• CSD-1 CSD-1 Establishment of Clearing House and Central Depository Facilities

    • CSD-1.1 CSD-1.1 Licensing Conditions

      • Requirement to be Licensed

        • CSD-1.1.1

          As per Article 40 of the CBB Law, no person shall operate or hold himself out as a licensed clearing house or licensed central depository in the Kingdom of Bahrain, unless he has been licensed by the CBB under this section.

          Amended: April 2016

        • CSD-1.1.1A

          No person may market any financial services in the Kingdom of Bahrain unless:

          (a) Allowed to do by the terms of a license issued by the CBB;
          (b) The activities come within the terms of an exemption granted by the CBB by way of a Directive; or
          (c) Has obtained the express written permission of the CBB to offer financial services.
          Added: April 2013

        • CSD-1.1.1B

          In accordance with Resolution No.(16) for the year 2012 and for the purpose of Paragraph CSD-1.1.1A, the word 'market' refers to any promotion, offering, announcement, advertising, broadcast or any other means of communication made for the purpose of inducing recipients to purchase or otherwise acquire financial services in return for monetary payment or some other form of valuable consideration.

          Added: April 2013

        • CSD-1.1.1C

          Persons in breach of Paragraph CSD-1.1.1A are considered in breach of Resolution No.(16) for the year 2012 and are subject to penalties under Articles 129 and 161 of the CBB Law.

          Amended: April 2016
          Added: April 2013

        • CSD-1.1.2

          No person shall establish, maintain, operate or hold himself out as intending to establish, maintain or operate a clearing house or central depository, without notifying the CBB of such intention at least 90 days prior to the establishment or commencement of operations of the clearing house or central depository.

        • CSD-1.1.3

          A person may apply to the CBB to reduce the period referred to in rule CSD-1.1.2 and the CBB may substitute such other period at its discretion.

          Amended: April 2016

        • CSD-1.1.4

          The CBB may require a person providing the notice period referred to in rule CSD-1.1.2 to furnish the CBB with such information or documents as the CBB considers necessary in relation to the notice.

          Amended: April 2016

      • Persons Operating Clearing or Depository Facilities

        • CSD-1.1.5

          The CBB may license a person operating a clearing or depository facility as a licensed clearing house or licensed central depository for the purposes of this Module, if it has satisfied the criteria laid out in this Module. The CBB may, on application, give authorisation to overseas clearing houses, clearing corporations, or central depositories, particularly for facilitating the operations of the licensed market operators and cross-listings.

          Amended: April 2016

        • CSD-1.1.6

          The CBB shall give notice in the Official Gazette of any person licensed under rule CSD-1.1.5.

        • CSD-1.1.7

          A license provided by the CBB under rule CSD-1.1.5 shall continue to have effect until it is withdrawn by the CBB.

        • CSD-1.1.8

          The CBB may withdraw the license of any licensed clearing house or licensed central depository at any time, on its own initiative or on the application of the licensed clearing house or licensed central depository, if the CBB is of the opinion that the considerations in rule CSD-1.1.5 are no longer valid or satisfied.

          Amended: April 2016

        • CSD-1.1.9

          The CBB shall give notice in the Official Gazette of any withdrawal under paragraph CSD-1.1.8.

        • CSD-1.1.10

          The CBB shall not withdraw on its own initiative the license of any person operating a clearing facility or depository as a licensed clearing house or licensed central depository, without giving the person an opportunity to be heard.

          Amended: April 2016

    • CSD-1.2 CSD-1.2 Licensing Process and Timeline

      • CSD-1.2.1

        A person may apply to the CBB to be:

        (a) A licensed clearing house (including the function of central depository); and
        (b) A licensed central depository.
        Amended: July 2016

      • CSD-1.2.2

        Unless otherwise approved, a person licensed as a clearing house or central depository, or either a licensed clearing house or licensed central depository is required to be registered as a joint stock company in Bahrain in accordance with the Commercial Companies Law (CCL) 2001.

      • CSD-1.2.3

        An application for a license to operate as a clearing house or central depository under Article 39 of the CBB Law shall be made in Form 1 and shall be lodged with the CBB, together with the following:

        (a) Form 3 (Application for Approved Person Status) and Form 4 (Information on Shareholders and Subsidiaries);
        (b) Any relevant annexe and information specified in those forms;
        (c) A non-refundable prescribed application fee of BD100;
        (d) A business plan setting forth the internal controlling and risk management procedures of the enterprise; furthermore, the business plan must contain a budgeted accounting plan for the first three business years;
        (e) The memorandum and articles of association of the company or any of its constituent documents;
        (f) Three-year operational plans including the organisational structure, communication facilities and training programmes;
        (g) Draft business rules in respect of its operations as a licensed clearing house or central depository; and
        (h) The details of the proposed authorised and paid-up capital.
        Amended: April 2013

      • CSD-1.2.4

        The CBB may, within 30 days from the date of submission, require an applicant to furnish it with amendments or such additional information or documents as the CBB considers necessary in relation to the application.

      • CSD-1.2.5

        Where strict compliance with any form is not possible, the CBB may in its sole discretion, and upon request from the applicant to this effect, allow for the necessary modifications to be made to that form, or for the requirements of that form to be complied with in such other manner.

      • CSD-1.2.6

        The applicant may, at any time before a decision has been made about the application, withdraw his application or make amendments to any errors therein or in the supporting documents.

      • CSD-1.2.7

        The CBB shall decide on the application within 60 days from the date of receiving the application, complete with all the required information and documents.

      • CSD-1.2.8

        The CBB may grant an 'in principle' confirmation that the applicant appears likely to meet the CBB's licensing requirements, subject to the remaining information and documents being assessed as satisfactory. The 'in principle' confirmation will also list all outstanding documents required before an application can be considered complete and subject to formal consideration.

        Amended: April 2016

      • CSD-1.2.8A

        An 'in principle' confirmation does not constitute a license approval, nor does it commit the CBB to issuing a license. However, it provides sufficient assurance for an applicant to complete certain practical steps, such as securing suitable executive staff that satisfy CBB's 'fit and proper' requirements. Once this has been done, the applicant may finalise its application, by submitting the remaining documents and, once assessed as complete by the CBB, a signed and dated final version of Form 1. However, a Bahraini company proposing to undertake financial services activities would not be eligible to obtain a Commercial Registration from the Ministry of Industry and Commerce unless it receives the final approval from the CBB.

        Added: April 2016

      • CSD-1.2.9

        At no point should an applicant hold themselves out as having been licensed by the CBB, prior to receiving formal written notification of the fact in accordance with rule CSD-1.2.3.

      • CSD-1.2.10

        The CBB may call for further information if it is of the opinion that the information provided is incomplete or needs to be substantiated.

      • CSD-1.2.11

        Where a clearing house applies to be licensed as a clearing house including the function of a central depository, the licensed clearing house shall apply for a single license as a clearing house and central depository, but must comply with the requirements of both a clearing house and central depository.

      • CSD-1.2.12

        A clearing house or central depository shall confirm that, for the duration of the license, it shall satisfy all conditions and restrictions that may be imposed on it.

      • General Criteria Applicable to a Clearing House and Central Depository

        • CSD-1.2.13

          The applicant must also demonstrate to the satisfaction of the CBB that it has:

          (a) The financial resources, and the management and human resources with appropriate experience, necessary for the operation of a clearing house or central depository;
          (b) Made arrangements for the proper supervision of all transactions effected through the clearing house or central depository, so as to ensure compliance with the clearing house or central depository rules;
          (c) Taken sufficient steps to maintain security and back-up procedures to ensure the integrity of the records of transactions effected through the clearing house or central depository;
          (d) IT infrastructure and necessary systems to perform its function and comply with its obligations, including business continuity and disaster recovery systems;
          (e) Procedures in place for compliance with obligations in respect of Anti-Money Laundering and the Combating of Financial Crime;
          (f) Rules and procedures in place for the disciplining of its members and depository participants;
          (g) The ability to avoid and manage any conflicts of interest;
          (h) The ability to maintain confidentiality as required in this Module.

      • Criteria for Granting License of a Clearing House

        • CSD-1.2.14

          The CBB may license a person as a clearing house if:

          (a) The CBB is satisfied that the establishment of a clearing house to be operated by a person will;
          (i) Contribute towards developing the financial sector and enhance confidence therein; and
          (ii) Protect the interests of investors;
          (b) The CBB is satisfied that the person, having applied to be a licensed clearing house under this Module, is able/will be able to comply with the obligations or requirements imposed on the clearing house; and
          (c) If the CBB shall be satisfied that the rules of the applicant make satisfactory provision for:
          (i) The size and structure, or proposed size and structure, of the clearing facility;
          (ii) The nature of the services provided, or to be provided, by the clearing facility;
          (iii) The nature of the transactions cleared, or to be cleared, by the clearing facility;
          (iv) The clearing and settlement of transactions and for the management of trade and settlement risk;
          (v) The market where the transactions cleared through the clearing facility are traded or are to be traded;
          (vi) The nature of the investors or members, or proposed investors or members, who may use or have an interest in the clearing facility;
          (vii) Whether the person operating the clearing facility is otherwise regulated by the CBB Law or any other law;
          (viii) Whether the clearing facility has the ability to perform its function as a central counterparty;
          (ix) Whether the clearing facility takes on counterparty risks, through novation or otherwise, in the clearing or settlement of transactions;
          (x) The parties who may be affected in the event that the clearing facility runs into difficulties;
          (xi) The interests of the public;
          (xii) The ability to meet international standards and related protocols including IOSCO;
          (xiii) The ability to meet the International Securities Identification Number (ISIN) Standards and other international standards and protocols; and
          (xix) Any other circumstances that the CBB may deem relevant.

        • CSD-1.2.15

          This Paragraph has been left blank.

          Added: April 2013

      • Criteria for Granting License of a Central Depository

        • CSD-1.2.16

          The CBB may license a person as a central depository if:

          (a) The CBB is satisfied that the establishment of a central depository to be operated by a person will;
          (i) Contribute towards developing the financial sector and enhance confidence therein; and
          (ii) Protect the interests of investors; and
          (b) The CBB is satisfied that the person, having applied to be a licensed central depository under this Module, is able/will be able to comply with the obligations or requirements imposed on the central depository.
          (c) The CBB shall be satisfied that the rules of the applicant make satisfactory provision:
          (i) With respect to the conditions under which securities may be deposited with, held by, withdrawn from, or transferred within, the central depository;
          (ii) For the holding of securities deposited with the central depository or its nominee company;
          (iii) For the processing of dealings in deposited securities;
          (iv) For facilitating the settlement of deposited securities;
          (v) For the protection of the interests of depositors and the protection and control of information on deposited securities and dealings therein;
          (vi) For the monitoring of compliance with, and for the enforcement of, the rules of the central depository;
          (vii)With respect to the maintenance of a policy or policies of insurance, and the establishment and maintenance of compensation funds, for the purpose of settling claims by depositors against the central depository, its nominee companies and depository participants; and
          (viii) Adequate regulation and supervision of its depository participants.

        • CSD-1.2.17

          Where the CBB rejects an application, the decision and any appeal by the applicant shall be governed by Article 46 of the CBB Law.

    • CSD-1.3 CSD-1.3 Withdrawal of License or Cessation of Business

      • Voluntary Surrender

        • CSD-1.3.1

          A clearing house or central depository which intends to cease operating must apply to the CBB to surrender its license.

        • CSD-1.3.2

          Any objections received from any user, member or depository participant of the clearing house or central depository shall be considered by the CBB prior to issuing its consent for the surrender of license or cessation of business of the licensee.

        • CSD-1.3.3

          The CBB may, subject to paragraph CSD-1.3.2, cancel the license if it is satisfied that the licensed clearing house or licensed central depository has ceased operating and that there are no pending obligations of the licensed clearing house or licensed central depository or contracts traded.

          Amended: July 2016
          Amended: April 2016

        • CSD-1.3.4

          The licensed clearing house or licensed central depository shall publish a notice of its intention to cease to operate its market in 2 daily newspapers, one in Arabic and the other in English, in Bahrain.

          Amended: April 2016

        • CSD-1.3.5

          The notice referred to in rule CSD-1.3.4 shall be subject to the approval of the CBB and shall be published at least 60 days prior to the cessation taking effect.

      • Cancellation of License

        • CSD-1.3.6

          The CBB may cancel any license held by a licensed clearing house or licensed central depository if:

          (a) There exists a ground under which the CBB may refuse an application;
          (b) The licensed clearing house or licensed central depository is in the course of being wound up or otherwise dissolved;
          (c) The licensed clearing house or licensed central depository contravenes:
          (i) Any condition or restriction applicable in respect of its license;
          (ii) Any direction issued to it by the CBB;
          (iii) Any provision in this Module; or
          (iv) Any other CBB law, rule or regulation;
          (d) The licensed clearing house or licensed central depository operates in a manner that is in the opinion of the CBB, contrary to the interests of the public or user; or
          (e) Any information or document provided by the licensed clearing house or licensed central depository to the CBB is false or misleading.
          Amended: April 2016

        • CSD-1.3.7

          The CBB may not, subject to paragraph CSD-1.3.6, cancel any license that was granted to a licensed clearing house or licensed central depository without giving the opportunity to be heard.

          Amended: April 2016

        • CSD-1.3.8

          The CBB may cancel a license that was granted to a licensed clearing house or licensed central depository on any of the following grounds without giving an opportunity to be heard:

          (a) The licensed clearing house or licensed central depository is in the course of being wound up or otherwise dissolved;
          (b) A receiver, a receiver and manager, or an equivalent person has been appointed, in relation to or in respect of any property of the licensed clearing house or licensed central depository; or
          (c) The licensed clearing house or licensed central depository has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty or the conviction for which involved a finding that it had acted fraudulently or dishonestly.
          Amended: April 2016

        • CSD-1.3.9

          A licensed clearing house or licensed central depository shall be deemed to have ceased to operate if:

          (a) It has ceased to offer its services as a licensed clearing house or licensed central depository for more than 30 days, unless it has obtained the prior approval of the CBB to do so; or
          (b) It has ceased to offer a licensed clearing house or licensed central depository services under a direction issued by the CBB.
          Amended: April 2016

        • CSD-1.3.10

          Any cancellation of a license of a licensed clearing house or licensed central depository shall not operate so as to:

          (a) Avoid or affect any agreement, transaction or arrangement entered into by a licensed clearing house or licensed central depository, whether the agreement, transaction or arrangement was entered into before or after the revocation of the license; or
          (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.
          Amended: April 2016

        • CSD-1.3.11

          Where the CBB cancels or amends a license of a licensed clearing house or licensed central depository, notification to the licensed clearing house or licensed central depository and an appeal against such a decision shall be governed by Article 48 of the CBB Law.

          Amended: July 2016
          Amended: April 2016

      • Publication of the Decision to Grant, Cancel or Amend a License

        • CSD-1.3.12

          The CBB shall publish its decision to grant, cancel or amend a license in the Official Gazette as well as in 2 local newspapers, one published in Arabic and the other in English in Bahrain.

          Amended: July 2017

        • CSD-1.3.13

          For the purpose of Paragraph CSD-1.3.12, the cost of publication of this notice must be borne by the clearing house or central depository.

          Added: July 2017

        • CSD-1.3.14

          The CBB may also publish its decision on such cancellation or amendment using any other means it considers appropriate, including electronic means.

          Added: July 2017

    • CSD-1.4 CSD-1.4 Annual Fees

      • Annual Fees Payable by Clearing House and Central Depository

        • CSD-1.4.1

          Every licensed clearing house or central depository must pay to the CBB an annual fee on the 1st December of the preceding year for which the fee is due.

          Amended: July 2016
          Amended: April 2016
          Amended: April 2014
          Amended: April 2013

        • CSD-1.4.1A

          The following fee is currently prescribed for licensed clearing houses and licensed central depositories:

          Managing and operating clearing, settlement and central depository systems (fixed) BD10,000
          Amended: April 2016
          Added: April 2013

        • CSD-1.4.1B

          For new licensees, their first annual license fee is payable when their license is issued by the CBB. The annual fee due in relation to the first year in which the license is granted, is prorated for the year using the date of the official licensing letter from the CBB, as the base for the prorated period. The prorated fee will result in fees charged only for the number of complete months left in the current calendar year.

          Added: April 2014

        • CSD-1.4.2

          Where a license is cancelled (whether at the initiative of the firm or the CBB), no refund is paid for any months remaining in the calendar year in question, should a fee have been paid for that year.

          Amended: April 2014

        • CSD-1.4.3

          A licensed clearing house or licensed central depository failing to comply with Paragraph CSD-1.4.1 may be subject to financial penalties as prescribed by the CBB.

          Added: April 2016

    • CSD-1.5 CSD-1.5 Power to Stop Commencement or Order Cessation

      • CSD-1.5.1

        The CBB may order a person who has applied under rule CSD-1.1.1 not to establish or commence operation of a clearing or depository facility if:

        (a) The person did not furnish the CBB with such information or documents as required under rule CSD-1.2.3 of this Module;
        (b) Any information or document provided by the person to the CBB is or proves to be false or misleading; or
        (c) The CBB is of the opinion that it is in the interests of the capital market or financial sector.

      • CSD-1.5.2

        The CBB may, by notice in writing, order a licensed clearing house or central depository to cease operating its clearing or depository facility if:

        (a) It has contravened any provision of the CBB Law, or any other law or rule in the course of operating its clearing facility;
        (b) It has not complied with any of the licensing requirements contained in this Module;
        (c) It provided any information or document to the CBB that is false or misleading;
        (d) In the opinion of the CBB, it is operating the clearing or depository facility in a manner that is likely to pose systemic risk to the financial system of Bahrain;
        (e) It is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
        (f) A receiver, a receiver and manager, or an equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the licensed clearing house or central depository;
        (g) It has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly; or
        (h) The CBB is of the opinion that it is in the interests of the public to do so.

      • CSD-1.5.3

        The CBB shall give notice in the Official Gazette of any order made under rule CSD-1.5.2.

      • CSD-1.5.4

        Subject to CSD-1.5.5, the CBB shall not make an order under rule CSD-1.5.1 or rule CSD-1.5.2 without giving the person an opportunity to be heard.

      • CSD-1.5.5

        The CBB may order a person not to establish or commence operation of a clearing or central depository facility under rule CSD-1.5.1, or to cease operating its clearing or central depository facility under rule CSD-1.5.2 on any of the following grounds without giving the person an opportunity to be heard:

        (a) The person is in the course of being wound up or otherwise dissolved, whether in Bahrain or elsewhere;
        (b) A receiver, a receiver and manager, or an equivalent person has been appointed, whether in Bahrain or elsewhere, in relation to or in respect of any property of the person;
        (c) The person has been convicted, whether in Bahrain or elsewhere, of an offence involving fraud or dishonesty, or the conviction for which involved a finding that it had acted fraudulently or dishonestly.

      • CSD-1.5.6

        The CBB may direct, by notice in writing, a licensed clearing house or licensed central depository, to whom an order to cease operations of its clearing facility has been made by the CBB under rule CSD-1.5.2, to take such action as it considers necessary, including any of the following actions:

        (a) Ordering the liquidation of all positions or part thereof, or the reduction in such positions;
        (b) Altering conditions of delivery of transactions cleared or settled, or to be cleared or settled through the clearing or depository facility;
        (c) Fixing the settlement price at which transactions are to be liquidated;
        (d) Requiring margins or additional margins for transactions cleared or settled or to be cleared or settled through the clearing or depository facility;
        (e) Modifying or suspending any of the business rules of the licensed clearing house or licensed central depository; or
        (f) Transferring the rights and obligations of that licensed clearing house or licensed central depository to another licensed clearing house and licensed central depository; and

        the licensed clearing house or licensed central depository shall comply with that direction.

        Amended: April 2016

      • CSD-1.5.7

        The CBB may modify any action taken by a licensed clearing house or licensed central depository, including the setting aside of that action.

        Amended: April 2016

      • CSD-1.5.8

        Any order made under rule CSD-1.5.2 shall not operate so as to:

        (a) Avoid or affect any agreement, transaction or arrangement entered into in connection with the use of a clearing facility operated by the person, whether the agreement, transaction or arrangement was entered into before or after the order of the cessation; or
        (b) Affect any right, obligation or liability arising under such agreement, transaction or arrangement.

    • CSD-1.6 CSD-1.6 Establishment of a Clearing House and Central Depository as an SRO

      • CSD-1.6.1

        A licensed clearing house or licensed central depository shall be established as self-regulatory organisations (SROs) and must comply with the requirements laid down under the CBB Law, this Module, its approved business rules and the other applicable laws, rules and regulations.

        Amended: April 2016

      • CSD-1.6.2

        As an SRO, the objectives and functions of the licensed clearing house and licensed central depository will be to:

        (a) Promote fairness and investor protection;
        (b) Provide for admission, regulation, supervision and expulsion of participation or membership;
        (c) Promote fair access to its facilities and information;
        (d) Promote the provision of timely and accessible relevant data;
        (e) Treat all its members, depository participants, users and investors in a fair and transparent manner;
        (f) Promptly inform the CBB of any violations of the provision of this Module or any relevant act, laws or regulations by its members, depository participants, users or investors;
        (g) Act in good faith and avoid conflict of interest in the conduct of its functions;
        (h) Comply with the norms of corporate governance, as provided under Module HC (High-level Controls (Corporate Governance)); and
        (i) Provide adequate supervision and regulation over its members.
        Amended: April 2016