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  • 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.