Comment or recommendation
21. Paragraph 7.45 "We therefore recommend
that the Clearing House should cover or lay off its risk so that it is not significantly exposed itself and should only accept risks to the extent that it has resources available to cover them."
Action taken by the HKFE
this is achieved is by a novation of each contract when it is registered in order to create two new contracts in respect of which the Clearing House acts as counterparty. particular, please see the provisions of Rule 310.
In
Since the Clearing House is a counterparty to every trade, it is liable as principal on every contract. The provisions of Clause 309 make it clear that that liability is limited to the amounts which the Clearing House can expect to receive from brokers on the performance of their contracts and all the amounts standing to the credit of a Reserve Fund created for the purpose.
The Reserve Fund will comprise monies earmarked to it by the Clearing House (out of deposits from Members and the purchase price payable in respect of the acquisition of new Memberships), insurance policies and any banking or other credit facilities made available for the purpose.
It
is noted that it is recommended that the Clearing House should only accept risks to the extent that it has resources available to cover them. It is felt that it would not be prudent to include a rule which provides that accepting risk where resources are not available
amounts to a breach of the Rules by the Clearing House since this might tend to expose the Clearing House to attack needlessly. The evaluation of whether or not to accept risk should rest with the management of the Clearing House. Day-to-day management will rest with the General
Manager/Managing Director who will be answerable to the Board of the Clearing House.
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