4.—(1) In the circumstances prescribed by paragraph (2) or paragraph (5), the charges to stamp duty and stamp duty reserve tax shall be treated as not arising.
(2) The circumstances prescribed by this paragraph are where, in connection with a facility transaction or an over the counter transaction, the conditions in paragraphs (3) and (4) are met.
(3) A clearing member client contract entered into by a defaulting clearing participant (“DCP”) is transferred from the DCP to a non-defaulting clearing participant in accordance with the defaulting rules of ECCN.
(4) The clearing member client contract referred to in paragraph (3) does not represent the end transaction in the clearing of that contract either before or after the transfer.
(5) The circumstances prescribed by this paragraph are where, in connection with a facility transaction or an over the counter transaction (excluding transactions that come within section 80C and 89AA of the Finance Act 1986(1)), conditions A, B and C are met.
(6) Condition A is that traded securities or options are transferred, or agreed to be transferred, from—
(a)a clearing participant or its nominee to another clearing participant or its nominee;
(b)a non-clearing firm or its client, or nominee of a non-clearing firm or its client, to a clearing participant or its nominee;
(c)a clearing participant or its nominee to ECCN or its nominee;
(d)a person other than a clearing participant to ECCN or its nominee, as a result of a failure by a clearing participant to fulfil its obligations in respect of the transaction concerned to transfer traded securities or options to ECCN or its nominee;
(e)a person other than a clearing participant to a clearing participant or its nominee as a result of a failure by a non-clearing firm or its client, or nominee of a non-clearing firm or its client or by another clearing participant or its nominee to fulfil its obligations in respect of the transaction concerned to transfer traded securities or options to that clearing participant or its nominee;
(f)a prescribed recognised clearing house or its nominee to ECCN or its nominee;
(g)a prescribed EEA central counterparty or its nominee to ECCN or its nominee;
(h)a prescribed third country agreement central counterparty or its nominee to ECCN or its nominee; or
(i)ECCN or its nominee to a clearing participant or its nominee.
(7) Condition B is that the person to whom those securities or options are agreed to be transferred under any of the agreements specified in paragraph (6) (“the relevant agreement”) is required on receipt of those securities or options to transfer traded securities or options under a matching agreement to another person or, in the case of an agreement falling within paragraph (6)(d) or (6)(e), would have been so required if the failure referred to in those paragraphs had not occurred.
(8) Condition C is that where traded securities or options which are the subject of the relevant agreement are received by a clearing participant, the agreement must be identified by the clearing participant as an agreement that has been made solely in relation to the clearing of those traded securities or options on behalf of a third party.
(9) In this regulation “matching agreement” means an agreement under which—
(a)the traded securities or options agreed to be transferred are of the same kind as the traded securities or options agreed to be transferred under the relevant agreement; and
(b)the number and transfer price of the traded securities or options agreed to be transferred are in total identical to the number and transfer price of the traded securities or options agreed to be transferred under the relevant agreement.
Sections 80C and 89AA of the Finance Act 1986 (c. 41) (which were inserted by section 98 and section 103 of the Finance Act 1997 (c. 16)) relate to stock lending transactions.