11.—(1) This paragraph applies as regards contracts falling within section 155(2)(a) of the Companies Act.
(2) The rules mentioned in paragraph 10 must provide—
(a)for all rights and liabilities between those party as principal to unsettled market contracts to which the defaulter is party as principal to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the rules;
(b)for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum; and
(c)for the certification by or on behalf of the exchange of the net sum payable or, as the case may be, of the fact that no sum is payable.
(3) The reference in sub-paragraph (2) to rights and liabilities between those party as principal to unsettled market contracts does not include rights and liabilities—
(a)in respect of margin; or
(b)arising out of a failure to perform a market contract.
(4) The rules may make the same or similar provision, in relation to non-members designated in accordance with the procedures mentioned in sub-paragraph (5), as in relation to members of the exchange.
(5) If such provision is made as is mentioned in sub-paragraph (4), the exchange must have adequate procedures—
(a)for designating the persons, or descriptions of person, in respect of whom action may be taken;
(b)for keeping under review the question which persons or descriptions of person should be or remain so designated; and
(c)for withdrawing such designation.
(6) The procedures must be designed to secure that—
(a)a person is not, or does not remain, designated if failure by him to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market; and
(b)a description of persons is not, or does not remain, designated if failure by a person of that description to meet his obligations in respect of one or more market contracts would be unlikely adversely to affect the operation of the market.
(7) The exchange must have adequate arrangements—
(a)for bringing a designation or withdrawal of designation to the attention of the person or description of persons concerned; and
(b)where a description of persons is designated, or the designation of a description of persons is withdrawn, for ascertaining which persons fall within that description.
12.—(1) This paragraph applies as regards contracts falling within section 155(2)(b) of the Companies Act.
(2) The rules mentioned in paragraph 10 must provide—
(a)for all rights and liabilities of the defaulter under or in respect of unsettled market contracts to be discharged and for there to be paid by or to the defaulter such sum of money (if any) as may be determined in accordance with the rules;
(b)for the sums so payable by or to the defaulter in respect of different contracts to be aggregated or set off so as to produce a net sum;
(c)for that sum—
(i)if payable by the defaulter to the exchange, to be set off against any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property) so as to produce a further net sum;
(ii)if payable by the exchange to the defaulter, to be aggregated with any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property); and
(d)for the certification by or on behalf of the exchange of the sum finally payable or, as the case may be, of the fact that no sum is payable.
(3) The reference in sub-paragraph (2) to the rights and liabilities of a defaulter under or in respect of an unsettled market contract includes (without prejudice to the generality of that provision) rights and liabilities arising in consequence of action taken under provisions of the rules authorising—
(a)the effecting by the exchange of corresponding contracts in relation to unsettled market contracts to which the defaulter is party;
(b)the transfer of the defaulter’s position under an unsettled market contract to another member of the exchange;
(c)the exercise by the exchange of any option granted by an unsettled market contract.
(4) A “corresponding contract” means a contract on the same terms (except as to price or premium) as the market contract but under which the person who is the buyer under the market contract agrees to sell and the person who is the seller under the market contract agrees to buy.
(5) Sub-paragraph (4) applies with any necessary modifications in relation to a market contract which is not an agreement to sell.
(6) The reference in sub-paragraph (2) to the rights and liabilities of a defaulter under or in respect of an unsettled market contract does not include, where he acts as agent, rights or liabilities of his arising out of the relationship of principal and agent.