TNAG-1764-FCO40-2518-Hong-Kong-stock-market-and-exchange-rate-1988 — Page 46

23.

the clearing house should be subject to authorisation and supervision by the regulatory authority. 5.128)

the clearing house should :-

(para.

24.

(a)

apply membership requirements including minimum and risk-based capital levels;

(b)

25.

(c)

(d)

(e)

(£)

monitor members on an intra-day and day-to-day basis and ensure that there are regular thorough audits of a member's financial and operational position;

have lien over securities held in the system;

establish a Brokers' Fund;

mark-to-market each member's open unsettled positions on a daily basis, and in fast markets on an intra-day basis; and

take out insurance against a level of defaulters exceeding its ability to recover its losses from its members.

(para. 5.132)

the clearing house should put in place systems and controls to ensure that it avoids releasing securities or cash before the counterparty payment or delivery is received. (para. 5.137)

26. the clearing house should :-

27.

(a)

(b)

(c)

apply membership requirements to non-brokers;

take a charge over securities if it is directly exposed to credit risk or if it acts as principal in lending and borrowing stock; and

consider establishing a second fund to protect itself, brokers and their clients against defaults. (para. 5.138)

a single organisation (the clearing house) should be responsible for running the central clearing and settlement system. (para. 5.140)

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