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PART VE+W+SMARKET CHARGES

Interpretation of Part VE+W+S

7.  In this Part of these Regulations, unless the context otherwise requires—

“the Bank” means the Bank of England;

“business day” has the same meaning as in section 167(3) of the Act;

F1...

“CGO Service” means the computer-based system established by the Bank and The Stock Exchange to facilitate the transfer of specified securities;

“CGO Service charge” means a charge of the kind described in section 173(1)(c) of the Act;

“CGO Service member” means a person who is entitled by contract with [F2CRESTCo Limited (which is now responsible for operating the CGO Service)] to use the CGO Service;

[F3“clearing member” has the same meaning as in section 190(1) of the Act;]

[F3“client” has the same meaning as in section 190(1) of the Act;]

[F4“default fund contribution” has the same meaning as in section 188(3A) of the Act;]

F5...

“former CGO Service member” means a person whose entitlement F6... to use the CGO Service has been terminated or suspended;

[F3“indirect client” has the same meaning as in section 190(1) of the Act;]

“market charge” means a charge which is a market charge for the purposes of Part VII of the Act;

[F7“recognised body” has the same meaning as in section 190(1) of the Act;]

[F3“recognised central counterparty” has the same meaning as in section 190(1) of the Act;]

[F7“recognised CSD” has the same meaning as in section 190(1) of the Act;]

“settlement bank” means a person who has agreed under a contract with [F8CRESTCo Limited (which is now responsible for operating the CGO Service)] to make payments of the kind mentioned in section 173(1)(c) of the Act;

“specified securities” has the meaning given in section 173(3) of the Act;

“Talisman” means The Stock Exchange settlement system known as Talisman;

“Talisman charge” means a charge granted in favour of The Stock Exchange over property credited to an account within Talisman maintained in the name of the chargor in respect of certain property beneficially owned by the chargor; F9...

[F7“third country CSD” has the same meaning as in section 190(1) of the Act; and]

“transfer” when used in relation to specified securities has the meaning given in section 173(3) of the Act.

Textual Amendments

Commencement Information

I1Reg. 7 in force at 25.4.1991, see reg. 1

Charges on land or any interest in land not to be treated as market chargesE+W+S

8.—(1) No charge, whether fixed or floating, shall be treated as a market charge to the extent that it is a charge on land or any interest in land.

(2) For the purposes of paragraph (1), a charge on a debenture forming part of an issue or series shall not be treated as a charge on land or any interest in land by reason of the fact that the debenture is secured by a charge on land or any interest in land.

Commencement Information

I2Reg. 8 in force at 25.4.1991, see reg. 1

Amendments to section 173 of Act concerning certain charges granted in favour of The Stock Exchange and certain charges securing debts and liabilities arising in connection with allotment of specified securitiesE+W+S

9.  Section 173 of the Act (market charges) shall be amended—

(a)by inserting the following paragraph after section 173(1)(a)—

“(aa)in favour of The Stock Exchange, for the purpose of securing debts or liabilities arising in connection with short term certificates;”;

(b)by inserting, in section 173(1)(c), the words “or allotment” after the word “transfer” and the words “or allottee” after the word “transferee”;

(c)by inserting “(aa),” after the words “subsection (1)(a)” in section 173(2); and

(d)by substituting the following for the first line of section 173(3)—

“In subsection (1)—

“short term certificate” means an instrument issued by The Stock Exchange undertaking to procure the transfer of property of a value and description specified in the instrument to or to the order of the person to whom the instrument is issued or his endorsee or to a person acting on behalf of either of them and also undertaking to make appropriate payments in cash, in the event that the obligation to procure the transfer of property cannot be discharged in whole or in part;”

Commencement Information

I3Reg. 9 in force at 25.4.1991, see reg. 1

Extent to which charge granted in favour of recognised investment exchange to be treated as market chargeE+W+S

10.—(1) A charge granted in favour of a recognised investment exchange other than The Stock Exchange shall be treated as a market charge only to the extent that—

(a)it is a charge over property provided as margin in respect of market contracts entered into by the exchange for the purposes of or in connection with the provision of clearing services [F10or over property provided as a default fund contribution to the exchange];

(b)in the case of a recognised UK investment exchange, it secures the obligation to pay to the exchange [F11any sum due to the exchange from a member or designated non-member of the exchange or from a recognised clearing house [F12or from a recognised CSD] or from another recognised investment exchange in respect of unsettled market contracts to which the member, designated non-member [F13or recognised body] is a party under the rules referred to in paragraph 12 of the Schedule to the Recognition Requirements Regulations]; and

(c)in the case of a recognised overseas investment exchange, it secures the obligation to reimburse the cost (other than fees and other incidental expenses) incurred by the exchange in settling unsettled market contracts in respect of which the charged property is provided as margin.

(2) A charge granted in favour of The Stock Exchange shall be treated as a market charge only to the extent that—

(a)it is a charge of the kind described in paragraph (1); or

(b)it is a Talisman charge and secures an obligation of either or both of the kinds mentioned in paragraph (3).

(3) The obligations mentioned in this paragraph are—

(a)the obligation of the chargor to reimburse The Stock Exchange for payments (including stamp duty and taxes but excluding Stock Exchange fees and incidental expenses arising from the operation by The Stock Exchange of settlement arrangements) made by The Stock Exchange in settling, through Talisman, market contracts entered into by the chargor; and

(b)the obligation of the chargor to reimburse The Stock Exchange the amount of any payment it has made pursuant to a short term certificate.

(4) In paragraph (3), “short term certificate” means an instrument issued by The Stock Exchange undertaking to procure the transfer of property of a value and description specified in the instrument to or to the order of the person to whom the instrument is issued or his endorsee or to a person acting on behalf of either of them and also undertaking to make appropriate payments in cash, in the event that the obligation to procure the transfer of property cannot be discharged in whole or in part.

Textual Amendments

Commencement Information

I4Reg. 10 in force at 25.4.1991, see reg. 1

Extent to which charge granted in favour of recognised clearing house to be treated as market chargeE+W+S

11.  A charge granted in favour of a recognised clearing house shall be treated as a market charge only to the extent that—

(a)it is a charge over property provided as margin in respect of market contracts entered into by the clearing house [F14or over property provided as a default fund contribution to the clearing house];

[F15(aa)in the case of a recognised central counterparty, it secures the obligation to pay to the recognised central counterparty any sum due to it from a clearing member, a client, an indirect client, a recognised investment exchange [F16, a recognised CSD] or recognised clearing house in respect of unsettled market contracts to which the clearing member, client, indirect client [F17or recognised body] is a party;]

(b)[F18in the case of a recognised clearing house which is not a recognised central counterparty], it secures the obligation to pay to the clearing house [F19any sum due to the clearing house from a member of the clearing house or from a recognised investment exchange [F20or from a recognised CSD] or from another recognised clearing house in respect of unsettled market contracts to which the member [F21or recognised body] is a party under the rules referred to in paragraph 25 of the Schedule to the Recognition Requirements Regulations]; and

(c)in the case of a recognised overseas clearing house, it secures the obligation to reimburse the cost (other than fees or other incidental expenses) incurred by the clearing house in settling unsettled market contracts in respect of which the charged property is provided as margin.

Textual Amendments

Commencement Information

I5Reg. 11 in force at 25.4.1991, see reg. 1

[F22Extent to which charge granted in favour of recognised CSD to be treated as market chargeE+W+S

11A.—(1) A charge granted in favour of a recognised CSD shall be treated as a market charge only to the extent that—

(a)it is a charge over property provided as margin in respect of market contracts entered into by the recognised CSD or over property provided as a default fund contribution to the recognised CSD; and

(b)it secures the obligation to pay to the recognised CSD any sum due to it from a member of the recognised CSD or from a recognised clearing house or from a recognised investment exchange or from another recognised CSD in respect of unsettled market contracts to which the member or recognised body is a party.

(2) A charge granted in favour of [F23a] third country CSD shall be treated as a market charge only to the extent that—

(a)it is a charge over property provided as margin in respect of market contracts entered into by the F24... third country CSD or over property provided as a default fund contribution to the EEA CSD or third country CSD; and

(b)it secures the obligation to reimburse the cost (other than fees or other incidental expenses) incurred by the F25... third country CSD in settling unsettled market contracts in respect of which the charged property is provided as margin.]

Textual Amendments

Circumstances in which CGO Service charge to be treated as market chargeE+W+S

12.  A CGO Service charge shall be treated as a market charge only if—

(a)it is granted to a settlement bank by a person for the purpose of securing debts or liabilities of the kind mentioned in section 173(1)(c) of the Act incurred by that person through his use of the CGO Service as a CGO Service member; and

(b)it contains provisions which refer expressly to the [F26CGO Service].

Textual Amendments

Commencement Information

I6Reg. 12 in force at 25.4.1991, see reg. 1

Extent to which CGO Service charge to be treated as market chargeE+W+S

13.  A CGO Service charge shall be treated as a market charge only to the extent that—

(a)it is a charge over any one or more of the following—

(i)specified securities held within the CGO Service to the account of a CGO Service member or a former CGO Service member;

(ii)specified securities which were held as mentioned in sub-paragraph (i) above immediately prior to their being removed from the CGO Service consequent upon the person in question becoming a former CGO Service member;

(iii)sums receivable by a CGO Service member or former CGO Service member representing interest accrued on specified securities held within the CGO Service to his account or which were so held immediately prior to their being removed from the CGO Service consequent upon his becoming a former CGO Service member;

(iv)sums receivable by a CGO Service member or former CGO Service member in respect of the redemption or conversion of specified securities which were held within the CGO Service to his account at the time that the relevant securities were redeemed or converted or which were so held immediately prior to their being removed from the CGO Service consequent upon his becoming a former CGO Service member; and

(v)sums receivable by a CGO Service member or former CGO Service member in respect of the transfer by him of specified securities through the medium of the CGO Service; and

(b)it secures the obligation of a CGO Service member or former CGO Service member to reimburse a settlement bank for the amount due from him to the settlement bank as a result of the settlement bank having discharged or become obliged to discharge payment obligations in respect of transfers or allotments of specified securities made to him through the medium of the CGO Service.

Commencement Information

I7Reg. 13 in force at 25.4.1991, see reg. 1

[F27Limitation on disapplication of moratorium on certain legal processes under Schedule B1 to the Insolvency Act 1986 (administration) in relation to CGO Service charges]E+W+S

14.—(1) In this regulation “qualifying period” means the period beginning with the fifth business day before the day on which [F28an application] for the making of an administration order in relation to the relevant CGO Service member or former CGO Service member is presented and ending with the second business day after the day on which an administration order is made in relation to the relevant CGO Service member or former CGO service member pursuant to the petition.

[F29(1A) A reference in paragraph (1) to an application for an administration order shall be treated as including a reference to—

(a)appointing an administrator under paragraph 14 or 22 of Schedule B1 to the Insolvency Act 1986, or

(b)filing with the court a notice of intention to appoint an administrator under either of those paragraphs,

and a reference to “an administration order” shall include the appointment of an administrator under paragraph 14 or 22 of Schedule B1 to the Insolvency Act 1986.]

(2) [F30The disapplication of paragraph 43(2) of Schedule B1 to the Insolvency Act 1986 (including that provisions as applied by paragraph 44 of that Schedule)] by section 175(1)(a) of the Act shall be limited in respect of a CGO Service charge so that it has effect only to the extent necessary to enable there to be realised, whether through the sale of specified securities or otherwise, a sum equal to whichever is less of the following—

(a)the total amount of payment obligations discharged by the settlement bank in respect of transfers and allotments of specified securities made during the qualifying period to the relevant CGO Service member or former CGO Service member through the medium of the CGO Service less the total amount of payment obligations discharged to the settlement bank in respect of transfers of specified securities made during the qualifying period by the relevant CGO Service member or former CGO Service member through the medium of the CGO Service; and

(b)the amount (if any) described in regulation 13(b) due to the settlement bank from the relevant CGO Service member or former CGO Service member.

Textual Amendments

Commencement Information

I8Reg. 14 in force at 25.4.1991, see reg. 1

Ability of administrator or receiver to recover assets in case of property subject to CGO Service charge or Talisman chargeE+W+S

15.—(1) [F31The disapplication—

(a)by section 175(1)(b) of the Act, of paragraphs 70, 71 and 72 of Schedule B1 to the Insolvency Act 1986, and

(b)by section 175(3) of the Act, of sections 43 and 61 of the 1986 Act,

shall cease to have effect] in respect of a charge which is either a CGO Service charge or a Talisman charge after the end of the second business day after the day on which an administration order is made or, as the case may be, an administrative receiver or a receiver is appointed, in relation to the grantor of the charge, in relation to property subject to it which—

(a)in the case of a CGO Service charge, is not, on the basis of a valuation in accordance with paragraph (2), required for the realisation of whichever is the less of the sum referred to in regulation 14(2)(a) and the amount referred to in regulation 14(2)(b) due to the settlement bank at the close of business on the second business day referred to above; and

(b)in the case of a Talisman charge is not, on the basis of a valuation in accordance with paragraph (2), required to enable The Stock Exchange to reimburse itself for any payment it has made of the kind referred to in regulation 10(3).

[F32(1A) A reference in paragraph (1) to “an administration order” shall include the appointment of an administrator under paragraph 14 or 22 of Schedule B1 to the Insolvency Act 1986.]

(2) For the purposes of paragraph (1) the value of property shall, except in a case falling within paragraph (3), be such as may be agreed between whichever is relevant of the administrator, administrative receiver or receiver on the one hand and the settlement bank or The Stock Exchange on the other.

(3) For the purposes of paragraph (1), the value of any investment for which a price for the second business day referred to above is quoted in the Daily Official List of The Stock Exchange shall—

(a)in a case in which two prices are so quoted, be an amount equal to the average of those two prices, adjusted where appropriate to take account of any accrued interest; and

(b)in a case in which one price is so quoted, be an amount equal to that price, adjusted where appropriate to take account of any accrued interest.

Textual Amendments

Commencement Information

I9Reg. 15 in force at 25.4.1991, see reg. 1