Document ID: chunk:federal_register_of_legislation:F2024L00683:body:0:p12
Version: federal_register_of_legislation:F2024L00683
Segment Type: other
Provision Reference: 
Character Range: 31536–34740

and continue to meet its obligations.

   11.1 A securities settlement facility should have default rules and procedures that enable the securities settlement facility to continue to meet its obligations in the event of a participant default and that address the replenishment of resources following a default. A securities settlement facility should ensure that financial and other obligations created for non-defaulting participants in the event of a participant default are proportional to the scale and nature of individual participants' activities.

   11.2 A securities settlement facility should be well prepared to implement its default rules and procedures, including any appropriate discretionary procedures provided for in its rules. This requires that the securities settlement facility should:

      (a) require its participants to inform it immediately if they:

        (i) become subject to, or become aware of the likelihood of external administration, or have reasonable grounds for suspecting that they will become subject to external administration; or

        (ii) have breached, or are likely to breach, a risk control requirement of the securities settlement facility;

      (b) allow for the cancellation or suspension of a participant or commercial settlement bank from the securities settlement facility:

        (i) if the participant or commercial settlement bank is in external administration; or

        (ii) if there is a reasonable suspicion that the participant or commercial settlement bank may become subject to external administration; and

      (c) allow participant users of a commercial settlement bank which becomes subject to external administration, or which is reasonably likely to become subject to external administration, to quickly nominate a new commercial settlement bank.

   11.3 A securities settlement facility should publicly disclose key aspects of its default rules and procedures. Where a securities settlement facility settles via a multilateral net batch, arrangements for dealing with any unsettled trades of a defaulting participant that are not guaranteed by a central counterparty, such as reconstituting the multilateral net batch excluding the settlement obligations of the defaulting participant, should be clear to all its participants and should be capable of being executed in a timely manner.

   11.4 A securities settlement facility should involve its participants and other stakeholders in the testing and review of the securities settlement facility's default procedures. Such testing and review should be conducted at least annually and following material changes to the rules and procedures to ensure that they are practical and effective.

   11.5 A securities settlement facility should demonstrate that its default management procedures take appropriate account of interests in relevant jurisdictions and, in particular, any implications for pricing, liquidity and stability in relevant financial markets.

Standard 12: General business risk

A securities settlement facility should identify, monitor and manage its general business risk and hold, or demonstrate that it has legally certain access to, sufficient liquid