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  • 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