Recognition requirements for central counterparties5A

Parts 5 and 6 of the Schedule set out recognition requirements applying to bodies in respect of which a recognition order has been made under section 290(1)(b) of the Act, or which have applied for such an order under section 288(1) of the Act.

PART 5Recognition requirements for central counterparties

Requirements of the EMIR regulation

29

A central counterparty providing clearing services must meet the requirements set out in the EMIR regulation (within the meaning of section 313 of the Act).

Market abuse or financial crime

30

The central counterparty must ensure that appropriate measures are adopted to reduce the extent to which its facilities can be used for a purpose connected with market abuse or financial crime, and to facilitate their detection and monitor their incidence.

Access to central counterparty, clearing and settlement facilities

31

1

The central counterparty must make transparent and non-discriminatory rules, based on objective criteria, governing access to central counterparty, clearing or settlement facilities provided by it.

2

The rules under sub-paragraph (1) must enable an investment firm or a credit institution authorised by the competent authority of another EEA State (including a branch established in the United Kingdom of such a firm or institution) to have access to those facilities on the same terms as a UK firm for the purposes of finalising or arranging the finalisation of transactions in financial instruments.

3

The central counterparty may refuse access to those facilities on legitimate commercial grounds.

PART 6Recognition requirements applying to central counterparties: default rules

Introduction

32

This Part sets out recognition requirements which apply to the default rules of a central counterparty.

Interpretation

33

In this Part—

a

“assets” has the meaning given by Article 39(10) of the EMIR Level 1 Regulation;

b

“clearing member” has the meaning given by Article 2(14) of the EMIR Level 1 Regulation;

c

“client” has the meaning given by section 190(1) of the Companies Act 198952;

d

“default rules” has the meaning given by section 188(1) of the Companies Act 198953;

e

“defaulting” has the meaning given by section 188(2) of the Companies Act 1989;

f

“EMIR Level 1 Regulation” means Regulation (EU) No 648/2012 of 4 July 2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories;

g

“indirect client” has the meaning given by section 190(1) of the Companies Act 1989;

h

“position” has the has the meaning given by section 190(1) of the Companies Act 1989.

Portability of accounts: default rules going beyond requirements of EMIR

34

1

Sub-paragraph (2) applies to any provisions of the default rules which—

a

provide for the transfer of the positions or assets of a defaulting clearing member;

b

are not necessary for the purposes of complying with the minimum requirements of Articles 48(5) and (6) of the EMIR Level 1 Regulation; and

c

may be relevant to a question falling to be determined in accordance with the law of a part of the United Kingdom.

2

Where this sub-paragraph applies to any provisions of the default rules, the default rules must—

a

include a summary of how a transfer under the provisions will work and its main legal implications (including information on the applicable insolvency law in the relevant jurisdictions), or a clear and prominent reference to the place where such a summary can be directly and easily accessed by the public;

b

ensure that a position or asset cannot be transferred under the provisions without the consent of—

i

the person for whose account the position or asset is held; and

ii

the clearing member to whom the position or asset is transferred;

c

ensure that any transfer under the provisions is fair to clients and indirect clients; and

d

specify a pre-defined transfer period within which a transfer under the provisions must take place.

3

For the purposes of sub-paragraph (2)(a), a clear and prominent reference to a place where a summary can be directly and easily accessed by the public may be provided by way of a direct internet link to an appropriate internet site.

4

For the purposes of sub-paragraph (2)(b), consent may be given in advance of a default (such as by means of suitable provision in the default rules).

Liquidation of accounts

35

The default rules must contain provision ensuring that, after the liquidation of an account and the return of any collateral to clients or to a clearing member for the account of the clearing member’s clients, the amount of any other net sum payable or, as the case may be, the fact that no other net sum is payable, in respect of that account will be certified for the purposes of section 163 of the Companies Act 198954.