necessary, declare an event of default. As part of its Default Management Plan, APEX Clear may carry out actions in accordance with its Clearing Procedures including to activate the IRT to assist the defaulting Member, suspend the defaulting Member’s access to all APEX systems, reject pending trades and freeze all assets of the defaulting Member, as well as to transfer and / or close out open positions of the defaulting Member. To protect the Clearing House from the potential losses of a Clearing Member default, APEX Clear collects margins from its Clearing Members on their open positions. At the same time, APEX Clear itself contributes to and also collects from its Clearing Members Guaranty Fund contributions which will be utilised in the following manner in the event of a Clearing Member default: (i) any monies, assets or Collateral held in any account of or in respect of the Defaulting Clearing Member (including the proceeds of the Security Deposits of the Defaulting Clearing Member) except where such monies, securities or collateral relate to any Customer Position, the application shall only be carried out in the event the conditions in Clearing Rule 406.1(s) are met; (ii) up to 60% of APEX Clear’s mandatory contribution to the Guaranty Fund; (iii) up to USD500,000 in Security Deposit from each non-defaulting Clearing Member, provided that any application of the Security Deposits of non-defaulting Clearing Members shall be in equal amounts across all non-defaulting Clearing Members; (iv) up to 40% of APEX Clear’s mandatory contribution to the Guaranty Fund; (v) all remaining Security Deposits (if any) of the non-defaulting Clearing Members as contributed on the date of Declared Default; (vi) all remaining balance of APEX Clear’s contribution to the Guaranty Fund (if any); and (vii) any other monies or other assets available to the Clearing House. Clearing Rule 805(c) allows APEX to require its Clearing Members to replenish their respective Guaranty Fund contributions that have been utilised in the default.
13.2	An FMI should be well prepared to implement its default rules and procedures, including any appropriate discretionary procedures provided for in its rules.
APEX Clear’s Default Management Plan serves as a guideline and response plan when dealing with a Clearing Member default. These procedures are also further enhanced through regular drills with Clearing Members as well as internal exercises which will enable APEX Clear’s Senior Management and staff to familiarise themselves with the necessary steps and be well prepared to handle an actual default situation.
13.3	An FMI should publicly disclose key aspects of its default rules and procedures.
The key aspects of APEX Clear’s Default Management Plan are set out in section 12 of the Clearing Procedures which is also available on the APEX website.
13.4	An FMI should involve its participants and other stakeholders in the testing and review of the FMI’s default procedures, including any close-out procedures. Such testing and review should be conducted at least annually or following material changes to the rules and procedures to ensure that they are practical and effective.
APEX Clear will conduct annual drills with Clearing Members and other stakeholders to enhance its Default Management Plan, to test the preparedness of the Incident Response and