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  • Chapter 6

    • Article 22 Brokers' Access to the Central Depository System

      1. The broker may access the part accessible to him in the Central Depository System during the hours fixed by the Exchange to perform the following:
      (a) Open investors accounts for his clients.
      (b) Enquire about the movement and balances of the investors who deposit their securities through him.
      (c) To review any other information about his clients as may be authorized by the Unit.
      2. A broker should not disclose the secret number granted to him to access the Clearing System to any other person. Such broker shall bear all liabilities and consequences resulting from violation of this provision.
      3. The broker undertakes to maintain the confidentiality of the Central Depository System, refrain from abuse of the system, maintain his secret number, define the authority of his staff and remind them of the importance of the confidentiality of the system and related laws.

    • Article 23 Financial Settlements

      1. Settlement of transactions executed on the Exchange shall be carried out within the following two days trading (T+2).
      2. All transactions concluded at the Exchange through the electronic trading system shall be transferred automatically to the Clearing system, to complete the clearing operations and payment of the purchased securities value through the Settlement Bank within the two days following the trading (T+2), and transfer the ownership of the securities simultaneously with payment of net cash balances.
      3. The net to pay or receive amounts to the broker shall be calculated within half an hour after the trading session, and the report shall be sent to the Settlement Bank on the same day of trading.
      4. The broker shall pay the net to pay amount due from him according to the 'net to pay amount statement' issued by the Clearing system not later than 09:30 a.m. on settlement day (T+2).
      5. The Settlement Bank shall, upon the instructions of the Unit, pay the amount stated in the 'net to pay amount statement' in the relevant broker's account not later than 10:00 a.m. on settlement day (T+2).
      6. The Settlement Bank shall send to the Unit on (T+2) a report to confirm completion of settlement and clearing of the transactions which should be settled by the brokers before the commencement of the trading session.

    • Article 24 Debentures Settlement

      1. Unless otherwise provided in the debentures prospectus, debentures shall be settled in the Exchange with regard to their maturity and settlement terms, in the manner applicable to other securities.
      2. The settlement amount shall include the value of the transaction and accumulated interest up to the settlement date (T+2), in accordance with ISMA Regulations.
      3. Accumulated interest shall be calculated up to the settlement date, in accordance with the mechanism and procedures issued by ISMA.
      4. Commission on trading of debentures shall be calculated on the basis of the value of the traded debentures only. Accumulated interest shall not be taken into consideration in calculation of the commission.
      5. Accumulated interest shall be calculated on the basis of the nominal value of the debenture, and interest shall accumulate as of the date of the last payment of interest amount until the date of the transaction.

    • Article 25 Receipt of Amounts due from Brokers

      1. The brokers shall deposit amounts due from them in the Settlement Bank not later than 09:30 a.m. on the settlement day (T+2).
      2. Amounts due from brokers deposited in the accounts with the Settlement Bank on the settlement day (T+2) shall correspond with the amounts stated in the net receivable amount statement issued by the Clearing system.
      3. The broker shall pay amounts due from him by transferring the funds to the BSE's clearing account with the Settlement Bank.

    • Article 26 Payment of Amounts due to Brokers

      4. The Exchange shall pay the amounts due to brokers through the Settlement Bank not later than 10:00 a.m. on the settlement day (T+2).
      5. Amounts payable to the brokers (creditors) should correspond exactly to the amounts stated in the net payable amounts statement issued by the Clearing System.
      6. The Settlement Bank shall, upon the instructions of the Exchange, pay the amounts payable to the brokers (creditors) by transfer of the funds from the clearing account of the Exchange to the relevant brokers account(s) with the Settlement Bank.

    • Article 27 Participants Contribution to the Guarantee Fund

      1. The broker must, upon admission to the membership of the Clearing, Settlement and Central Depository System, pay the prescribed minimum contribution in the joint Guarantee Contribution Fund account with the Settlement Bank.
      2. Amounts relating to the brokers' contribution in the Guarantee Fund should be kept separately from the Exchange assets.
      3. Every broker must contribute to the Guarantee Fund a fixed amount of money, which is currently as follows, through the term of his membership with the Clearing, Settlement and Central Depository System:
      (a) A minimum of BD50,000 (Fifty Thousand Bahraini Dinars) for participating brokers in category (A), established in accordance with the provisions of Article 16 (Secondly) of the Exchange's Internal Regulations and the Chairman of the Exchange's Resolution No. 2/95.
      (b) A minimum amount of BD25,000 (Twenty Five Thousand Bahraini Dinars) for participating brokers other than category (A), established in accordance with the provision of Article 16 (Firstly) of the Exchange's Internal Regulations.

    • Article 28 Utilisation of the Guarantee Fund Amount

      1. If any participating broker fails to pay the net balance amount due from him to the Exchange at 09:30 a.m. on settlement day (T+2), the shortfall shall be deducted from the Guarantee Fund account and shall be paid to the Exchange's clearing account.
      2. If the unsatisfied obligations in connection with the net payable balance amount exceed the broker's contribution, the shortfall shall be proportionately distributed amongst other contributors to the Fund, based on the proportion of their respective contributions and the said amount shall be deposited in the Unit's clearing account.
      3. The participating broker who fails to pay the net payable balance amount due from him, shall be liable to the Exchange to repay the amount charged to the Guarantee Fund account and all costs associated with the use of the Guarantee Fund as may be determined by the Exchange.
      4. If the participating broker fails to pay the net payable balance amount due from him by 09:30 a.m. on the settlement day, the Exchange may suspend the provision of the following services to the defaulting broker, and the suspension of such services shall continue until payment of the amount mentioned in paragraph (2) above.
      (a) All services relating to trading of securities in general.
      (b) All services and activities relating to Clearing, Settlement and Central Depository operations. Services relating to the broker's obligations pending settlement shall be excepted.

    • Article 29 Disposal of Securities Purchased for the Broker

      1. To guarantee payment of the net balance due from the broker, the Exchange shall be entitled to dispose of all securities purchased by the broker and such right of disposal shall be retained by the Exchange until such time when all obligations of the broker are satisfied.
      2. If the broker fails to pay the amount charged against him in the Guarantee Fund account and all other costs associated with the Fund's balance, the Exchange may authorize any other broker to sell all or any part of the securities mentioned in paragraph (1) above and the sale shall be carried out for the account of the Exchange, without notifying the relevant participating broker with the sale transaction. The proceeds of sale shall (after deduction of commission, costs, fees and expenses) be paid to the Guarantee Fund account.

    • Article 30 Participating Broker's Rights in the Event of Default by the Client

      To guarantee payment of amounts due to the participating broker from his clients for providing brokerage services in connection with the clients' securities, the broker may object to the transfer of purchased securities from the clients account with the broker to his account with another broker. The broker shall be entitled on the third day after trading (T+3) to request the resale of the relevant securities to recover amounts due to him, provided that the resale shall be effected subject to the Exchange's approval and through a different broker, in accordance with the procedures laid down by Resolution No. 3/2000 on Clearance, Settlement and Central Depository Rules at the Exchange.

    • Article 31 Replenishment of the Guarantee Fund Amount by the Defaulting Participating Broker

      1. The defaulting broker who fails to pay the net payable balance amount due from him by 09:30 a.m. on settlement day (T+2), and causes the Exchange to satisfy his obligations to other brokers participating in the Guarantee Fund account, shall undertake to replenish the Guarantee Fund account with the amount drawn from the Fund by the Exchange to cover his debit balance.
      2. If it becomes evident to the Exchange by 09:45 a.m. on T+3 that the broker has failed to repay the amount drawn from the Guarantee Fund account to settle the broker's debit balance, the Exchange may instruct the defaulting broker to sell the purchased securities in absolute secrecy by another broker.
      3. If the defaulting purchaser's broker fails to sell the purchased securities through the authorized broker on T+3, the Exchange may allow the defaulting broker one additional day to sell the relevant securities on T+4.
      4. If the defaulting broker fails to sell the purchased securities on T+4, the Exchange may instruct the Trading and Members Affairs Units to sell the relevant securities by public auction on T+5.
      5. If it becomes evident to the Unit by 09:30 a.m. on T+6 that the proceeds of the sale of the securities according to this Article are insufficient to cover the amount required to supplement the Guarantee Fund account, the Unit shall require the defaulting broker to pay the balance, provided that any surplus amount (if any) shall be paid to the relevant investor after deduction of all expenses and fines payable by the defaulting broker.

    • Article 32 Replenishment of the Guarantee Fund Amount by Other Brokers

      1. If it becomes evident to the Unit by 09:00 a.m. on T+7 that the defaulting broker has failed to pay the balance referred to in Article (31-5) of this Resolution and that the Guarantee Fund balance is insufficient, the Exchange shall immediately require all participating brokers to inject funds into the Guarantee Fund account, in addition to notifying the Settlement Bank to enter all amounts received into the Guarantee Fund account.
      2. The Unit shall determine the amount required to be transferred by each broker according to paragraph (1) above to the Guarantee Fund account, in accordance with the following formula:

      Total net value (balance)
      _________________________________________
      Number of brokers - Number of defaulting brokers
      3. The Unit shall, immediately upon calculation of the amounts to be transferred to the Guarantee Fund account, send a written notification to all participating brokers fixing the amount payable by each broker and the method used in the calculation of the amount. The participating brokers shall issue instructions to the Settlement Bank to deposit the said amounts in the Guarantee Fund account, no later than the day following the said notification date.

    • Article 33 Suspension of Services Provided by the Exchange To Defaulting Participating Brokers

      1. If any participating broker fails to pay the net payable balance amount due from him by 09:30 a.m. on the settlement day (T+2), the Exchange may, according to Article (13) of the Resolution No. 4/2000 on the Establishment of the Guarantee Fund, suspend the following services to the defaulting broker pending payment of the amount due:
      (a) Any service relating to trading of securities provided by the Exchange in general.
      (b) All services and activities relating to clearing and settlement, with the exception of services associated with any pending settlement obligations by the defaulting broker.
      2. If the defaulting broker settles the net payable balance amount due from him, the Exchange may resume provision of services referred to in paragraph (1) above to the defaulting broker and the other relevant parties shall be immediately notified thereof.
      3. The Exchange may, at its own discretion, apply the provisions of Article (26) of Resolution No. 3/2000 on the Clearing, Settlement, Registry and Central Depository Rules to the participating broker who defaults in the payment of the net payable balance amount due from him for more than twice in one year.

    • Article 34 Disposal of Securities Purchased for the Account of the Participating Broker

      1. To secure payment of the net payable balance amount due from the defaulting broker, the Exchange may dispose of all or part of securities purchased by the defaulting broker, provided that the right of disposal shall be retained by the Exchange until such time when the defaulting broker shall pay his obligations for the settlement of the relevant transaction.
      2. The proceeds of resale of purchased securities shall be transferred to the Exchange's operating account and the Unit shall, upon receipt of such amount, issue instructions to the Settlement Bank to deduct the amount pertaining to the proceeds of sale of the purchased securities from the Exchange's operating account and credit the amount, after deduction of any commission, cost or expense due to the Exchange and the Settlement Bank.

    • Article 35 Suspension of the Exchange's Services to the Defaulting Participating Broker

      1. The Exchange may suspend trading, clearing and settlement services provided by the Exchange to the participating broker in the following circumstances:
      (a) If the broker fails by 09:30 a.m. on the settlement day (T+2) to pay his debit balance in the Exchange account with the Settlement Bank.
      (b) If the broker fails to pay his initial contribution or any additional contribution in the Guarantee Fund's account within 5 days from the date of receipt of the payment memorandum issued by the Unit.
      (c) If the broker fails to transfer the amount due from him to replenish the Guarantee Fund account, in accordance with Article (31) of these Procedures.
      2. Where the Exchange terminates the services provided by it to the broker, in accordance with Article (1) above, the Unit shall return to the broker his contribution in the Guarantee Fund and any accruing interest on such amount, within 15 days from the date of termination of services provided by the Exchange to the broker, provided that the broker shall pay all his obligations to the Exchange and the Settlement Bank.

    • Article 36 Suspension of Trading, Clearing and Settlement Services From All Participating Brokers

      1. If it becomes evident to the Exchange that the total balance of the Guarantee Contribution Fund has been reduced to less than 50% of its original balance, due to the arrears in the net debit balances of one or more brokers, or due to default in the transfer of funds to the Guarantee Contribution Fund, the Exchange may temporarily suspend the trading, clearing and settlement services from all brokers.
      2. The Exchange may, in accordance with the provisions of Article (1) above, require all participating brokers to contribute additional amounts in proportion to their contributions in the Guarantee Fund, and credit such amounts to the Guarantee Fund account with the Settlement Bank.
      3. The Exchange shall resume provision of services to the brokers who pay the amount required to replenish the Guarantee Fund and the Unit shall immediately notify the relevant parties of such resumption of services.

    • Article 37 Liquidity Reserve

      1. The liquidity reserve account shall be used where the value of the transaction exceeds the permissible trading limit for any broker, according to the formula provided for in Article (11) of the Resolution No. 4/2000 on the Establishment of the Guarantee Contribution Fund, provided that the value of the relevant transaction shall not exceed the Guarantee Fund balance at the time of the application.
      2. The broker, who wishes to increase his permissible limit of trading according to Article (11) of Resolution No. 4/2000 on the Establishment of the Guarantee Fund, shall submit an application to the designated official at the Exchange, and the Exchange may accept or reject the application at its own discretion.
      3. The Exchange may, on reviewing the application submitted by the participating broker, give sufficient consideration to the factors provided for in Articles (3-11) of the Resolution No. 4/2000 on the Establishment of the Guarantee Contribution Fund, and in the event of rejection of the application, the Exchange shall notify the broker of the reasons for the rejection.
      4. The broker shall, upon acceptance of his application, deposit the total value of the transaction in the liquidity reserve account not later than 09:30 a.m. on (T+1).
      5. The broker shall be deemed to have failed to pay the value of the transaction on the liquidity reserve account by 09:30 a.m. on T+1, if no confirmation is received by the Unit from the Settlement Bank, stating that the broker has paid the claimed amount to the liquidity reserve account at the time fixed by Article (4) above.
      6. The Exchange may prevent the participating broker who fails in the payment of the value of the transaction in the liquidity reserve account by 09:30 a.m. on T+1 from entering the Trading Floor, suspend the trading, clearing and settlement services provided to such broker, and may order the sale of the purchased shares through any other broker on T+2.
      7. In the event of application of paragraph (6) above, the procedures for the sale of shares provided for in Article (31) above shall be followed.

    • Article 38 Execution of Transactions Whose Value Exceeds the Guarantee Fund Balance

      1. Notwithstanding the provisions of Article (37) of these procedures, the participating broker must provide the value of the deal in cash, or provide any security that would be acceptable to the Exchange where the value of the transaction placed for execution exceeds the Guarantee Fund balance at the time of application.
      2. The security referred to in paragraph (1) above shall be provided to the Exchange and may be deposited in the liquidity reserve account prior to the execution of the transaction. The broker may cancel or modify the said security if he sells the purchased shares in the same trading session.

    • Article 39 Parties Authorized to Provide Custodial Services at the Exchange

      The securities custodial services shall be provided at the Exchange by brokerage companies licensed pursuant to the Minister of Commerce and Agriculture's Resolution No. 2/1995 on the Services Provided by Brokerage Companies at the Exchange.

      The Exchange may permit banks and other financial institutions to provide such services, subject to obtaining the prior approval of the Bahrain Monetary Agency.

    • Article 40 Participation of Banks and Financial Institutions in the Membership of the Central Depository

      Banks and financial institutions wishing to provide securities custodial services in the Exchange may participate in the membership of the Central Depository. They should submit their applications to the Exchange, accompanied by the following documents:

      1. Approval of the Bahrain Monetary Agency.
      2. Copy of the Memorandum and Articles of Association.
      3. Copy of the Commercial Registration.
      4. Copy of its Board of Director's Resolution approving the provision of securities' custodial services at the Exchange.

    • Article 41 Services Provided By Securities Custodians

      The custodian shall directly provide the following services in the Central Depository on behalf of his clients:

      1. Obtain an Investor's Number for his clients.
      2. Open securities accounts for his clients.
      3. Deposit securities for his clients.
      4. Transfer securities from his clients' accounts with brokers, to their accounts with other brokers.
      5. Transfer ownership of his clients' securities as transaction exempted from trading at the Exchange.
      6. Mortgage and release his clients' mortgaged securities.
      7. Amend and update his clients' particulars.
      8. Apply for obtaining statements of his clients' accounts, reports and letters issued by the Central Depository for them.
      9. Any other services approved by the Exchange.

    • Article 42 Provision of Central Depository Services Contract

      The services provided for in Article (41) above shall be provided by a contract to be made with the beneficial owner, where rights and obligations of the two parties shall be defined, provided that the contract shall include, inter alia, the following:

      1. The scope of services provided by the participating member to his clients and the commission payable to him for providing such services.
      2. Conditions relating to the management of the clients' securities accounts.
      3. Attendance of general meetings and voting on behalf of the clients.
      4. Reports and statements of accounts to be submitted to the client and the time and manner in which they will be presented. The custodian should inform his clients of the securities deposited in his account with the Central Depository within three days from the date of deposit.

    • Article 43 Custodian Responsibilities

      The custodians shall dispose of the securities deposited in their names on behalf of their clients and shall bear all legal and financial consequences resulting from their actions.

    • Article 44 Execution of Sale and Purchase Orders Issued to the Custodians

      The custodians who are not brokers shall carry out orders issued to them from their clients for the sale and purchase of securities through approved brokerage companies and brokerage offices at the Exchange.

    • Article 45 Clients Accounts

      A client should not open more than one account with a broker if he has opened a previous account in his name with the same broker by a custodian appointed by him.

    • Article 46 Transactions Exempted From Trading

      The Unit may transfer the ownership of securities as transactions exempted from trading, upon the request of the custodian, according to Article (36) of the Internal Regulations as amended.

    • Article 47 Amendment of Procedures

      The Exchange may, from time-to-time, amend these procedures, provided that brokers and the members participating in the Central Depository System are notified of such amendment upon the issuance thereof.