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 andsettlement of transactions and for deliveringsecurities to and receivingsecurities from clearing members and makingpayment to and receivingpayment from clearing members in connection with any transaction.Settlement Bank(s)
CSD-2.1.2
The
licensed clearing house may undertake thesettlement function directly, or from time-to-time appointsettlement bank(s) to act as thesettlement bank(s) for thesettlement of the transactions.Amended: April 2016CSD-2.1.3
The appointed
settlement bank(s) shall act as agent(s) of thelicensed clearing house for the collection andpayment for funds towardssettlement obligations, margins and other dues.Amended: April 2016Clearing 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 asettlement bank .Amended: April 2016CSD-2.1.5
The clearing members shall operate the designated bank accounts only for the purpose of
payment of their monetary obligations to thelicensed clearing house and/or thelicensed exchange and receipt of monetary entitlements from thelicensed clearing house orlicensed exchange .Amended: April 2016Settlement Bank to Act on Instructions of the Clearing House
CSD-2.1.6
The
licensed clearing house shall instruct thesettlement banks to debit or credit the account maintained by thelicensed clearing house and also the designated bank accounts of theclearing members . Thesettlement banks shall act on such instructions, which shall be deemed to be confirmed orders by theclearing members to debit and/or credit funds, as may be specified in the instructions from time-to-time.Amended: July 2016
Amended: April 2016CSD-2.1.7
[This Paragraph was merged with CSD-2.1.6 in July 2016.]
Amended: July 2016
Amended: April 2016CSD-2.1.8
Clearing members shall authorisesettlement banks to access their designated bank accounts for debiting and/or crediting their accounts electronically, on the instructions of thelicensed exchange orlicensed clearing house .Amended: April 2016Settlement 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, thesettlement bank shall forthwith report such instances of shortage to the officer of thelicensed clearing house andlicensed exchange designated for the purpose in a mutually agreed mode of communication.Amended: April 2016CSD-2.2 CSD-2.2 Settlement by Clearing House
CSD-2.2.1
All securities transactions shall be settled through the
licensed clearing house , bydelivery andpayment by theclearing members to thelicensed clearing house in accordance with the provisions contained in this Module, the rules of thelicensed clearing house and relevant directives or provisions that the CBB may from time-to-time prescribe.Amended: April 2016CSD-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 andsettlement of transactions by or through thelicensed 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 anysecurity orsecurities .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 ofsettlement of all transactions contracts entered into or to be entered into in anysecurity orsecurities by theclearing members through thelicensed clearing house .Amended: April 2016CSD-2.2.6
All the
clearing members , custodians, clearing banks,central depositories ,depository participants and otherpersons having beneficial interest insettlement shall comply with the provisions contained in the rules and regulations of thelicensed exchange and the rules of thelicensed clearing house from time-to-time.Amended: April 2016CSD-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 ofsecurities and the transfer ofsecurities by book entry;(d) Netting arrangements;(e)Securities lending, including repurchase agreements and other economically equivalent transactions;(f) Finality ofsettlement ;(g) Margin trading and securities lending and borrowing;(h) Arrangements for achievingdelivery versuspayment ;(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 2016CSD-2.2.8
The
licensed clearing house shall maintain asettlement guarantee fund to guaranteesettlement obligations ofclearing members .Amended: April 2016CSD-2.2.9
The
licensed clearing house shall deliver, at its discretion,securities which it has received from aclearing member to any otherclearing member who is entitled to the same.Amended: April 2016CSD-2.2.10
The
licensed clearing house shall determine thesettlement obligations relating todelivery and receipt ofsecurities by and betweenclearing members to be exchanged electronically through the clearing andsettlement system of thelicensed clearing house .Amended: April 2016Timing of Settlement
CSD-2.2.11
Final
settlement should occur no later than the end of thesettlement 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 2016CSD-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 ofdepositories licensed by the CBB.CSD-2.3.2
A
clearing member shall be required to maintain a designated account with one or moredepositories .Amended: April 2016CSD-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 asecurities account .CSD-2.4.2
A
depository participant which deals in depositedsecurities as principal shall, in relation to such dealing, open and maintain asecurities account with thecentral depository .Amended: April 2016CSD-2.4.3
A
central depository may establish different types ofsecurities accounts for different classes ofpersons .CSD-2.4.4
Every
securities account opened with acentral depository shall be in the name of thebeneficial owner of the deposited securities.CSD-2.4.5
The
person opening thesecurities account shall make a declaration in such manner as may be specified in the rules of thecentral depository that he is thebeneficial owner of depositedsecurities .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 depositedsecurities held in custody by, or registered in the name of thecentral depository for the securities holders at such time and in such manner as may be provided in the rules of thecentral 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 depositedsecurities for the time being held in custody by, or registered in the name of thecentral depository .Amended: April 2016CSD-2.4.8
A
central depository shall, on receipt of a written notice under paragraph CSD-2.4.7 and uponpayment 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 thepersons referred to in Paragraph CSD-2.5.2 to be adepository participant for all or any of the following purposes:(a) To facilitate the deposit ofsecurities ;(b) To open, maintain and closesecurities accounts ;(c) To make entries insecurities accounts ;(d) To collect such fees and charges imposed by thecentral depository as may be provided under these rules; or(e) Such other incidental and ancillary purposes as may be specified by the rules of thecentral depository .Amended: April 2016CSD-2.5.2
A
central depository may appoint as adepository participant any of the following:(a) A stock exchange;(b) Aclearing house or depository;(c) A bank licensed by the CBB;(d) [This Subparagraph was deleted in April 2016]; or(e) Aninvestment 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 thecentral depository , in respect of such purposes, be authorised to give, divulge, reveal or disclose to thecentral depository any information or documents relating to asecurities account .Amended: April 2016Agreement Between Depository and Depository Participant
CSD-2.5.3
A
central depository shall enter into an agreement with one or moredepository 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 alicensed exchange or market operator give notice to the public and its security holders of its intention to immobilise thesecurities .Amended: April 2016CSD-2.6.2
A listed company may from time-to-time after consultation with the
licensed exchange prescribe that anysecurity listed or quoted on thelicensed exchange , or proposed to be listed or quoted on thelicensed exchange or licensed market operator, be immobilised by depositing suchsecurity with thecentral depository .Amended: April 2016CSD-2.6.3
A
central depository or itsdepository participant , as the case may be shall, within the period prescribed in the rules, after the deposit by anyperson of a certificate and the instruments of transfer in respect thereof, if any, lodge the certificate and instrument with theissuer of thesecurity 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 thesecurity underlying such certificate in the name of thecentral depository .CSD-2.6.5
Where an
issuer refuses registration of a transfer, it shall serve on the transferor and thecentral 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, theissuer 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 suchsecurity , it discovers that:(i) There has been a duplication in the issuance of the certificate representing thesecurity ;(ii) Such certificate is a certificate issued in excess of the issued share capital of theissuer ; or(iii) It has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of thesecurity underlying such certificate.Amended: April 2016CSD-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 acentral depository, theissuer shall complete and deliver the appropriate certificate to thecentral 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 thesecurities received and the transfer lodged; or(b) Thesecurities are invalid, not genuine.Added: April 2016Issuance of Consolidated Statements
CSD-2.6.8
A
central depository may require anissuer of deposited securities toissue in the name of thecentral depository a consolidated statement for suchsecurities .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 thecentral depository .Amended: April 2016Withdrawal of Immobilised Securities
CSD-2.6.10
A depositor may by an application to the
central depository withdraw an immobilisedsecurity standing to the credit of hissecurities account .Amended: April 2016CSD-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 acentral depository or itsdepository participant , thecentral depository shall forthwith place suchsecurity under suspense with theissuer including:(a) The certificate representing thesecurity ; and(b) The instrument of transfer duly executed by thecentral depository or itsdepository participant , as the case may be,for the purpose of effecting the transfer in favour of the depositor.
Amended: July 2016
Amended: April 2016CSD-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 fordelivery 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 anysecurity withdrawn from acentral depository on alicensed exchange, unless suchsecurity is redeposited in acentral 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-entrysecurities 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 anddepository participant shall not, except in the case of any willful act, omission, neglect or default on the part of thecentral depository or its authoriseddepository participant , be liable for any loss, damage or liability suffered or incurred by anyperson in respect of dealing in anysecurity .Amended: April 2016CSD-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 alicensed exchange give notice to the public and its shareholders of its intention to dematerialise thesecurities . Any issue of suchsecurities after this Module comes into effect shall be in dematerialised form.Amended: April 2016CSD-2.7.2
A listed company may from time-to-time after consultation with the
licensed exchange prescribe that anysecurity listed or quoted on thelicensed exchange, or proposed to be listed or quoted on thelicensed exchange, be dematerialised.Amended: April 2016CSD-2.7.3
On or after the
dematerialisation date, everyissuer of asecurity prescribed as a dematerialisedsecurity shall:(a) Surrender the physical register of securities holders to thecentral depository ; and(b) Provide or instruct its registrar to provide information to thecentral depository of any securities holder who appears in the appropriate register as a holder of a certificate not already dematerialised by thecentral depository .Amended: April 2016CSD-2.7.4
A
central depository shall maintain information of the holders ofsecurities in a computerisedrecord form, in accordance with the relevant provisions of Module AML (Anti-Money Laundering & Combating Financial Crime).Amended: April 2016CSD-2.7.5
No
issuer shall after thedematerialisation date issue any certificate in respect of a dematerialisedsecurity .Amended: April 2016CSD-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 therecord of securities holders maintained by thecentral depository ;(b) A transfer ofsecurities from a transferee shall be deemed to be a reference to a book entry transfer performed by thecentral depository ; and(c) Any certificate, instrument of transfer or any movableproperty representing anysecurity which is used as prima facie evidence of ownership of thesecurity shall be deemed to be a reference to a statement of account issued by thecentral depository .Amended: April 2016Dealings Effected by Means of Electronic Process
CSD-2.7.7
A dealing by a
beneficial owner in respect of a dematerialisedsecurity shall be effected by means of an entry in thesecurities account of thebeneficial owner .Amended: April 2016CSD-2.7.8
Transfer of
securities shall be effected bybeneficial 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 asecurities account established and maintained directly by acentral depository , be deemed to have been made by, or with the authority of, thecentral depository ; and(b) In the case of asecurities account established through and maintained by adepository participant on behalf of acentral depository , be deemed to have been made by, or with the authority of, thedepository participant .Amended: April 2016Entries 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 aperson , the identity of theperson making the entry.Record of an Entry Prima Facie Evidence
CSD-2.8.3
A
record of an entry in asecurities account in respect of adealing in depositedsecurities 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 depositedsecurity may, in the manner and period prescribed by the rules of thecentral depository , request thecentral depository to issue him arecord of the securities holders holding the aforementionedsecurities under theirsecurities 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 depositedsecurities 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 2016Charging 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 ofsecurities , including the acceptance of a pledge by abeneficial owner and the responsibilities of the pledger in respect of effecting the pledge.Amended: April 2016CSD-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"), acentral depository or adepository participant , with or through whom thesecurities 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 thesecurities account .Amended: April 2016CSD-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 2016CSD-2.8.9
Where a pledge over a deposited
security has been discharged or released, thecentral depository or itsdepository participant , as the case may be, shall, upon receipt of a notice in writing from the pledgee confirming the same, release the pledge within thesecurities account of the pledger.Amended: April 2016Securities in Suspense
CSD-2.8.10
A
central depository must specify that any deposited security in asecurities account as being in suspense in any of the following circumstances:(a) Where thesecurities have not been made fully paid-up;(b) Where thecentral depository has reason to believe or is satisfied that there is a breach of the rules of thecentral depository ,licensed exchange orlicensed clearing house ;(c) Where thecentral 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 thatsecurities account of a securities holder is relevant to its investigations regarding the contravention;(d) Where thecentral depository has been served with an order of a court of competent jurisdiction prohibiting any dealing in respect of a depositedsecurity ;(e) Where thesecurities or interim certificates are lost and no othersecurities or certificates are given in lieu; or(f) Such other circumstances as may be prescribed by the CBB.Amended: April 2016CSD-2.8.11
In the case of a
security that is specified in thesecurities 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 asecurity ,shall be as prescribed by the suspension order.
Amended: April 2016CSD-2.8.12
Where the
central depository specifies that any deposited security in asecurities account has been suspended, thecentral depository shall inform thesecurities account holder, issuer, the relevantdepository participants and the relevantlicensed exchange .Amended: April 2016CSD-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 aperson :(a) Amarket contract ;(b) The rules of alicensed clearing house relating to thesettlement of amarket contract ;(c) Any proceeding or other action taken under the rules of alicensed clearing house relating to thesettlement of amarket contract ;(d) Amarket charge ;(e) Thedefault rules of alicensed clearing house orcentral depository ; and(f) Anydefault proceedings .Amended: April 2016CSD-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) Thesettlement in accordance with the rules of alicensed clearing house orlicensed central depository of amarket contract ; or(b) Anydefault proceedings taken in pursuant todefault rules .Amended: April 2016