3The exchange must have adequate arrangements for securing that—
(a)parties to unsettled market contracts with a defaulter acting as principal are notified as soon as reasonably practicable of the default and of any decision taken under the rules in relation to contracts to which they are a party; and
(b)parties to unsettled market contracts with a defaulter acting as agent and the defaulter’s principals are notified as soon as reasonably practicable of the default and of the identity of the other party to the contract.
Commencement Information
I1Sch. 21 wholly in force at 25.4.1991; Sch. 21 in force on 25.3.1991 insofar as is necessary to enable regulations to be made under para. 2(3) and wholly in force at 25.4.1991 see s. 215(2) and S.I. 1991/488, art. 2(2), 1991/878, art. 2, Sch.
1(1)The exchange must have default rules which, in the event of a member of the exchange appearing to be unable to meet his obligations in respect of one or more market contracts, enable action to be taken in respect of unsettled market contracts to which he is a party.
(2)The rules may authorise the taking of the same or similar action in relation to a member who appears to be likely to become unable to meet his obligations in respect of one or more market contracts.
(3)The rules must enable action to be taken in respect of all unsettled market contracts, other than those entered into by a recognised clearing house for the purposes of or in connection with the provision of clearing services for the exchange.
(4)As regards contracts entered into by the exchange for the purposes of or in connection with the provision of its own clearing services, the rules must contain provision corresponding to that required by paragraphs 9 to 11 below in the case of a UK clearing house.
(5)As regards other contracts the rules must contain provision complying with paragraphs 2 and 3 below.
Commencement Information
2(1)The rules must provide 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.
(2)The rules must further provide—
(a)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
(b)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 rules may make special provision with respect to, or exclude from the provisions required by sub-paragraphs (1) and (2), contracts of any description prescribed for the purposes of this sub-paragraph by regulations made by the Secretary of State.
F1(4)The reference in sub-paragraph (1) 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.
Textual Amendments
F1Schedule 21, para. 2(4) added by S.I. 1991/880, reg. 17
Commencement Information
I3Sch. 21 wholly in force at 25.4.1991; Sch. 21 in force on 25.3.1991 insofar as is necessary to enable regulations to be made under para. 2(3) and wholly in force at 25.4.1991 see s. 215(2) and S.I. 1991/488, art. 2(2), 1991/878, art. 2, Sch.