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  • CSD-3 CSD-3 Obligations of a Clearing House and Central Depository

    • CSD-3.1 CSD-3.1 General Obligations of a Clearing House and Central Depository

      • CSD-3.1.1

        A licensed clearing house and licensed central depository shall:

        (a) As far as is reasonably practicable, operate a safe and efficient clearing or central depository facility;
        (b) Manage any risks associated with its business and operations prudently;
        (c) In discharging its obligations under this Module, not act contrary to the interests of the public, having particular regard to the interests of the investing public;
        (d) Ensure that access for participation in its clearing or central depository facility is subject to criteria that are fair and objective, and that are designed to ensure the safe and efficient functioning of its facility and to protect the interests of the investing public;
        (e) Maintain business rules that make satisfactory provision for:
        (i) The clearing or central depository facility to be operated in a safe and efficient manner; and
        (ii) The proper regulation and supervision of its members and depository participants;
        (f) Enforce compliance by its members and depository participants with its business rules;
        (g) Have sufficient financial, human and system resources:
        (i) To operate a safe and efficient clearing or central depository facility;
        (ii) To meet contingencies or disasters; and
        (iii) To provide adequate security arrangements;
        (h) Ensure that it appoints or employs fit and proper persons as its chairman, chief executive officer, directors and key management officers;
        (i) Maintain efficient risk management and internal controls;
        (j) Maintain a record of all transactions effected through its clearing or central depository facility in such form and manner as the CBB may prescribe, including:
        (i) The extent to which the record includes details of each transaction in line with the applicable laws, rules and regulations related to the Know Your Client and the Prevention and Prohibition of Money Laundering; and
        (ii) The period of time that the record is to be maintained.
        (k) Provide to the CBB, for its review and comment, at least 5 business days prior to publishing in the press, the draft agenda for any shareholders meetings referred to in Subparagraph CSD-3.1.1(m);
        (l) Ensure that any agenda items to be discussed or presented during the course of meetings which require the CBB's prior approval, have received the necessary approval, prior to the meeting taking place;
        (m) Invite a representative of the CBB to attend any shareholders' meeting (i.e. ordinary and extraordinary general assembly) taking place. The invitation must be provided to the CBB at least 5 business days prior to the meeting taking place; and
        (n) Within a maximum of 15 calendar days of any shareholders' meetings referred to in Subparagraph CSD-3.1.1(m), provide to the CBB a copy of the minutes of the meeting.
        Amended: July 2016
        Amended: April 2016

      • CSD-3.1.1A

        Licensed clearing houses and licensed central depositories must ensure that all regulated financial services are provided without any discrimination based on gender, nationality, origin, language, faith, religion, physical ability or social standing.

        Added: October 2020

      • CSD-3.1.2

        The CBB may by notice in writing, exempt any clearing or central depository facility operated by a licensed clearing house or licensed central depository from all or any of the provisions of this Module, if the CBB is satisfied that such exemption would not detract from the objectives specified in rule CSD-3.1.1.

        Amended: April 2016

      • CSD-3.1.3

        In rule CSD-3.1.1 (g), "contingencies or disasters" include technical disruptions occurring within automated systems.

      • CSD-3.1.4

        A licensed clearing house or licensed central depository shall formulate and implement appropriate procedures for ensuring that its members or participants comply with the CBB Law, rules and regulations, and rules of the licensed clearing house or central depository.

        Amended: April 2016

      • CSD-3.1.5

        A licensed clearing house or licensed central depository shall, for the conduct of its business, at all times provide and maintain:

        (a) Adequate and properly equipped premises;
        (b) Competent personnel; and
        (c) Automated systems with adequate capacity, facilities to meet contingencies or emergencies, security arrangements and technical support.
        Amended: April 2016

      • CSD-3.1.6

        Internal rules and procedures of a licensed clearing house or central depository must be enforceable with a high degree of certainty, so as to ensure its effective operation.

      • CSD-3.1.7

        The rules and contracts related to the operation of the clearing house or central depository should be enforceable in the event of the insolvency of a member or depository participant.

        Amended: April 2016

      • Obligation to Submit Periodic Financial Reports

        • CSD-3.1.8

          A licensed clearing house or central depository shall submit to the CBB such reports in such form, manner and frequency as the CBB may prescribe. A licensed clearing house or central depository shall submit to the CBB for the preceding quarter, in such form as may be approved by the CBB:

          (a) Within 3 months after the end of its financial year, a copy of its:
          (i) Annual report and directors' report prepared in accordance with the provisions of the IFRS; and
          (ii) Auditors' long form report;
          (b) Within 45 days after the end of each of the first 3 quarters of its financial year, a copy of its:
          (i) Profit and loss accounts; and
          (ii) Balance-sheet;
          (c) Within 3 months after the end of its financial year, a report on how the licensed clearing house or central depository has discharged its responsibilities under the CBB Law and this Module during that financial year;
          (d) A report reviewed by the internal auditor relating to the business of operating the licensed clearing house or central depository, at such time or on such periodic basis as may be specified by the CBB; and
          (e) Such other report as the CBB may require at such time or on such periodic basis as may be specified by the CBB.

        • CSD-3.1.9

          The auditors' long form report referred to in rule CSD-3.1.8 (a) (ii) shall include the findings and recommendations of the auditors, if any, on:

          (a) The risk management and internal controls of the licensed clearing house or central depository; and
          (b) The non-compliance with any:
          (i) Provision of the CBB Law;
          (ii) Direction issued by the CBB under the CBB Law and regulations; or
          (iii) Other relevant laws or regulations.

      • IIS Reporting Requirements

        • CSD-3.1.9A

          A licensed clearing house or licensed central depository is required to complete online non-financial information related to its institution by accessing the CBB's institutional information system (IIS). Licensees must update the required information at least on a quarterly basis or when a significant change occurs in the non-financial information included in the IIS. If no information has changed during the quarter, the licensee must still access the IIS quarterly and confirm the information contained in the IIS. Licensees must ensure that they access the IIS within 20 calendar days from the end of the related quarter and either confirm or update the information contained in the IIS.

          Amended: April 2016
          Added: April 2013

        • CSD-3.1.9B

          Licensees failing to comply with the requirements of Paragraph CSD-3.1.9A or reporting inaccurate information are subject to financial penalties or other enforcement actions.

          Amended: April 2016
          Added: April 2013

      • Obligation to Maintain Transparency

        • CSD-3.1.10

          A licensed clearing house or licensed central depository must maintain complete transparency in relation to its operations, including clearing, settlement, depository and central registry with particular regard to:

          (a) Transaction execution;
          (b) Settlement arrangements;
          (c) Fees and charges;
          (d) Margin requirements, including lending and borrowing;
          (e) Operational requirements; and
          (f) Business rules.
          Amended: April 2016

      • Obligation to Assist CBB

        • CSD-3.1.11

          A person operating a clearing or depository facility shall provide such assistance to the CBB as the CBB may require for the performance of the functions and duties of the CBB, including the furnishing of such returns and the provision of:

          (a) Such books and other information:
          (i) Relating to the business of the clearing or depository facility; and
          (ii) In respect of any transaction or class of transactions cleared or settled by the clearing facility, or accepted for deposit by a depository; and
          (b) Such other information or assistance, as the CBB may require for the proper administration of the CBB Law and regulations.
          Amended: April 2016

      • Obligation to Notify CBB of Certain Matters

        • CSD-3.1.12

          A person operating a clearing or depository facility shall (including where a clearing facility carries on business or acquires a substantial shareholding in a central depository, or vice-versa), notify the CBB in the event of the following:

          (a) The carrying on of any business by the licensed clearing house or licensed central depository other than:
          (i) The business of operating a clearing facility and/or depository;
          (ii) A business incidental to operating a clearing facility or depository; or
          (iii) Such business or class of businesses as the CBB may prescribe;
          (b) The acquisition by the licensed clearing house or licensed central depository of a substantial shareholding in a corporation which does not carry on:
          (i) The business of operating a clearing facility or central depository;
          (ii) A business incidental to operating a clearing facility or central depository; or
          (iii) Such business or class of businesses as the CBB may prescribe;
          (c) The licensed clearing house or licensed central depository becoming aware of a financial irregularity or other matter which in its opinion:
          (i) May affect its ability to discharge its financial obligations; or
          (ii) May affect the ability of a member or participant of the licensed clearing house or licensed central depository to meet its financial obligations to the licensed clearing house or licensed central depository;
          (d) The licensed clearing house or licensed central depository reprimanding, fining, suspending, expelling or otherwise taking disciplinary action against a member or depository participant of the licensed clearing house or licensed central depository; and
          (e) Any other matter that the CBB may prescribe by regulations or specify by notice in writing to the licensed clearing house or licensed central depository.
          Amended: April 2016

        • CSD-3.1.13

          A licensed clearing house or licensed central depository shall, immediately after becoming aware of the occurrence of any of the following circumstances, notify the CBB in writing of:

          (a) Any civil or criminal legal proceeding instituted against the licensed clearing house or licensed central depository, or any of its members or depository participants, whether in Bahrain or elsewhere;
          (b) Any disciplinary action taken against the licensed clearing house or licensed central depository, or any of its members or depository participants by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
          (c) Any significant change to the regulatory requirements imposed on the licensed clearing house or licensed central depository by any regulatory body, whether in Bahrain or elsewhere, other than the CBB;
          (d) Any admission or cessation of a bank to act as a settlement bank for the licensed clearing house;
          (e) Any failure by any party to debit or credit the relevant accounts for the purpose of the settlement of transactions, including the settlement of moneys, securities or physically delivered futures contracts; and
          (f) Any disruption of or delay in any clearing, settlement or central depository procedures of the licensed clearing house or licensed central depository, including those resulting from any system failure.
          Amended: April 2016

        • CSD-3.1.14

          Where a circumstance under Subparagraphs CSD-3.1.13 (a), (b), (e) or (f) has occurred, the licensed clearing house or licensed central depository shall, in addition to the notification required under Paragraph CSD-3.1.13, within 7 days of the occurrence of the circumstance, submit a report to the CBB of the circumstances relating to the occurrence, the remedial actions taken at the time of the occurrence, and the subsequent follow-up actions that the licensed clearing house or licensed central depository has taken, or intends to take.

          Amended: April 2016

        • CSD-3.1.15

          A licensed clearing house or licensed central depository shall, within a reasonable period of time prior to entering into negotiations to establish a clearing linkage, clearing arrangement, depository arrangement or co-operative arrangement with a person establishing or operating another clearing facility or depository, notify the CBB of such intent to enter into negotiations.

          Amended: April 2016

        • CSD-3.1.16

          In rule CSD-3.1.15, ''co-operative arrangement'' shall not include:

          (a) Any joint development of products and services;
          (b) Any joint marketing efforts between the licensed clearing house or licensed central depository and the person operating an overseas market, or clearing or depository facility, in promoting the services of either entity; or
          (c) Any memorandum of understanding for the exchange of information.
          Amended: April 2016

        • CSD-3.1.17

          A licensed clearing house or licensed central depository shall seek the approval of the CBB prior to making any change to the financial resources that are available to the licensed clearing house or licensed central depository to support a default of its member; and

          (a) The CBB may grant its approval referred to above, subject to such conditions or restrictions as the CBB may deem fit.
          (b) For the purposes of this Paragraph, ''financial resources that are available to the licensed clearing house to support a default of its member'' shall not include margin trading facilities held with the licensed clearing house.
          Amended: April 2016

        • CSD-3.1.18

          A person operating a clearing facility or depository shall, no later than 7 days after the occurrence of any of the following circumstances, notify the CBB of:

          (a) A change of an approved person, in accordance with Section CSD-5.3;
          (b) A change of the address of the principal place of business at which it carries on the business of operating a clearing facility or depository;
          (c) A material change in the business of the clearing facility or depository; or
          (d) Such other matter as the CBB may prescribe.
          Amended: July 2016

        • CSD-3.1.19

          A licensed clearing house or licensed central depository shall seek the approval of the CBB prior to accepting any new type of securities (e.g. equities or warrants) for clearing, settlement or deposit.

          Amended: April 2016

        • CSD-3.1.20

          The CBB may at its discretion, unless the timeframe is stipulated by law, decide on an application by the licensed clearing house or licensed central depository to vary the timeframe for compliance with the obligations in this Module and substitute such timeframe.

          Amended: April 2016

        • CSD-3.1.21

          Any application for an extension of the timeframe in which to comply with the obligations of this Chapter must be made in writing, stating the extraordinary reason for such request.

          Amended: April 2016

    • CSD-3.2 CSD-3.2 Obligation to Maintain Confidentiality

      • CSD-3.2.1

        In line with Part 8 of the CBB Law, and except under circumstances specified in Paragraphs CSD-3.2.2 and CSD-3.2.3, a licensed clearing house or licensed central depository and its officers and employees shall maintain, and aid in maintaining, confidentiality of all user information that:

        (a) Comes to the knowledge of the licensed clearing house or licensed central depository or any of its officers or employees; or
        (b) Is in the possession of the licensed clearing house or licensed central depository or any of its employees.
        Amended: April 2016

      • Exemption of Obligation to Maintain Confidentiality

        • CSD-3.2.2

          Rule CSD-3.2.1 shall not apply to:

          (a) The disclosure of user information for such purposes, or in such circumstances, as the CBB may prescribe;
          (b) Any disclosure of user information which is authorised by the CBB to be disclosed or furnished; or
          (c) The disclosure of user information pursuant to any requirement imposed under any written law or order of court in Bahrain.
          Amended: April 2016

        • CSD-3.2.3

          Rule CSD-3.2.1 shall not apply to the disclosure of user information by a licensed clearing house or licensed central depository, or its officers or employees, for the following purposes or in the following circumstances:

          (a) The disclosure of user information is necessary for the making of a complaint or report under any law for an offence alleged or suspected to have been committed under such law;
          (b) The disclosure of user information is permitted for such purpose specified in writing by the user or, where the user is deceased, by his appointed personal representative;
          (c) The user information is disclosed to the approved holding company of the licensed clearing house or licensed central depository;
          (d) The disclosure of user information is necessary for the execution by the licensed clearing house or licensed central depository of a transaction in any listed securities or futures contracts, or clearing or settlement of a transaction on a licensed exchange and such disclosure is made only to another user which is:
          (i) A party to the transaction; or
          (ii) A member of a licensed exchange or a licensed clearing house through which that transaction is executed, cleared or settled;
          (e) The disclosure of user information is necessary:
          (i) In any disciplinary proceedings of the licensed clearing house or licensed central depository, provided that reasonable steps are taken to ensure that user information disclosed to any third person is used strictly for the purpose for which the user information is disclosed; or
          (ii) For the publication, in any form or manner, of the disciplinary proceedings and the outcome thereof;
          (f) The user information disclosed is already in the public domain;
          (g) The disclosure of user information is made in connection with an arrangement for protection against a default by a member or participant of the licensed clearing house or licensed central depository to another member or participant of the licensed clearing house or licensed central depository, who is identified by the licensed clearing house or licensed central depository for the purposes of carrying out or undertaking the obligations under the arrangement;
          (h) The disclosure is required in accordance with international and multilateral arrangements including, but not limited to the IOSCO MMoU;
          (i) The disclosure of user information is made to a member or depository participant of the licensed clearing house or licensed central depository in connection with an arrangement for the transfer to that member or depository participant of any contract or position from another member of the licensed clearing house or licensed central depository who is in default;
          (j) The disclosure of user information is made in connection with:
          (i) The outsourcing or proposed outsourcing of any function of the licensed clearing house or licensed central depository to a third party after obtaining the approval of the CBB;
          (ii) The engagement or potential engagement of a third party by the licensed clearing house or licensed central depository to create, install or maintain systems of the licensed clearing house or licensed central depository; or
          (iii) The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service;
          (k) The disclosure of user information is necessary in:
          (i) An application for a grant of probate or letters of administration, or the resealing thereof in relation to the estate of a deceased user; or
          (ii) The administration of the estate of a deceased user, including such disclosure as may be required by the applicable laws, rules and regulations; or
          (l) The disclosure of user information is made in connection with:
          (i) In the case where the user is an individual, the bankruptcy of a user; or
          (ii) In the case where the user is a body corporate, the winding up or receivership of a user.
          Amended: April 2016

        • CSD-3.2.4

          Where user information is disclosed under Subparagraphs CSD-3.2.3 (g), (h) or (i), the licensed clearing house or licensed central depository shall:

          (a) Maintain a record of:
          (i) The circumstances relating to the disclosure of user information referred to in that sub-paragraph; and
          (ii) In the case of disclosure of information, the particulars of:
          A. The arrangement for protection;
          B. The arrangement for transfer;
          C. The outsourcing of the function of the licensed clearing house or licensed central depository;
          D. The engagement of the third party; and
          E. The appointment or engagement of an auditor, a lawyer, a consultant or other professional by the licensed clearing house or licensed central depository under a contract for service, and make the record available for inspection by the CBB.
          (b) Disclose the user information insofar as this is necessary for the relevant purpose; and
          (c) Take reasonable steps to ensure that user information disclosed is used by the person to whom the disclosure is made strictly for the relevant purpose, and that the user information is not disclosed by that person to any other person except with the consent of the licensed clearing house or licensed central depository.
          Amended: April 2016

        • CSD-3.2.5

          Where disclosure of user information is permitted to be made for any purpose or in any circumstance under Paragraph CSD-3.2.3 to a body corporate, the user information may be disclosed only to those officers of the body corporate to whom the disclosure is necessary for the relevant purpose.

          Amended: April 2016

        • CSD-3.2.6

          In Paragraphs CSD-3.2.4 and CSD-3.2.5, ''relevant purpose'' means:

          (a) In the case of the disclosure of information under Subparagraph CSD-3.2.3(g), the carrying out of the arrangement for protection;
          (b) In the case of the disclosure of information under Subparagraph CSD-3.2.3(h), the carrying out of the arrangement for transfer;
          (c) In the case of the disclosure of information under Subparagraphs CSD-3.2.3(j) and (i), facilitating the outsourcing of the function of the licensed clearing house or licensed central depository;
          (d) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (ii), facilitating the engagement of the third party; and
          (e) In the case of the disclosure of information under Subparagraph CSD-3.2.3(j) (iii), facilitating the appointment or engagement of the auditor, lawyer, consultant or other professional.
          Amended: April 2016

        • CSD-3.2.7

          For the avoidance of doubt, nothing in this Section shall be construed as preventing a licensed clearing house or licensed central depository from entering into a written agreement with a user which obliges the licensed clearing house or licensed central depository to maintain a higher degree of confidentiality than that specified in this Section.

          Amended: April 2016

    • CSD-3.3 CSD-3.3 Business Continuity Plan

      • CSD-3.3.1

        A licensed clearing house or licensed central depository shall maintain at all times a plan of action (referred to in this Module as a business continuity plan), setting out the procedures and establishing the systems necessary to restore safe and efficient operations of any clearing facility or depository it operates, in the event of any disruption to the processes of its clearing facility or depository.

        Amended: April 2016

      • CSD-3.3.2

        As part of a business continuity plan the licensed clearing house or licensed central depository should provide for:

        (a) Recovery situations;
        (b) Recovery situations affecting the clients, members and depository participants;
        (c) The evacuation of the office premises; and
        (d) Back-up licensed clearing house data centre.
        Amended: April 2016

      • CSD-3.3.3

        A licensed clearing house or licensed central depository shall review the procedures and systems referred to in rule CSD-3.3.1 on such regular basis as may be specified in the business continuity plan.

        Amended: April 2016

      • CSD-3.3.4

        A licensed clearing house or licensed central depository shall immediately notify the CBB of any activation of its business continuity plan and of any action taken, or intended to be taken, to restore safe and efficient operations of its clearing facility.

        Amended: April 2016

      • CSD-3.3.5

        A licensed clearing house or licensed central depository shall, within 7 days, inform the CBB of any material change to the business continuity plan and shall submit, at the request of the CBB, a copy of the new plan to the CBB.

        Amended: April 2016

    • CSD-3.4 CSD-3.4 Transmission and Storage of User Information

      • CSD-3.4.1

        A licensed clearing house or licensed central depository shall take all reasonable measures to maintain the integrity and security of the transmission and storage of its user information.

        Amended: April 2016

    • CSD-3.5 CSD-3.5 Regulation of Clearing and Deposit Fees of Licensed Clearing Houses and Licensed Central Depositories

      • CSD-3.5.1

        A licensed clearing house or licensed central depository shall not impose, modify, restructure or otherwise change any existing clearing or depository fee imposed on its members or depository participants, without the prior written approval of the CBB.

        Amended: April 2016

      • CSD-3.5.2

        The CBB may require the licensed clearing house or licensed central depository to furnish it with such information or documents as the CBB considers necessary in relation to the application referred to in rule CSD-3.5.1, and the licensed clearing house or licensed central depository shall furnish such information or documents as the CBB may require.

        Amended: April 2016

      • CSD-3.5.3

        The CBB shall, within 30 business days of receipt of a completed application referred to in paragraph CSD-3.5.2, by notice in writing to the licensed clearing house or licensed central depository, either grant the approval or notify the licensed clearing house or licensed central depository of its intention to refuse to grant the approval.

        Amended: July 2016

      • CSD-3.5.4

        The CBB may, by notice in writing to the licensed clearing house or licensed central depository, extend the period referred to in rule CSD-3.5.3:

        (a) To a maximum of 45 business days from the day of receipt of a completed application referred to in rule CSD-3.5.1; or
        (b) For a further period of such duration as the CBB thinks fit upon the expiry of the 45 business days referred to in (a) above.
        Amended: April 2016

      • CSD-3.5.5

        The CBB may have regard to the following matters for the purposes of deciding whether to grant or to refuse to grant its approval:

        (a) The effect of the proposed imposition of or change in the fee on:
        (i) Competition in the financial services industry of Bahrain; and
        (ii) Access to clearing, settlement or depository services in Bahrain;
        (b) The cost of providing the service for which such proposed imposition or change in fee is proposed;
        (c) The effect of such proposed imposition or change on the cost and efficiency of trading, clearing, settlement and depository in Bahrain of securities or futures contracts; and
        (d) The effect of such proposed imposition or change in the objective of the CBB as specified in the CBB Law.

      • CSD-3.5.6

        The CBB may grant its approval subject to such conditions or restrictions as the CBB may deem fit to impose by notice in writing to the licensed clearing house or licensed central depository, including conditions or restrictions relating to:

        (a) The period for which the approval of the fee will be in force;
        (b) The circumstances under which, or date by which the licensed clearing house or licensed central depository will be required to submit another application for approval of the clearing or depository fee under rule CSD-3.5.1 upon the expiry of the period referred (a) above; and
        (c) The circumstances under which, or the changes in the fee for which, the licensed clearing house or licensed central depository will not be required to submit another application for approval of a change in the fee under rule CSD-3.5.1 upon the expiry of the period referred to in (a) above.
        Amended: April 2016

      • CSD-3.5.7

        The CBB shall not refuse to grant its approval without giving the licensed clearing house or licensed central depository an opportunity to be heard.

        Amended: April 2016

      • CSD-3.5.8

        The licensed clearing house or licensed central depository may only charge the fee approved by the CBB under rule CSD-3.5.1 for the service or services in respect of which it was approved.

        Amended: April 2016

    • CSD-3.6 CSD-3.6 Inspection, Accounting and Internal Audit

      • CSD-3.6.1

        Every member or depository participant must submit to the licensed clearing house or licensed central depository:

        (a) Audited financial reports; and
        (b) Quarterly internal audit reports.
        Amended: April 2016

      • CSD-3.6.2

        The licensed clearing house or licensed central depository shall carry out periodic visits to the offices of its members or depository participants and clearing or depository facilities to review the operating procedures, systems maintenance and compliance with the CBB Law, rules and regulations and its business rules.

        Amended: April 2016

      • CSD-3.6.3

        The board of directors of the licensed clearing house or licensed central depository may appoint a Disciplinary Action Committee (DAC) to deal with any matter relating to allegations of improper conduct from the clients of the members or depository participants and the issuers.

        Amended: April 2016

      • CSD-3.6.4

        The DAC is empowered to :

        (a) Suspend or expel a member or depository participant;
        (b) Declare a security as ineligible on the central depository system;
        (c) Freeze a member or depository participant account; and
        (d) Conduct inspections or call for records and issue notices.

      • CSD-3.6.5

        If a member or depository participant is aggrieved by the action of the DAC, it has the right to appeal directly to the CBB against the action of the DAC, within 30 days of the action of the DAC.

      • CSD-3.6.6

        The CBB shall hear the appeal within two months from the date of filing the appeal.

      • CSD-3.6.7

        The orders passed by the DAC shall be binding on the member or depository participant and the clients.

      • CSD-3.6.8

        The information on all such actions under Paragraph CSD-3.6.4 shall be furnished to the CBB.

        Amended: April 2016

    • CSD-3.7 CSD-3.7 Specific Obligations of a Clearing House

      • Customers' Money and Assets Held by Licensed Clearing House

        • CSD-3.7.1

          Every licensed clearing house may accept money or assets deposited with or paid by its members in respect of or in relation to the market contracts of the customers of such members.

        • CSD-3.7.2

          A licensed clearing house, which accepts assets or money deposited with or paid to it by its members in respect of or in relation to contracts of the customers of such members, shall require each of its members to notify it in such manner as it may determine:

          (a) Whether a market contract is a contract of a customer of the member which has been cleared and settled by the member; and
          (b) Whether the money or assets being deposited with or paid to the licensed clearing house is, or are deposited or paid in respect of, or in relation to, a contract of a customer of the member.

        • CSD-3.7.3

          Where a member has notified the licensed clearing house under rule CSD-3.7.2 that the money or assets are deposited or paid in respect of, or in relation to a contract of a customer of the member, the licensed clearing house shall:

          (a) Account for all such money and assets on an aggregated basis, separate from all other money and assets received by the licensed clearing house from the member; and
          (b) Subject to Paragraphs CSD-3.8.1 and CSD-3.8.2, ensure that such money is deposited in a trust account, or such assets are deposited in a custody account, to be held for the benefit of the customers of the member and disposed of or used only in respect of or in relation to contracts of customers of the member.
          Amended: April 2016

      • Daily Computation of Customers' Money and Assets

        • CSD-3.7.4

          A licensed clearing house shall, at such intervals as the licensed clearing house determines appropriate, but no less frequently than once each business day, compute the total amount of customers' money and assets held by the licensed clearing house, including money that has been kept by the licensed clearing house.

        • CSD-3.7.5

          Any computation referred to in rule CSD-3.7.4 shall be completed no later than the commencement of the following trading session and shall be kept by the licensed clearing house together with all supporting data.

        • CSD-3.7.6

          For the purpose of this Module, a "business day" refers to any day in which the licensed clearing house is open for business.

      • Verification of Money and Assets Placed with Licensed Clearing House

        • CSD-3.7.7

          A licensed clearing house shall require its auditors to submit to the CBB a report within 3 months of the financial year-end or such other time as the CBB may require:

          (a) Certifying that the money and assets deposited by a member with the licensed clearing house in respect of, or in relation to, a contract of a customer of the member are:
          (i) Segregated from the other money and assets deposited by the member with the designated clearing house;
          (ii) Deposited in a trust account or custody account and are not combined with the money and assets of the licensed clearing house;
          (iii) Used as permitted under or in accordance with Section CSD-3.8; and
          (b) Setting out the amount, on an aggregated basis, of all money and assets deposited by the member with the licensed clearing house:
          (i) In respect of, or in relation to, a contract of a customer of the member; and
          (ii) In respect of, or in relation to, any other market contract.
          Amended: January 2022
          Amended: April 2016

        • CSD-3.7.8

          The business rules must support the segregation of customer assets or other arrangements for prioritizing claims in bankruptcy that serve to protect customers' holdings.

          Amended: April 2016

        • CSD-3.7.9

          The licensed central depository must enforce effective segregation of customer assets by custodians.

          Amended: April 2016

    • CSD-3.8 CSD-3.8 Permissible Use of Customers' Money and Assets by Licensed Clearing House

      • CSD-3.8.1

        Where a member of a licensed clearing house fails to meet its obligations to the licensed clearing house, the licensed clearing house may use any money or assets deposited or paid in respect of or in relation to contracts of customers of the member and held by the licensed clearing house, including any money deposited in the trust account and any assets deposited in the custody account referred to in rule CSD-3.7.3 (b), to meet the obligations of the member to the licensed clearing house, if the licensed clearing house has reasonable grounds for forming an opinion that:

        (a) The failure of the member to meet the member's obligations is directly attributable to the failure of any of the customers of the member to meet that customer's obligations under any market contract; and
        (b) The failure to use the money or assets to meet the obligations of the member may jeopardize the financial integrity of the licensed clearing house.

      • CSD-3.8.2

        A licensed clearing house shall notify the CBB prior to using any such money or assets in the circumstances specified in Paragraph CSD-3.8.1.

        Amended: April 2016

      • CSD-3.8.3

        A licensed clearing house shall, in so far as any money which has been deposited in a trust account, or any asset which has been deposited in a custody account, ensure that it is used only in respect of or in relation to contracts of a customer of the member; or in accordance with its business rules.

      • CSD-3.8.4

        Where a licensed clearing house uses money and assets in contravention of Paragraph CSD-3.8.3, it shall:

        (a) In the case of money, repay the money to the trust account referred to in rule CSD-3.7.3 (b); or
        (b) In the case of assets:
        i. Return the asset to the custody account referred to in rule CSD-3.7.3 (b); or
        ii. If the asset cannot be returned to the custody account, deposit an amount of money which is equivalent to the monetary value of the asset at the time of the contravention of rule CSD-3.7.3 (b) in a trust account referred to in rule CSD-3.7.3 (b) for the benefit of the customers of the member.
        Amended: April 2016

    • CSD-3.9 CSD-3.9 Permissible Investments of Customers' Money and Assets by Licensed Clearing House

      • CSD-3.9.1

        Subject to Paragraph CSD-3.9.2, a licensed clearing house may invest any money or assets deposited, or paid in respect of, or in relation to, contracts of customers of a member and held by the licensed clearing house in the course of its clearing or settlement activities, including any money deposited in the trust account in any security, instrument or other form of investment arrangement as the CBB may prescribe, which are low risk and which are not otherwise restricted by the CBB.

        Amended: April 2016

      • CSD-3.9.2

        A licensbed clearing house may invest the money deposited with or paid to it in the following classes:

        (a) Securities of the Government;
        (b) Bank deposits;
        (c) Transferrable negotiable certificates of deposit; and
        (d) Any other investment approved by the CBB.

      • CSD-3.9.3

        The licensed clearing house shall seek the prior written approval of the CBB before investing any such money or assets under Paragraph CSD-3.9.2.

        Amended: April 2016

      • CSD-3.9.4

        The licensed clearing house seeking the approval of the CBB under Paragraph CSD-3.9.2 shall satisfy the CBB:

        (a) That the management of the investments made by the licensed clearing house is consistent with the principles of preserving principal and maintaining sufficient liquidity to meet the obligations of customers of members of the licensed clearing house;
        (b) That prudential measures have been adopted to manage the risks in respect of the licensed clearing house's investment activities; and
        (c) Of any other matter which the CBB considers necessary for the sound management of the investments.
        Amended: April 2016

      • CSD-3.9.5

        The CBB may grant the approval referred to in Paragraph CSD-3.9.3, subject to such conditions or restrictions as the CBB may deem fit.

        Amended: April 2016

    • CSD-3.10 CSD-3.10 Specific Obligations of a Licensed Central Depository

      • Obligation to Maintain Certain Records

        • CSD-3.10.1

          A licensed central depository shall provide or cause to be provided all such facilities as may be necessary:

          (a) To facilitate efficient deposit of securities;
          (b) To facilitate registration of dealings in deposited securities;
          (c) To ensure the safe custody of certificates and other documents representing deposited securities;
          (d) To guard against falsification of any records or accounts required to be kept or maintained under the Module; and
          (e) To establish a proper and efficient system for the verification, inspection, identification and recording of all securities deposited with the central depository.
          Amended: April 2016

        • CSD-3.10.2

          Every licensed central depository shall maintain the following records and documents, mainly:

          (a) Records of securities dematerialised and re-materialised;
          (b) The names of the transferor, transferee, and the dates of transfer of securities;
          (c) A register and an index of beneficial owners;
          (d) Records of instructions received from and sent to depository participants, issuers, issuers' agents and beneficial owners; and
          (e) Records of approval, notice, entry and cancellation of pledge or charge, as the case may be.
          Amended: April 2016

        • CSD-3.10.3

          A licensed central depository shall also keep such records and accounts, in sufficient detail, so as to show particulars of:

          (a) All monies received or paid by the licensed central depository, including dividends received in respect of any deposited securities and the disbursement of such dividends to depositors;
          (b) All income received from commissions, fees, charges and other sources and all expenses, commissions and other payments made or paid by the licensed central depository;
          (c) All assets and liabilities (including contingent liabilities) of the licensed central depository;
          (d) All deposited securities and particulars showing for whom the certificates and the instruments of transfer in respect of such certificates are held;
          (e) All purchases and sales of deposited securities and particulars of other dealings made in respect thereof, the charges and credits arising therefrom, the identity of the buyer and seller of each of those deposited securities or, in the case of other dealings, the identity of the persons executing such dealings and the person in whose favour such dealings are executed as the case may be.
          Amended: April 2016

        • CSD-3.10.4

          An entry in the records or accounts shall specify the date and time of making such entry and, in the case of an entry made by a person, the identity of such person.

        • CSD-3.10.5

          All such records to be maintained for a minimum period of 10 years as required under the CBB law.

    • CSD-3.11 CSD-3.11 Duty Not to Acquire or Deal in Deposited Securities by a Licensed Central Depository

      • CSD-3.11.1

        No licensed central depository shall purchase, acquire, or otherwise deal in, any deposited security as principal other than for such purpose and in such manner as may be permitted by the CBB under this Module.

        Amended: April 2016

      • CSD-3.11.2

        A licensed central depository which contravenes the aforesaid provision shall be guilty of an offence and shall be subject to such penalty as the CBB may choose to levy.

        Amended: April 2016