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Financial Markets Act, 2012 (Act No. 19 of 2012)

Regulations

Financial Markets Act Regulations

Chapter VI : Central Counterparties

32. Segregation and portability

 

(1) The clearing house rules for a central counterparty must, in addition to the matters set out in section 53(2) provide—
(a) for arrangements for the segregation and portability of funds and securities held as collateral that effectively protect a clearing member’s clients’ positions and related collateral from the default or insolvency of that clearing member;
(b) for a clearing member to employ an account structure that enables it to readily identify positions of a clearing member’s clients and to segregate related collateral;
(c) for clearing members to maintain client positions and collateral in individual client accounts or in omnibus client accounts;
(d) that clearing members offer their clients, at least, the choice between omnibus client segregation and individual client segregation and inform them of the costs and level of protection referred to in subregulation (3)(e) associated with each option; and that when a client chooses individual client segregation, any margin in excess of the client’s requirement must be posted to the central counterparty and distinguished from the margin of other clients or clearing members and may not be exposed to losses connected to positions recorded in another account;
(e) for the central counterparty to structure its portability arrangements in a way that makes it highly likely that the positions and collateral of a defaulting clearing member’s clients will be transferred to one or more other clearing members;
(f) that a clearing member discloses to its clients whether client collateral is protected on an individual or omnibus basis;
(g) that a clearing member discloses to its clients any constraints, such as legal or operational constraints, that may impair its ability to segregate or port the clients’ positions and related collateral.

 

(2) Any rules made in terms of subregulation (1)(a) and (1)(d) must have due regard for, and not be in conflict with, any applicable depository rules.

 

(3) A central counterparty must—
(a) keep separate records and accounts that will enable it, at any time and without delay, to distinguish in accounts with the central counterparty the assets and positions held for the account of one clearing member from the assets and positions held for the account of any other clearing member and from its own assets;
(b) offer to keep separate records and accounts enabling each clearing member to distinguish in accounts with the central counterparty the assets and positions of that clearing member from those held for the accounts of its clients (‘omnibus client segregation’);
(c) offer to keep separate records and accounts enabling each clearing member to distinguish in accounts with the central counterparty the assets and positions held for the account of a client from those held for the account of other clients (‘individual client segregation’); and
(d) upon request, offer clearing members the possibility to open more accounts in their own name or for the account of their clients;
(e) publicly disclose the levels of protection and the costs associated with the different levels of segregation that they provide and must perform those functions on reasonable commercial terms, which disclosure must include details of the different levels of segregation including a description of the main legal implications of the respective levels of segregation offered including information on the applicable insolvency law.

 

(4) The requirement to distinguish assets and positions with the central counterparty in accounts is satisfied where—
(a) the assets and positions are recorded in separate accounts;
(b) the netting of positions recorded on different accounts is prevented; and
(c) the assets covering the positions recorded in an account are not exposed to losses connected to positions recorded in another account.