• CSD-2 CSD-2 Clearing House and Central Depository Function

    • CSD-2.1 CSD-2.1 Clearing House Function

      • CSD-2.1.1

        A licensed clearing house shall act as the central counterparty of the clearing members for clearing and settlement of transactions and for delivering securities to and receiving securities from clearing members and making payment to and receiving payment from clearing members in connection with any transaction.

      • Settlement Bank(s)

        • CSD-2.1.2

          The licensed clearing house may undertake the settlement function directly, or from time-to-time appoint settlement bank(s) to act as the settlement bank(s) for the settlement of the transactions.

          Amended: April 2016

        • CSD-2.1.3

          The appointed settlement bank(s) shall act as agent(s) of the licensed clearing house for the collection and payment for funds towards settlement obligations, margins and other dues.

          Amended: April 2016

      • Clearing Houses to Have Designated Accounts with Settlement Bank(s)

        • CSD-2.1.4

          Every clearing member of the licensed clearing house shall maintain a designated bank account with a settlement bank.

          Amended: April 2016

        • CSD-2.1.5

          The clearing members shall operate the designated bank accounts only for the purpose of payment of their monetary obligations to the licensed clearing house and/or the licensed exchange and receipt of monetary entitlements from the licensed clearing house or licensed exchange.

          Amended: April 2016

      • Settlement Bank to Act on Instructions of the Clearing House

        • CSD-2.1.6

          The licensed clearing house shall instruct the settlement banks to debit or credit the account maintained by the licensed clearing house and also the designated bank accounts of the clearing members. The settlement banks shall act on such instructions, which shall be deemed to be confirmed orders by the clearing members to debit and/or credit funds, as may be specified in the instructions from time-to-time.

          Amended: July 2016
          Amended: April 2016

        • CSD-2.1.7

          [This Paragraph was merged with CSD-2.1.6 in July 2016.]

          Amended: July 2016
          Amended: April 2016

        • CSD-2.1.8

          Clearing members shall authorise settlement banks to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of the licensed exchange or licensed clearing house.

          Amended: April 2016

      • Settlement Banks to Inform Status

        • CSD-2.1.9

          If there is any shortage in meeting monetary obligations by a clearing member relating to debits into a designated bank account, the settlement bank shall forthwith report such instances of shortage to the officer of the licensed clearing house and licensed exchange designated for the purpose in a mutually agreed mode of communication.

          Amended: April 2016

    • CSD-2.2 CSD-2.2 Settlement by Clearing House

      • CSD-2.2.1

        All securities transactions shall be settled through the licensed clearing house, by delivery and payment by the clearing members to the licensed clearing house in accordance with the provisions contained in this Module, the rules of the licensed clearing house and relevant directives or provisions that the CBB may from time-to-time prescribe.

        Amended: April 2016

      • CSD-2.2.2

        Arrangements for clearing and settlement systems should provide for the prompt verification of a trade, as close as possible to real-time verification (including pre-validation).

      • CSD-2.2.3

        Information which records the transaction, allows it to be checked and provides the basis for settlement should be available.

      • Settlement Rules and Regulations Form Part of Contracts

        • CSD-2.2.4

          All the clearance and settlement rules and regulations in force from time-to-time relating to any procedure for the clearing and settlement of transactions by or through the licensed clearing house and the provisions of this Module shall be construed to be part of the contracts entered into by any trading member and/or clearing member with his clients and between trading members, inter-se, in any security or securities.

      • Settlement Procedure

        • CSD-2.2.5

          The licensed exchange or clearing house shall prescribe the procedure, schedule, manner and mode to be followed in respect of settlement of all transactions contracts entered into or to be entered into in any security or securities by the clearing members through the licensed clearing house.

          Amended: April 2016

        • CSD-2.2.6

          All the clearing members, custodians, clearing banks, central depositories, depository participants and other persons having beneficial interest in settlement shall comply with the provisions contained in the rules and regulations of the licensed exchange and the rules of the licensed clearing house from time-to-time.

          Amended: April 2016

        • CSD-2.2.7

          Key aspects of the settlement process that the legal framework should support include the following:

          (a) Enforceability of transactions;
          (b) Protection of customer assets, particularly against loss upon the insolvency of a custodian;
          (c) Dematerialisation of securities and the transfer of securities by book entry;
          (d) Netting arrangements;
          (e) Securities lending, including repurchase agreements and other economically equivalent transactions;
          (f) Finality of settlement;
          (g) Margin trading and securities lending and borrowing;
          (h) Arrangements for achieving delivery versus payment;
          (i) Default rules addressing the consequences of a member's default;
          (j) Arrangement for registration of pledges and liens; and
          (k) Liquidation of assets pledged or transferred as collateral to support members' obligations.
          Amended: April 2016

        • CSD-2.2.8

          The licensed clearing house shall maintain a settlement guarantee fund to guarantee settlement obligations of clearing members.

          Amended: April 2016

        • CSD-2.2.9

          The licensed clearing house shall deliver, at its discretion, securities which it has received from a clearing member to any other clearing member who is entitled to the same.

          Amended: April 2016

        • CSD-2.2.10

          The licensed clearing house shall determine the settlement obligations relating to delivery and receipt of securities by and between clearing members to be exchanged electronically through the clearing and settlement system of the licensed clearing house.

          Amended: April 2016

      • Timing of Settlement

        • CSD-2.2.11

          Final settlement should occur no later than the end of the settlement day as approved by the CBB.

        • CSD-2.2.12

          The timing of settlement finality should be defined clearly to all the members.

      • Approval of Settlement System

        • CSD-2.2.13

          The settlement system of a licensed clearing house must be able to effect:

          (a) Settlement of transfer orders within the system itself; and
          (b) Be able to comply with the requirements stipulated in Paragraph CSD-2.2.7.
          Amended: April 2016

        • CSD-2.2.14

          If the CBB determines that the criteria specified in rule CSD-2.2.13 have been met as regards a designated system, it shall issue in respect of the system a certificate certifying to that effect ("certificate of finality"), and specify a date and time from which the certificate shall have effect.

        • CSD-2.2.15

          If the CBB is unable to make a determination in the terms mentioned in rule CSD-2.2.13 as regards a designated system, it shall inform the system operator in writing accordingly, giving particulars of the criteria specified in paragraph CSD-2.2.7 which have not been met, or of the further information it requires in order to make a determination in relation to such criteria.

        • CSD-2.2.16

          A certificate of finality in respect of a designated system remains in effect until it is revoked.

      • Finality of Settlement and Precedence Over Law of Insolvency

        • CSD-2.2.17

          In line with Article 108 of the CBB Law:

          (a) This Module shall be regarded as the requirements regarding conditions and controls to be incorporated in a Market Contract, as well as the procedures for carrying out clearing according to such contract;
          (b) Notwithstanding the provisions of any other law relating to clearing, bankruptcy or insolvency, any Close-out Netting shall be carried out according to the Market Contract in connection with debts, loans and dealings between the parties thereof that were originated or completed before any of the parties became insolvent or bankrupt. The same shall apply against the parties of the contract, their receivers in bankruptcy and their creditors; and
          (c) The previous paragraph shall not apply if one party knows or ought to have known that:
          (i) An application for the liquidation and winding up of the other party by reason of insolvency, is being considered by the concerned authority; or
          (ii) The other party has taken formal steps under any other applicable law to liquidate or wind up by reason of bankruptcy.

        • CSD-2.2.18

          In line with Article 109 of the CBB Law:

          (a) Notwithstanding the provisions of any other law, no restriction or suspensions shall be applied to any provision related to clearance according to a Market Contract; and
          (b) Notwithstanding the provisions of any other law relating to clearance, bankruptcy or insolvency, the parties in a Market Contract may:
          (i) Agree to any system which will enable the parties to convert a non-financial obligation into a financial one of equivalent value and to valuate such an obligation for the purposes of any clearance or netting;
          (ii) Agree on the rate of exchange, or the method to be used to establish the rate of exchange to be applied in effecting any clearance or netting when the sums to be cleared or netted are in different currencies, and to establish the currency in which payment of the net sum is to be effected; or
          (iii) Agree that any transactions carried out pursuant to any Market Contract shall be treated as a single transaction for the purposes of the contract, whether such transactions were complete by the parties, a receiver in bankruptcy, a competent court, an officer representing the parties or that such transactions have been categorized or attributed to a certain type of trading.

    • CSD-2.3 CSD-2.3 Arrangements for Depository Services

      • CSD-2.3.1

        The clearing house shall put in place necessary arrangements to avail of the services of depositories licensed by the CBB.

      • CSD-2.3.2

        A clearing member shall be required to maintain a designated account with one or more depositories.

        Amended: April 2016

    • CSD-2.4 CSD-2.4 Central Depository Function

      • Securities Accounts and Records

        • CSD-2.4.1

          No person shall deal in deposited securities without first having a securities account.

        • CSD-2.4.2

          A depository participant which deals in deposited securities as principal shall, in relation to such dealing, open and maintain a securities account with the central depository.

          Amended: April 2016

        • CSD-2.4.3

          A central depository may establish different types of securities accounts for different classes of persons.

        • CSD-2.4.4

          Every securities account opened with a central depository shall be in the name of the beneficial owner of the deposited securities.

        • CSD-2.4.5

          The person opening the securities account shall make a declaration in such manner as may be specified in the rules of the central depository that he is the beneficial owner of deposited securities.

      • Issuance of Statements of Accounts

        • CSD-2.4.6

          A central depository shall issue to all securities holders statements of accounts in respect of all deposited securities held in custody by, or registered in the name of the central depository for the securities holders at such time and in such manner as may be provided in the rules of the central depository.

        • CSD-2.4.7

          Notwithstanding rule CSD-2.4.6, a securities holder may, at any time, by written notice, require the central depository to issue to him a statement of account in respect of all or any of the deposited securities for the time being held in custody by, or registered in the name of the central depository.

          Amended: April 2016

        • CSD-2.4.8

          A central depository shall, on receipt of a written notice under paragraph CSD-2.4.7 and upon payment of any charges which may be imposed under these rules, issue to the securities holder the statement so required.

        • CSD-2.4.9

          A statement of account issued under this rule shall be prima facie evidence of the truth of the matters specified in the statement.

    • CSD-2.5 CSD-2.5 Authorised Depository Participant

      • CSD-2.5.1

        A central depository must appoint any of the persons referred to in Paragraph CSD-2.5.2 to be a depository participant for all or any of the following purposes:

        (a) To facilitate the deposit of securities;
        (b) To open, maintain and close securities accounts;
        (c) To make entries in securities accounts;
        (d) To collect such fees and charges imposed by the central depository as may be provided under these rules; or
        (e) Such other incidental and ancillary purposes as may be specified by the rules of the central depository.
        Amended: April 2016

      • CSD-2.5.2

        A central depository may appoint as a depository participant any of the following:

        (a) A stock exchange;
        (b) A clearing house or depository;
        (c) A bank licensed by the CBB;
        (d) [This Subparagraph was deleted in April 2016]; or
        (e) An investment firm licensee licensed by the CBB;

        and any depository participant so appointed, in carrying out all or any of the purposes mentioned in rule CSD-2.5.1, shall, when so required by the central depository, in respect of such purposes, be authorised to give, divulge, reveal or disclose to the central depository any information or documents relating to a securities account.

        Amended: April 2016

      • Agreement Between Depository and Depository Participant

        • CSD-2.5.3

          A central depository shall enter into an agreement with one or more depository participants as its agent.

        • CSD-2.5.4

          Every agreement shall be consistent with the provisions of this Module.

    • CSD-2.6 CSD-2.6 Provisions Relating to Immobilised Securities

      • CSD-2.6.1

        A company or issuer must, in respect of securities listed or quoted on a licensed exchange or market operator give notice to the public and its security holders of its intention to immobilise the securities.

        Amended: April 2016

      • CSD-2.6.2

        A listed company may from time-to-time after consultation with the licensed exchange prescribe that any security listed or quoted on the licensed exchange, or proposed to be listed or quoted on the licensed exchange or licensed market operator, be immobilised by depositing such security with the central depository.

        Amended: April 2016

      • CSD-2.6.3

        A central depository or its depository participant, as the case may be shall, within the period prescribed in the rules, after the deposit by any person of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with the issuer of the security within two market days.

      • Verification of Certificates and Transfer to a Central Depository

        • CSD-2.6.4

          The issuer shall, on receipt of the certificate and instrument, forthwith, do all such acts and things as may be necessary in order to register the transfer of the security underlying such certificate in the name of the central depository.

        • CSD-2.6.5

          Where an issuer refuses registration of a transfer, it shall serve on the transferor and the central depository, being the transferee, a written notice giving the reasons for such refusal, within 7 days.

        • CSD-2.6.6

          Without prejudice to the right of an issuer to refuse to register a transfer under any written law, the issuer shall refuse registration of the transfer mentioned in rule CSD-2.6.8 if:

          (a) It ascertains that the certificate is not a genuine certificate, or is a certificate that was reported lost or destroyed; or
          (b) In relation to any such security, it discovers that:
          (i) There has been a duplication in the issuance of the certificate representing the security;
          (ii) Such certificate is a certificate issued in excess of the issued share capital of the issuer; or
          (iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of the security underlying such certificate.
          Amended: April 2016

        • CSD-2.6.7

          Within seven market days after a transfer is lodged with an issuer or within such longer period as may be allowed in writing by a central depository, the issuer shall complete and deliver the appropriate certificate to the central depository.

          The central depository may refuse entry of the certificates deposited where prima facie:

          (a) There are discrepancies between the securities received and the transfer lodged; or
          (b) The securities are invalid, not genuine.

        • CSD-2.6.7A

          The central depository may refuse entry of the certificates deposited where prima facie:

          (a) There are discrepancies between the securities received and the transfer lodged; or
          (b) The securities are invalid, not genuine.
          Added: April 2016

      • Issuance of Consolidated Statements

        • CSD-2.6.8

          A central depository may require an issuer of deposited securities to issue in the name of the central depository a consolidated statement for such securities.

        • CSD-2.6.9

          The issuer shall, upon receipt of a requirement as mentioned in Paragraph CSD-2.6.8 forthwith take such action as may be appropriate for the issuance of the consolidated statement to the central depository.

          Amended: April 2016

      • Withdrawal of Immobilised Securities

        • CSD-2.6.10

          A depositor may by an application to the central depository withdraw an immobilised security standing to the credit of his securities account.

          Amended: April 2016

        • CSD-2.6.11

          Where an application is made under paragraph CSD-2.6.10 for the withdrawal of an immobilised security which is registered in the name of a central depository or its depository participant, the central depository shall forthwith place such security under suspense with the issuer including:

          (a) The certificate representing the security; and
          (b) The instrument of transfer duly executed by the central depository or its depository participant, as the case may be,

          for the purpose of effecting the transfer in favour of the depositor.

          Amended: July 2016
          Amended: April 2016

        • CSD-2.6.12

          An issuer shall, within two weeks after the certificate and the instrument of transfer in respect thereof are lodged with it:

          (a) Complete and have ready for delivery to the depositor, the appropriate certificate registered in the name of such depositor; and
          (b) Unless otherwise instructed by the depositor, send or deliver the completed certificate to the depositor.

        • CSD-2.6.13

          No person shall trade any security withdrawn from a central depository on a licensed exchange, unless such security is redeposited in a central depository.

      • Central Depository Deemed a Bare Trustee

        • CSD-2.6.14

          A central depository shall, in relation to deposited securities which are registered in its name:

          (a) Not be deemed to have an interest in relation to the book-entry securities which are registered in its name; and
          (b) Be deemed to be a bare trustee.

      • Central Depository and Depository Participant not Liable for Loss

        • CSD-2.6.15

          A central depository and depository participant shall not, except in the case of any willful act, omission, neglect or default on the part of the central depository or its authorised depository participant, be liable for any loss, damage or liability suffered or incurred by any person in respect of dealing in any security.

          Amended: April 2016

    • CSD-2.7 CSD-2.7 Dematerialisation and Central Registry Function

      • Dematerialisation of Securities

        • CSD-2.7.1

          A company shall, in respect of securities listed or quoted on a licensed exchange give notice to the public and its shareholders of its intention to dematerialise the securities. Any issue of such securities after this Module comes into effect shall be in dematerialised form.

          Amended: April 2016

        • CSD-2.7.2

          A listed company may from time-to-time after consultation with the licensed exchange prescribe that any security listed or quoted on the licensed exchange, or proposed to be listed or quoted on the licensed exchange, be dematerialised.

          Amended: April 2016

        • CSD-2.7.3

          On or after the dematerialisation date, every issuer of a security prescribed as a dematerialised security shall:

          (a) Surrender the physical register of securities holders to the central depository; and
          (b) Provide or instruct its registrar to provide information to the central depository of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by the central depository.
          Amended: April 2016

        • CSD-2.7.4

          A central depository shall maintain information of the holders of securities in a computerised record form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).

          Amended: April 2016

        • CSD-2.7.5

          No issuer shall after the dematerialisation date issue any certificate in respect of a dematerialised security.

          Amended: April 2016

        • CSD-2.7.6

          With effect from the dematerialisation date, a reference in respect of a dematerialised security, to:

          (a) A register of members or securities holders including branch registers, maintained by a company under the Commercial Companies Law, 2001, shall be deemed to be a reference to the record of securities holders maintained by the central depository;
          (b) A transfer of securities from a transferee shall be deemed to be a reference to a book entry transfer performed by the central depository; and
          (c) Any certificate, instrument of transfer or any movable property representing any security which is used as prima facie evidence of ownership of the security shall be deemed to be a reference to a statement of account issued by the central depository.
          Amended: April 2016

      • Dealings Effected by Means of Electronic Process

        • CSD-2.7.7

          A dealing by a beneficial owner in respect of a dematerialised security shall be effected by means of an entry in the securities account of the beneficial owner.

          Amended: April 2016

        • CSD-2.7.8

          Transfer of securities shall be effected by beneficial owners or their authorised nominees.

    • CSD-2.8 CSD-2.8 Entries in Securities Accounts

      • CSD-2.8.1

        An entry in a securities account in respect of a dealing, shall:

        (a) In the case of a securities account established and maintained directly by a central depository, be deemed to have been made by, or with the authority of, the central depository; and
        (b) In the case of a securities account established through and maintained by a depository participant on behalf of a central depository, be deemed to have been made by, or with the authority of, the depository participant.
        Amended: April 2016

      • Entries in Securities Accounts to Specify Date, Time and Person Making the Entries

        • CSD-2.8.2

          An entry in a securities account made under the rule CSD-2.8.1 shall specify the date and time of the making of such entry and, in the case of an entry made by a person, the identity of the person making the entry.

      • Record of an Entry Prima Facie Evidence

        • CSD-2.8.3

          A record of an entry in a securities account in respect of a dealing in deposited securities shall be prima facie evidence of the truth of the matters so recorded.

      • Record of Securities Holders Beneficial Owner to be Issued to an Issuer on Request

        • CSD-2.8.4

          An issuer of any deposited security may, in the manner and period prescribed by the rules of the central depository, request the central depository to issue him a record of the securities holders holding the aforementioned securities under their securities accounts, as at the date of the notice or such other date as may be specified in the notice.

        • CSD-2.8.5

          The record of securities holders referred to in Paragraph CSD-2.8.4 shall contain the names, addresses, number of the deposited securities acquired by each securities holder and such other information and particulars of the securities holders as may be required and prescribed by the rules of the depository.

          Amended: April 2016

      • Charging or Pledging of Securities

        • CSD-2.8.6

          The central depository shall include in its Business Rules the rules and procedures in respect of the pledge of securities, including the acceptance of a pledge by a beneficial owner and the responsibilities of the pledger in respect of effecting the pledge.

          Amended: April 2016

        • CSD-2.8.7

          Where a deposited security is charged or pledged by a securities holder (hereinafter referred to as "pledger") in favour of any person ("pledgee"), a central depository or a depository participant, with or through whom the securities account of the securities holder is maintained shall, on a request on the prescribed form made by the securities holder or pledger, create a pledge on the relevant securities within the securities account.

          Amended: April 2016

        • CSD-2.8.8

          Where a request is made by a securities holder as provided under Paragraph CSD-2.8.7, such request shall be supported by documents evidencing such charge or pledge.

          Amended: April 2016

        • CSD-2.8.9

          Where a pledge over a deposited security has been discharged or released, the central depository or its depository participant, as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within the securities account of the pledger.

          Amended: April 2016

      • Securities in Suspense

        • CSD-2.8.10

          A central depository must specify that any deposited security in a securities account as being in suspense in any of the following circumstances:

          (a) Where the securities have not been made fully paid-up;
          (b) Where the central depository has reason to believe or is satisfied that there is a breach of the rules of the central depository, licensed exchange or licensed clearing house;
          (c) Where the central depository has been served with a notice by the CBB that the CBB suspects or has reason to believe that a provision of a related law has been contravened and that securities account of a securities holder is relevant to its investigations regarding the contravention;
          (d) Where the central depository has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a deposited security;
          (e) Where the securities or interim certificates are lost and no other securities or certificates are given in lieu; or
          (f) Such other circumstances as may be prescribed by the CBB.
          Amended: April 2016

        • CSD-2.8.11

          In the case of a security that is specified in the securities account as being in suspense pursuant to rule CSD-2.8.10:

          (a) The rights, benefits, powers and privileges of a securities holder; and
          (b) The liabilities, duties and obligations of a securities holder, in respect of, or arising from, the suspension of such a security,

          shall be as prescribed by the suspension order.

          Amended: April 2016

        • CSD-2.8.12

          Where the central depository specifies that any deposited security in a securities account has been suspended, the central depository shall inform the securities account holder, issuer, the relevant depository participants and the relevant licensed exchange.

          Amended: April 2016

    • CSD-2.9 CSD-2.9 Proceedings of Licensed Clearing House and Licensed Central Depository Take Precedence Over Law of Insolvency

      • CSD-2.9.1

        In line with Articles 108 and 109 of the CBB Law and Resolution No (44) of 2014 with respect to promulgating a Regulation for Close-out Netting under a Market Contract, none of the following shall be regarded as to any extent invalid under the law on the grounds of inconsistency with the law relating to distribution of the assets of a person on insolvency, bankruptcy or winding up, or on the appointment of a receiver over any of the assets of a person:

        (a) A market contract;
        (b) The rules of a licensed clearing house relating to the settlement of a market contract;
        (c) Any proceeding or other action taken under the rules of a licensed clearing house relating to the settlement of a market contract;
        (d) A market charge;
        (e) The default rules of a licensed clearing house or central depository; and
        (f) Any default proceedings.
        Amended: April 2016

      • CSD-2.9.2

        The powers of a relevant office-holder in his capacity as such, and the powers of a court acting under the law of insolvency, shall not be exercised in such a way so as to prevent or interfere with:

        (a) The settlement in accordance with the rules of a licensed clearing house or licensed central depository of a market contract; or
        (b) Any default proceedings taken in pursuant to default rules.
        Amended: April 2016