Back Custom print Link Text Only Rich Text Print

  • CSD-A CSD-A Introduction

    • CSD-A.1 CSD-A.1 Purpose

      • Executive Summary

        • CSD-A.1.1

          Module CSD sets out the Central Bank of Bahrain's regulatory framework governing licensing of clearing houses and central depositories operating in or from the Kingdom of Bahrain.

        • CSD-A.1.2

          The CSD Module seeks to introduce a consistent, effective and harmonised approach in regulation and supervision of licensed clearing houses and central depositories in the Kingdom of Bahrain. It sets out the CBB requirements for their licensing and authorisation, and the initial as well as ongoing compliance requirements.

        • CSD-A.1.3

          The key principles underlying the approach of the CBB in this Module aim:

          (a) To promote the safety and efficiency of clearing and settlement facilities that support systemically-important markets or form an integral part of the financial infrastructure;
          (b) To reduce systemic risk;
          (c) To reduce direct counterparty risk in securities transactions by use of contributions from depository participants' members, as well as by imposing adequate risk management techniques, including the requirement of cash cover and collateral;
          (d) To ensure finality of settlement;
          (e) To reduce cost of clearing and settlement of transactions; and
          (f) To ensure that the ownership and rights of investors are protected.

      • Legal Basis

        • CSD-A.1.4

          Article 1 of the CBB Law defines "Financial Sector Support Institutions" and "Financial Institutions" and the definition includes institutions licensed for operating clearance houses, settlement of payments, cheques and financial papers, and institutions which are wholly or partly set-up by financial institutions licensed by the Central Bank in order to provide services of a pure financial nature to the financial services industry. Articles 38 and 39 of the CBB Law provides the Governor of the CBB with the power to issue Directives or regulations in respect of regulated services.

        • CSD-A.1.5

          Article 40 of the CBB Law states that no financial institution should be established or carry out any regulated services without the prior approval of the CBB.

        • CSD-A.1.6

          Article 80 (4) includes depository, clearance and settlement of securities as regulated activities of companies in the securities market.

        • CSD-A.1.7

          Article 94 of the CBB Law provides the CBB with the power to authorise registration of ownership of the securities of a depositor in the name of a depository under a securities deposit agreement in accordance with the form issued for this purpose by a depository.

        • CSD-A.1.8

          Subject to the rules and laws of evidence and electronic transactions, Article 96 specifies that computer data, electronic files, recorded telephone calls, telex and facsimile correspondance may be considered as forms of evidence of ownership of securities when disputes relating to securities occur.

        • CSD-A.1.9

          Articles 108 and 109 provides the CBB with the power to issue regulations regarding procedures for clearing and netting of transactions and related exceptions.

        • CSD-A.1.10

          Article 110 provides that the Central Bank shall issue terms and conditions for the provision of any pledge, insurance, collateral or title transfer collateral to beneficiaries according to a market contract. Such terms and conditions are stipulated in detail under Resolution No (59) of 2011 in respect of Procedures Related to Pledging and Lien of Securities and the Discharge and Lifting of such Pledge and Liens, later amended as per Resolution No (30) of 2015.

          Amended: April 2016

        • CSD-A.1.11

          Article 178 provides the CBB with the power to issue regulations for enabling title to securities to be evidenced and transferred without the need to produce a written instrument.

        • CSD-A.1.12

          Article 95 states that the CBB shall by regulation specify the procedures to be followed for the registration of pledges and liens on securities and the discharge and lifting of such pledges and liens.

        • CSD-A.1.13

          Licensed clearing houses and central depositories shall be subject to Part 10 (Articles from 133 to 159) of the CBB Law with regards to cases of insolvency, the consequences of such insolvency and violation of the insolvency law by licensees, and compulsory liquidation. The CBB is entitled to place a licensee under administration in the event of insolvency, cancellation or amendment of the license of the clearing house or central depository, and when it is in the best interests of the public to do so. Rules and regulations for placing a licensee under administration are set out in Articles 136–143 of the CBB Law.

        • CSD-A.1.14

          Article 161 of the CBB Law stipulates a penalty for contravention of Article 40 of the CBB Law.

        • CSD-A.1.15

          This Module recognises Decree Law No (50) of 2014 regarding amendments to the provision of the Commercial Companies Law No (21) of 2001, particularly Articles 119 and 358A with respect to promulgating the CBB Law No (64) of 2006 related to the capital market regulated activities.

          Added: April 2016

        • CSD-A.1.16

          This Module contains the prior approval requirements for approved persons under Resolution No (23) of 2015.

          Added: April 2016

        • CSD-A.1.17

          This Module contains Resolution No (1) of 2007 (issued under Article 180 of the CBB Law) amended by Resolution No (26) of 2010 and further amended by Resolution No (1) of 2016 with respect to determining fees categories due for licensees and services provided by the CBB.

          Added: April 2016

        • CSD-A.1.18

          This Module contains Resolution No. (30) of 2015 in respect of amending Resolution No. (59) of 2011 for the purpose of extending the requirements related to the pledging and lien of securities and the discharge and lifting of such pledge and liens on securities issued by closed joint stock companies.

          Added: April 2016

        • CSD-A.1.19

          This Module contains Resolution No. (44) of 2014 with respect to promulgating a Regulation for Close-Out Netting under a Market Contract.

          Added: April 2016

    • CSD-A.2 CSD-A.2 Module History

      • Evolution of Module

        • CSD-A.2.1

          This Module was first issued in April 2009. Any material changes that are subsequently made to this Module are annotated with the calendar quarter date in which the change is made; Chapter UG-3 provides further details on Rulebook maintenance and version control.

          Amended: April 2013

        • CSD-A.2.1A

          A list of recent changes made to this Module is provided below:

          Module Ref. Change Date Description of Changes
          CSD-1.1.1A to CSD-1.1.1C 04/2013 References added to requirements under Resolution No.(16) for the year 2012.
          CSD-1.2.3 04/2013 Updated name change to Form 3.
          CSD-1.4.1 and CSD-1.4.1A 04/2013 Provided details of annual fee due to the CBB.
          CSD-3.1.9A and CSD-3.1.9B 04/2013 Added reference to report institutional information (IIS) to the CBB.
          CSD-5.3.12 04/2013 Added reference to Form 3: Application for Approved Person Status
          CSD-5.3 04/2013 Expanded the scope of this Section to include all approved persons occupying controlled functions and the various related Rules and Guidance.
          CSD-1.4 04/2014 Clarified Rules and guidance on annual license fees.
          Module CSD 04/2016 Various minor corrections to clarify language and link defined terms to the glossary.
          CSD-A.1 04/2016 Legal basis updated to reflect various Resolutions.
          CSD-3.1.1 and CSD-3.1.1A 04/2016 Added requirements dealing with shareholders' meetings.
          CSD-5.3 04/2016 Amended to be in line with Resolution No (23) of 2015 on Prior Approval Requirements for Approved Persons.
          CSD-5.3.2A 04/2016 New Paragraph added to ensure segregation of responsibilities in licensees' staffing arrangements.
          CSD-B.2 07/2016 Section deleted and moved to Glossary.
          CSD-1.2.1 07/2016 Deleted duplicate type of license.
          CSD-1.3.3, CSD-1.3.11, CSD-3.5.3 and CSD-6.4.3 07/2016 Changed from Rule to Guidance.
          CSD-1.4.1 07/2016 Deleted legal reference as already included under CSD-A.1.17.
          CSD-2.16 and CSD-2.17 07/2016 CSD-2.1.7 deleted and content moved to CSD-2.1.6 as Rule.
          CSD-2.6.11 07/2016 Corrected cross reference.
          CSD-3.1.1 07/2016 Corrected wording of Subparagraphs.
          CSD-3.1.18 07/2016 Amended requirement to be applicable to all approved persons.
          CSD-1.3.12 07/2017 Amended wording of paragraph.
          CSD-1.3.13 07/2017 Added Paragraph to clarify the cost of publication.
          CSD-1.3.14 07/2017 Added Paragraph on means of publication.
          CSD-5.3.7B 04/2018 Amended Paragraph.
          CSD-3.1.1A 10/2020 Added a new Paragraph on Provision of Financial Services on a Non-discriminatory Basis.
          CSD-3.7.7 01/2022 Amended Paragraph on submission of report by auditors with regards to verification of money and assets placed with Licensed Clearing House.

      • Superseded Requirements

        • CSD-A.2.2

          This Module supersedes the following provisions contained in circulars or other regulatory instruments:

          Circular/ other references Provision Subject
          BSE Clearing, Settlement & Central Depository & Registry Rules Rules that are contradictory to the provisions in this Module Rules and regulations relating to registry, clearing, settlement & central depository.
          BSE Clearing, Settlement and Central Depository Procedures Procedures that are contradictory to the provisions in this Module Scope of procedures to be carried out by clearance and settlement facilities and central depository.
          BSE Brokers & Custodians Resolutions Resolutions that are contradictory to the provisions in this Module Provisions for custodial services and services provided by brokerage companies at the BSE.
               
               

    • CSD-A.3 CSD-A.3 Interaction with other Modules

      • CSD-A.3.1

        All market participants must comply with all the other Modules in Volume 6 in addition to other applicable laws, rules and regulations.

      • CSD-A.3.2

        Licensed clearing houses and licensed central depositories must comply with Decree Law No. 4 of 2001 with respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 7 of 2001 with respect to Obligations Governing Institutions Concerning the Prohibition and Combating of Money Laundering; Ministerial Order No. 18 of 2002 Specifying the Powers of the Enforcement Unit in Implementing the Provisions of the Decree Law Promulgated with Respect to the Prevention and Prohibition of the Laundering of Money; Ministerial Order No. 23 of 2002 with Respect to Procedures of Money Laundering Prevention and Prohibition; and Module AML (Anti-Money Laundering & Combating Financial Crime).

        Amended: April 2016

      • CSD-A.3.3

        Licensed clearing houses must also comply with the CBB's Real Time Gross Settlement System (Membership) Regulations 2007 and other related rules, regulations and guidelines.

    • CSD-A.4 CSD-A.4 Division of Responsibilities

      • CSD-A.4.1

        SROs should be subject to the oversight of the regulator, and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

      • CSD-A.4.2

        SROs shall:

        (a) Have the capacity to carry out the purposes of governing laws, regulations and SRO rules, and to enforce compliance by its members and associated persons with those laws, regulations, and rules;
        (b) Treat all members of the SRO and applicants for membership in a fair and consistent manner;
        (c) Develop rules that are designed to set standards of behaviour for its members and to promote investor protection;
        (d) Submit to the regulator its rules for review and/or approval as the regulator deems appropriate, and ensure that the rules of the SRO are consistent with the public policy directives established by the regulator;
        (e) Cooperate with the regulator and other SROs to investigate and enforce applicable laws and regulations;
        (f) Enforce its own rules and impose appropriate sanctions for non-compliance;
        (g) Assure a fair representation of members in selection of its directors and administration of its affairs;
        (h) Avoid rules that may create uncompetitive situations; and
        (i) Avoid using the oversight role to allow any market participant to gain unfair advantage in the market.

      • CSD-A.4.3

        Regardless of the extent to which self-regulation is used, the CBB retains the authority to enquire into matters affecting investors or the market.

      • CSD-A.4.4

        Where the powers of an SRO are inadequate for enquiring into or addressing particular misconduct, or where a conflict of interest necessitates it, the CBB shall take over the responsibility for an enquiry from an SRO. It is important therefore, to ensure that the information provided by the SRO to the regulator allows these matters to be identified at an early stage.

      • CSD-A.4.5

        SRO's should follow similar professional standards of behaviour on matters such as confidentiality and procedural fairness as would be expected of the CBB.