures,

Santander Spain's traders and sales force who conduct these market activities will generally be able

to continue doing so during and outside these restricted periods, although senior management may

restrict such activities in extraordinary circumstances. Santander Spain will continue to maintain and

enforce these policies and procedures during the Restricted Period.

Other affiliates of Santander Spain conduct market activities in Santander Spain Shares in the

ordinary course of their business. In connection with the Rights Offering, these other affiliates will

comply with Regulation M, either by suspending their market activities during the relevant period or

by conducting those activities in accordance with an available exception from Regulation M. These

exceptions might include those available for "affiliated purchasers." Accordingly, Santander Spain

is not seeking relief from the Staff for these activities.

Ill.

The Rights Offering

On April 7, 2017, an Ordinary General Meeting of the shareholders of Santander Spain authorized

the Board of Directors of Santander Spain to increase the share capital of Santander Spain, within a

maximum term of three years and through one or more capital increases, up to a maximum amount

in nominal value of €3,645,585, 175 by means of the issuance of new ordinary shares. On the same

date, the Board of Directors of Santander Spain delegated such authorization to the Executive

Committee of the Board of Directors. The Executive Committee is expected to resolve that

Santander Spain carry out the Rights Offering, a proposed capital increase of approximately €7.0

billion, including the nominal value and the share issue premium of the shares to be issued, which

represents approximately 8% of Santander Spain's market capitalization based on the June 28,

2017 closing price of Santander Spain's ordinary shares, involving the offering to Santander Spain

11

shareholders of preemptive rights to purchase new Santander Spain Shares (the "Rights"). The

percentage that the Rights Offering will represent of Santander Spain's issued shares capital will be

dependent on the issue price of the new shares (nominal value plus share issue premium). In the

Rights Offering, Santander Spain will issue Rights to Santander Spain shareholders of record on the

second trading day after publication of the corresponding announcement in the Spanish Commercial

Registry Gazette (BORME); since said BORME, publication is expected to occur on July 5, 2017, the

record date is expected to be July 7, 2017 (the "Record Date"; the Santander Spain shareholders of

record on such date, the "Record Holders"); as a result, investors who acquire Santander Spain

Shares on the day of publication of the BORME announcement (the "Last Trading Date") and that,

following settlement of the transaction, appear as shareholders in the lberclear registries on the

second trading day after the publication of the BORME announcement, will also be entitled to

receive the Rights. Shareholders who have sold their shares on or prior to July 5, 2017 will not

receive Rights with respect to such shares

11

It is expected that the number of new Santander Spain Shares to be issued under the Rights Offering and the

offer price per Santander Spain Share will be determined and announced on or about July 3, 2017.

Josephine J. Tao

12

June 29, 2017

The Rights and the new Santander Spain Shares to be issued in the Rights Offering to record

holders of Santander Spain Shares with registered addresses in the United States (including Puerto

Rico) will be registered under the U.S. Securities Act of 1933, as amended, and the rules and

regulations promulgated thereunder (the "Securities Act"), pursuant to a registration statement on

Form F-3. A limited number of additional Rights and new Santander Spain Shares will be registered

on Form F-3 with respect to any possible "flowback" of new Santander Spain Shares to the United

States following the Rights Offer. Rights will be issued to the local custodian for the Depositary on

behalf of all holders of Santander Spain ADSs. The Depositary will not issue rights to Santander

Spain ADS holders and will instead cause the custodian to sell the Rights it receives and distribute

the cash proceeds to the holders of Santander Spain ADSs. Santander Spain will prepare one or

more offering documents for use in soliciting subscriptions and purchases in the Rights Offering,

including a prospectus and prospectus supplement for use in the United States.

The exercise price at which the rights may be exercised is expected to be determined and

announced on or about July 3, 2017. The Rights Offering subscription period is expected to last 15

calendar days, commencing on the first Spanish business day following the Record Date (the

"Subscription Period"). During the Subscription Period, the Rights will be traded on the Spanish

Exchanges and through the AQS. Rights may be exercised at any time during the Subscription

Period. In addition, during the Subscription Period, the Record Holders and investors who have

acquired Rights and have exercised all the rights they hold may request to subscribe for additional

new Santander Spain Shares (the "Additional Shares") in the event that, at the expiration of the

Subscription Period, there exist new Santander Spain Shares as to which Rights have not been

exercised (the "Surplus Shares"). The allocation of Additional Shares will take place on the fourth

trading day following the expiration of the Subscription Period and is expected to take place on July

26, 2017. On such date, Santander Spain, acting as Rights agent, will determine the number of

Surplus Shares and will allocate such shares to the Record Holders and the investors that have

requested Additional Shares according to the terms and conditions set forth in the offering. Such

allocation will be done on a pro rata basis if the number of Additional Shares requested exceeds the

number of Surplus Shares.

Any new Santander Spain Shares that have not been subscribed for during the Subscription Period

or allocated to Record Holders or investors requesting Additional Shares will be placed with qualified

institutional investors by the underwriters at the discretion of Santander Spain (the "Discretionary

Allocation Period"). The Discretionary Allocation Period, if any, is expected to begin on July 26,

2017 and to end before the AQS opening on July 27, 2017. In the event that any new Santander

Spain Shares are not subscribed for by qualified institutional investors at the expiration of the

Discretionary Allocation Period, such shares shall be subscribed for by the underwriters. Santander

Spain may reject or accept, in whole or in part, at its discretion, any requests to subscribe for new

Santander Spain Shares received during the Discretionary Allocation Period so long as any such

rejection is done on a good faith basis and would not require the underwriters to subscribe for any

new Santander Spain Shares.

The closing of the Rights Offering and the approval of the corresponding corporate resolutions and

execution of the public deed resolving to increase the share capital is currently expected to occur on

or about July 27, 2017. The new Santander Spain Shares will be submitted for listing on the

Spanish Stock Exchanges, the New York Stock Exchange (in the form of Santander Spain ADSs)

Josephine J. Tao

13

June 29, 2017

and the Milan, Lisbon, Buenos Aires, London (in the form of Santander Spain COis), Warsaw, Sao

Paulo (in the form of Santander Spain BDRs) and Mexico Stock Exchanges. 12

The joint bookrunners for the Rights Offering are expected to be Santander Spain, Citigroup Global

Markets Limited and UBS Limited. Santander Spain, the Non-U.S. Brokerage Units and the U.S.

Brokerage Units will participate in the Rights Offering as permitted by Rules 102(b)(5) and, to the

extent applicable, 101 (b)(9) of Regulation M.

IV.

Application of Regulation M

In connection with the Rights Offering, Santander Spain and certain affiliated purchasers as such

term is defined in Rule 100 of Regulation M will offer and sell Santander Spain Shares to Santander

Spain's existing shareholders, some of whom reside in the United States, and may therefore be

considered to be engaged in a distribution in the United States for purposes of Regulation M.

Pursuant to Rule 100 under Regulation M, the Restricted Period will commence one business day

prior to the determination of the offering price for the Rights and will end upon completion of the

Rights Offering. Thus, the Restricted Period is likely to last approximately three and one-half weeks.

As business units or affiliates of Santander Spain that, from time to time, purchase Santander Spain

Shares for their own accounts and the accounts of others and recommend and exercise investment

discretion with respect to the purchase of Santander Spain Shares, the Companies may be deemed

to be "affiliated purchasers" of Santander Spain, as defined in Rule 100 of Regulation M. As such,

their market activities will be subject to Rule 102 of Regulation M throughout the Restricted Period,

except to the extent that any of them acts as a "distribution participants" subject to Rule 101.

Under both Rule 101 and Rule 102, the Companies will not be permitted to bid for or purchase, or

attempt to induce any person to bid for or purchase, Santander Spain Shares during the Restricted

Period unless one of the specified exceptions under the applicable rule is available. There are no

exceptions available under either rule that would permit the Companies to engage in the ordinary

course market-making, derivatives hedging, asset management, insurance and unsolicited

brokerage activities described in this letter. Therefore, without the requested exemptive relief, the

Companies would not be permitted to engage in these activities for an extended period of time,

which is likely to last approximately three and one-half weeks.

Santander Spain believes that the withdrawal of the only market maker in Santander Spain Shares

in the primary market for those shares, which are among the most actively traded in Spain, for such

an extended period of time would have serious harmful effects in the home market and, indirectly, in

the U.S. market, for the Santander Spain Shares. These effects could include a significant

imbalance of buy and sell orders, particularly given the large number of shares to be distributed in

the Rights Offering, and thus greater volatility and reduced liquidity. In addition, as the Treasury

Department of Santander Spain is also a significant market maker in derivatives on Santander Spain

Shares, if the Treasury Department of Santander Spain is precluded from conducting market making

activities in the derivatives or from effecting hedging transactions in Santander Spain Shares relating

to the derivatives, the application of Regulation M could have adverse effects on the market for

derivatives, as well as on the Treasury Departments' ability to manage hedge positions maintained

by them and the customers of the Treasury Departments previously established in connection with

12

The commencement and subsequent events in the Rights Offering described above could be delayed.

Josephine J. Tao

14

June 29, 2017

this activity. The Asset Managers and the Brokerage Units may also be unable to execute assetmanagement related or unsolicited brokerage orders submitted by their customers in the normal

course, thereby forcing their customers to take their orders elsewhere or to refrain from trading.

Similarly, the Asset Managers and the Insurance Companies have a fiduciary duty to the investors of

the Managed Funds and to the purchasers of their insurance products to oversee the investments in

a manner that is in the best interests of those purchasers. Accordingly, the Asset Managers and the

Insurance Company may not refrain from, or engage in, trading in Santander Spain Shares or, as

the case may be, derivatives, including listed and over-the-counter options, warrants, convertible

securities and other structured products related to Santander Spain Shares or baskets or indices

including Santander Spain Shares, as well as index futures on the foregoing, as a result of

investment instructions received from Santander Spain, unless such action is in the best interests of

the purchasers of those policies. The derivatives market making and hedging, asset management,

insurance and unsolicited brokerage activities described in this letter are also important aspects of

Santander Spain's business as a major financial institution in Europe and, therefore, interrupting

those activities for such an extended period could also have an adverse impact on Santander

Spain's business, including its ability to properly manage its risks.

The Santander Spain Shares would easily qualify as actively traded securities that are exempt under

Rule 101(c)(1), with a value of average daily trading volume for the twelve months ended December

31, 2016 and the five months ended May 31, 2017 of approximately €406 million and €536 million,

respectively, and a public float value in excess of $100 billion. Regulation M normally would not

interfere with market-making and other market activities in actively traded securities, such as the

Santander Spain Shares. However, because the Companies are affiliated purchasers of the issuer,

they may not rely on the actively traded securities exception to do what market makers and brokers

for large U.S. issuers are normally allowed to do during distributions by those issuers.

In addition, the Rights Offering is being conducted and trading in Santander Spain Shares by the

business units and affiliates of Santander Spain identified herein during the Rights Offering is subject

to and will be conducted in accordance with applicable Spanish law and other applicable non-U.S.

laws. As discussed in greater detail below, applicable Spanish law provides important safeguards

against the type of risk of abuse that Regulation M was designed to prevent.

Finally, Santander Spain believes that the risk of market manipulation by the Companies is limited by

the "Information Barrier" procedures and fiduciary duties described above, the fact that the market

activities that are the subject of this request for exemptive relief are the ordinary course market

activities of the Companies rather than activities commenced or managed in contemplation of the

Rights Offering, and the fact that the jurisdictions in which the Companies operate have laws that

prohibit market manipulation (as further discussed below).

For the foregoing reasons, Santander Spain asks the Staff to provide an exemption from Regulation

M that would allow the Companies to continue to engage in market making, derivatives market

making and hedging, asset management, insurance and unsolicited brokerage activities with respect

to Santander Spain Shares and Santander Spain ADSs in the ordinary course of their respective

business as described above during the Restricted Period, as permitted under market practice and

applicable law in their home jurisdictions.

Josephine J. Tao

V.

15

June 29, 2017

The Spanish Regulatory Regime

The principal regulations that apply to the Spanish Companies' market activities under Spanish law

are the Regulation (EU) No 596/2014, of the European Parliament and the Council of 16 April 2014

on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European

Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and

2004/72/EC and implementing and delegated regulations (the "MAR"), the Spanish Securities

Market Act (the "SSMA"), Royal Decree 1333/2005, as amended (relating to market abuse), Royal

Decree 217/2008 (relating to regulations governing the activities of investment firms and conduct on

the Spanish Exchanges). Pursuant to the provisions of MAR, the SSMA established an independent

regulatory authority, the CNMV, to supervise the securities markets. The SSMA governs, among

other things, trading practices, insider trading and disclosure. In particular, Articles 231 13 , and

14

282.5 of the SSMA prohibit market manipulation. Under the SSMA, the CNMV oversees price

formation, execution and the settlement of transactions to ensure that insider trading, price

manipulation and other breaches of law may be detected. The CNMV has a division which has

responsibility for market supervision, monitoring compliance, investigating violations and imposing

disciplinary measures. The CNMV also takes measures to ensure that information necessary to

maintain a transparent market is made public. This applies, in particular, to the prices and volumes

of securities traded on and off the Spanish Exchanges.

The Spanish Criminal Code provides remedies for abusing confidential information that is likely to

influence the prices of securities. Market manipulation and dissemination of false rumors to affect the

prices of listed securities to realize a gain are prohibited. The breach of professional secrecy, insider

trading and price manipulation in Spain are criminal offenses. In particular, Article 284 of the Spanish

Criminal Code establishes criminal liability for employment of any mechanism with the intent to alter

prices that would otherwise result from a free market for, among other things, securities.

Under Spanish law, Santander Spain and its subsidiaries are prohibited from purchasing Santander

Spain Shares unless the purchase of Santander Spain Shares is generally authorized at a meeting

of shareholders of Santander Spain, and such purchase, together with the Santander Spain Shares

previously held by Santander Spain and its subsidiaries, do not result in a net equity lower than the

Santander Spain share capital amount plus any restricted legal or statutory reserves. In addition, the

total number of Santander Spain Shares held by Santander Spain and its subsidiaries may not

exceed 10% of the total capital stock of Santander Spain. Spanish law requires that the CNMV be

notified each time Santander Spain and its subsidiaries acquire, on an aggregate basis, 1% of the

outstanding capital stock of Santander Spain (without deducting any sales of Santander Spain

Shares which may have been made during that time period). In addition, the Bank of Spain requires

13

Article 231 provides:

Any person or entity acting or otherwise related to the securities markets shall refrain from engaging in

activities that may falsify the free development of prices in the securities markets.

14

Article 282.5 provides:

The following acts or omissions constitute extremely serious infringements by the individuals and

institutions referred to in Article 271 hereof [including brokers, market makers and their respective

officers]:

(i) breach of Article 231 if such breach has a material adverse effect on the price [of the relevant

security]. If the effect on the price is not material, this would still constitute a serious infringement, in

accordance with Article 295.

Josephine J. Tao

16

June 29, 2017

Santander Spain to provide monthly reports of the number of Santander Spain Shares held by

Santander Spain and its subsidiaries, the number of Santander Spain Shares held for hedging

purposes and the number of Santander Spain Shares held by third parties whose purchase was

either financed by or pledged to Santander Spain or any of its subsidiaries.

Pursuant to Spanish regulations relating to conduct in the securities markets, the Spanish Brokerage

Unit must keep records of orders received from any third party regarding Santander Spain Shares

and any other security as well as the execution of such order. The Spanish Brokerage Unit also must

keep records relating to transactions in which they are acting as principals. The information

contained in such records must include identification of the client, the number, type and price of

securities bought or sold and the market on which the transaction is effected. These records must be

made available to the CNMV upon request. In addition, the Market Making Subsidiary, the Treasury

Departments, the Spanish Asset Managers and the Insurance Company must also maintain records

relating to the transactions in which they engage, including the number, type and price of securities

bought or sold.

The jurisdictions in which the Companies other than the Spanish Companies operate generally have

anti-market manipulation, insider trading and record-keeping laws and regulations similar to those

governing market activities in Spain.

VI.

Relief Requested

As discussed above, Santander Spain is seeking exemptive relief from Rule 102 and, to the extent

applicable, Rule 101 of Regulation M to permit the Market Making Subsidiary, the Treasury

Departments, the Asset Managers, the Insurance Companies and the Non-U.S. Brokerage Units to

continue to engage in the ordinary course market making, derivatives market making and hedging,

asset management, insurance and unsolicited brokerage activities as described in this letter during

the Restricted Period. The Market Making Subsidiary, the Treasury Departments, the Asset

Managers, the Insurance Companies and the Non-U.S. Brokerage Units would conduct these

activities in the ordinary course of their business, not for the purpose of facilitating the Rights

Offering's' distribution and in accordance with applicable law, all as described in this letter.

Santander Spain also asks for relief to permit the U.S. Brokerage Units, Banco Santander

International and the Puerto Rico Asset Manager to engage in their respective activities in the

normal course of business, not for the purpose of facilitating the Rights Offering's distribution and in

accordance with applicable local law, as described in this letter.

As a condition to the relief being requested, none of the transactions for which relief is being

requested will occur in the United States, except transactions in connection with unsolicited

brokerage activities by Santander Investment Securities and Santander Securities LLC and asset

management activities by the Asset Managers, as each is described in this letter.

As another condition to the requested relief, all of the transactions for which relief is being requested

will be effected in the ordinary course of business, as described in this letter, and not for the purpose

of facilitating the Rights Offering.

As another condition to the relief being requested, Santander Spain would undertake to include

disclosure in the prospectus supplement that will be distributed to United States investors that

participate in the Rights Offering. The disclosure would be substantially similar to the following:

Josephine J. Tao

17

June 29, 2017

During the distribution of Santander Spain Shares in the Rights Offering, Santander Spain,

through certain identifiable business units, and certain of its affiliates have engaged and

intend to continue to engage in various dealing and brokerage activities involving Santander

Spain Shares outside the United States. Among other things, Santander Spain, through an

affiliate, has made a market, from time to time, and intends to continue to make a market,

from time to time, in the Santander Spain Shares by purchasing and selling Santander Spain

Shares for its own account in Spain on the Spanish Exchanges.

Certain mutual fund management companies. pension fund management companies. asset

management companies and insurance companies that are affiliates of Santander Spain

have purchased and sold, and intend to continue to purchase and sell, Santander Spain

Shares and derivatives, including the Rights, as part of their ordinary investing activities

and/or as part of the investment selections made by their clients. Santander Spain, through

its derivatives business units, has also engaged, and intends to continue to engage, in

dealings in Santander Spain Shares and derivatives, including the Rights, for their accounts

and for the accounts of their respective customers for the purpose of market making of

derivatives, short term management of balance sheet risk or of hedging their respective

positions established in connection with certain derivatives activities (such as options,

warrants, futures and other instruments) relating to Santander Spain Shares entered into by

Santander Spain and its affiliates and their respective customers. Santander Spain, through

its brokerage business units, has also engaged, and intends to continue to engage, in

unsolicited brokerage transactions in Santander Spain Shares with Santander Spain's

customers, as well as in such transactions in the Rights. These activities occurred and are

expected to continue to occur through the AQS, on the Spanish Exchanges, the stock

exchanges of Milan, Lisbon, Buenos Aires, London, Sao Paulo, Warsaw and Mexico and in

the over-the-counter market in Spain or elsewhere outside the United States.

Santander Spain's affiliates in the United States also have engaged and may continue to

engage in unsolicited brokerage and asset management transactions in Santander Spain

Shares and Santander Spain ADSs in the United States. In addition, Santander Spain's

affiliates in Puerto Rico have engaged and may continue to engage in unsolicited brokerage

transactions in Santander Spain Shares and Santander Spain ADSs in Puerto Rico and may

purchase Santander Spain Shares and Santander Spain ADSs in connection with asset

management activities in Puerto Rico. Santander Spain is not obliged to make a market in

Santander Spain Shares and any such market making may be discontinued at any time. All

of these activities could have the effect of preventing or retarding a decline in the market

price of the Santander Spain Shares.

Santander Spain has sought and received from the SEC certain exemptive relief from

Regulation M in order to permit its identifiable business units and affiliates to engage in the

foregoing activities during the Restricted Period.

As a further condition to the relief being requested, Santander Spain and each of the Companies will

undertake to keep records (the "Records") of the date and time when any Santander Spain Shares

or Santander Spain ADSs are purchased or sold, the broker (if any), the market or other manner in

which the purchase or sale is effected, the amount of Santander Spain Shares or Santander Spain

ADSs purchased or sold and the price of the purchase or sale, and whether the purchase or sale

was made for a customer account or a principal or proprietary account, for each purchase or sale of

Josephine J. Tao

18

June 29, 2017

Santander Spain Shares or Santander Spain ADSs that Santander Spain or any of the Companies

effects in the United States during the Restricted Period. This information will not include any clientspecific data, the disclosure of which is restricted under local law. Santander Spain will maintain

Records for a period of two years following the completion of the Rights Offering. Upon the written

request of the Division of Trading and Markets of the SEC, Santander Spain will make a copy of the

relevant Records (arranged in a time-sequence manner) available at the SEC's offices in

Washington, D.C, within 30 days of the request, and will make representatives of Santander Spain

and each of the Companies available by telephone to respond to inquiries of the Division relating to

the Records.

As a final condition to the relief being requested, except as otherwise permitted by the relief being

requested, Santander Spain and its affiliates will comply with Regulation M in connection with the

Rights Offering.

In connection with the relief requested by Santander Spain in this letter, please note that

substantially similar exemptive relief from Rule 101 and Rule 102 of Regulation M was granted to

Santander Spain with respect to market making, derivatives hedging, asset management, insurance

and unsolicited brokerage activities under your exemptive letters dated September 10, 2004, August

18, 2008, December 22, 2008, September, 18, 2014 and January 6, 2015 and to Banco Bilbao

Vizcaya Argentaria, S.A. under your exemptive letters dated June 25, 2007 and October 28, 2010,

substantially similar exemptive relief from Rule 101 and Rule 102 of Regulation M was granted to

Allianz AG with respect to market making, derivatives market making and hedging and unsolicited

brokerage activities under your exemptive letter dated April 10, 2003 and to Deutsche Bank AG

under your exemptive letter dated March 17, 2017 and similar exemptive relief from Rule 102 of

Regulation M was granted to Santander Spain with respect to derivatives market making and

hedging, asset management, insurance and unsolicited brokerage activities relating to shares of the

Royal Bank of Scotland under your exemptive letter dated July 23, 2007, to Lloyds Banking Group

pie with respect to derivatives hedging, asset management, insurance, unsolicited brokerage and

other activities under your exemptive letter dated September 16, 2013 and to National Bank of

Greece S.A. with respect to market making, derivatives hedging, asset management and unsolicited

brokerage activities under your exemptive letter dated May 7, 2014.

Josephine J. Tao

June 29, 2017

19

*

*

*

*

*

If you have any questions about this request, please do not hesitate to contact the undersigned at

(212) 450-4950. We appreciate your assistance in this matter.

Nicholas A. Kronfeld

Copy to:

Javier Illescas

Head of Corporate Legal

Banco Santander, S.A.

Pedro de Mingo

Head of Regulatory Compliance

Banco Santander, S.A.