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7A.01A.1

On the occurrence of any of the following events, or if the Clearing House in its discretion determines that any of the following events has occurred, the Clearing House may declare an event of default:—

a. the insufficiency of a Clearing Member's Collateral to discharge such Clearing Member's obligations to the Clearing House; or
b. the insufficiency of the Collateral of any other Relevant Market (other than the Connect Market), including a Participating Market, available to the Clearing House to fully meet such other Relevant Market's and/or its clearing house's obligations to the Clearing House; or
c. the insolvency of a Clearing Member (as determined by Rule 7A.01.3), any other Relevant Market which clears the opposite side of any Contract, including a Participating Market, and/or its clearing house or any depository (as defined in Rule 2.35.4); or
d. conversion, theft, breach of trust, embezzlement, or any other similar cause, caused or suffered by or in connection with a Clearing Member.

Added on 26 April 201326 April 2013 and Amended on 29 July 2022.

7A.01A.2 [Rule has been deleted.]

Deleted on 17 July 201917 July 2019.

7A.01A.2A [Rule has been deleted.]

Deleted on 17 July 201917 July 2019.

7A.01A.2B Application of the Clearing Fund
7A.01A.2B.1 The Clearing Fund shall be applied in the manner set out in Rule 7A.01A.2B.2 to meet losses suffered by the Clearing House, arising from or in connection with, an event of default or a Trigger Event, provided always that the defaulted Clearing Member's Collateral, or in the case of a Trigger Event, the Connect Counterparty’s collateral, has been fully applied in accordance with Rule 7A.05.1.
7A.01A.2B.2 Save as provided in Rule 7A.06.6.4 on the application of the Clearing Fund in a Multiple Default Period, and subject to the application of Rule 7A.01A.2F when a Trigger Event has been declared, the Clearing Fund shall be applied in the following order of priority, with each source of funds to be exhausted before the next source is applied:
a. first, the Clearing House First Loss Contribution, in the manner set out in Rule 7A.01A.2C;
b. second, the Clearing Fund Deposits of Active Clearing Members, in the manner set out in Rule 7A.01A.2D;
c. third, the Clearing House Intermediate Contribution, in the manner set out in Rule 7A.01A.2E;
d. fourth, the Clearing Fund Deposits of non-defaulting Clearing Members that are not available for use pursuant to Rule 7A.01A.2B.2.b, which will be applied on a pro-rata basis, calculated as the proportion of the Clearing Fund Deposit requirement of that Clearing Member relative to the aggregate Clearing Fund Deposit requirements of all such Clearing Members;
e. fifth, the Further Assessment Amounts of all non-defaulting Clearing Members, which will be applied on a pro-rata basis, calculated as the proportion of the Further Assessment Amount requirement of that Clearing Member relative to the aggregate Further Assessment Amount requirements of all such Clearing Members; and
f. sixth, any other contributions to the Clearing Fund.

Added on 17 July 201917 July 2019 and Amended on 29 July 2022.

7A.01A.2C Application of the Clearing House First Loss Contribution
7A.01A.2C.1 Subject to Rule 7A.01A.2C.2, the Clearing House First Loss Contribution shall be apportioned, in such proportion as the Clearing House determines, to meet losses in each Contract Class in which an event of default and/or Trigger Event has occurred.
7A.01A.2C.2 Where one or more auctions in respect of a Contract Class are held, the Clearing House First Loss Contribution apportioned to that Contract Class shall be further apportioned to each auction in such proportion as the Clearing House determines, and applied in the following manner:
a. the Clearing House First Loss Contribution apportioned to each auction shall be applied to meet losses arising from or in connection with that auction; and
b. any unused apportioned Clearing House First Loss Contribution for an auction shall be applied to meet any losses outstanding in the same Contract Class in such manner as the Clearing House determines.
7A.01A.2C.3 Where an event of default has occurred in more than one Contract Class, any unused apportioned Clearing House First Loss Contribution for one Contract Class shall be applied to meet any losses outstanding in the other Contract Class(es).

Added on 17 July 201917 July 2019 and Amended on 29 July 2022.

7A.01A.2D Application of Clearing Fund Deposits of Active Clearing Members
7A.01A.2D.1 Subject to Rule 7A.01A.2D.2 and Rule 7A.01A.2D.4, the Clearing Fund Deposits deposited by Active Clearing Members to clear the Contract Class in which an event of default and/or Trigger Event has occurred shall be applied to meet the losses in that Contract Class.
7A.01A.2D.2 Where an auction is held in relation to the Contract Class specified in Rule 7A.01A.5.a, the Clearing Fund Deposit of each Required Participant shall be further apportioned to that auction in such proportion as the Clearing House determines, to be applied to meet the losses arising from or in connection with that auction, in the following order of priority and manner, with each level to be exhausted before the next level is applied:
a. first, the apportioned Clearing Fund Deposits of Required Participants who did not submit a bid;
b. second, the apportioned Clearing Fund Deposits of Required Participants who had submitted bids that were below the Winning Bid Price, which will be applied on a pro-rata basis based on the product of:
i. the distance between such Required Participant's bid price and the Winning Bid Price; and
ii. the amount of such Required Participant's Clearing Fund Deposit apportioned to the auction;
c. third, the unused apportioned Clearing Fund Deposits of Required Participants who had submitted bids that were below the Winning Bid Price, which are not applied in Rule 7A.01A.2D.2.b; and
d. fourth, the apportioned Clearing Fund Deposits of Required Participants who had submitted the Winning Bid Price.
7A.01A.2D.3 Where an auction is held in relation to the Contract Class specified in Rule 7A.01A.5.a, any unused apportioned Clearing Fund Deposits for that auction shall be aggregated with the remaining Clearing Fund Deposits apportioned to the Contract Class, and applied to meet any outstanding losses in that Contract Class (including outstanding losses in any other such auction(s)) in such manner as the Clearing House determines.
7A.01A.2D.4 Where an event of default has occurred in more than one Contract Class, any unused apportioned Clearing Fund Deposits for a Contract Class (regardless of whether this follows the application of Rule 7A.01A.2D.3) shall be applied to meet any losses outstanding in the other Contract Class(es).

Added on 17 July 201917 July 2019 and Amended on 29 July 2022.

7A.01A.2E Application of the Clearing House Intermediate Contribution
7A.01A.2E.1 Subject to Rule 7A.01A.2E.2, the Clearing House Intermediate Contribution shall be apportioned, in such proportion as the Clearing House determines, to meet losses in each Contract Class in which an event of default and/or Trigger Event has occurred.
7A.01A.2E.2 Where one or more auctions in respect of a Contract Class are held, the Clearing House Intermediate Contribution apportioned to that Contract Class shall be further apportioned to each auction in such proportion as the Clearing House determines, and applied in the following manner:
a. the Clearing House Intermediate Contribution apportioned to each auction shall be applied to meet losses arising from or in connection with that auction; and
b. any unused apportioned Clearing House Intermediate Contribution for an auction shall be applied to meet any losses outstanding in the same Contract Class in such manner as the Clearing House determines.
7A.01A.2E.3 Where an event of default has occurred in more than one Contract Class, any unused apportioned Clearing House Intermediate Contribution for one Contract Class shall be applied to meet any losses outstanding in the other Contract Class(es).

Added on 17 July 201917 July 2019 and Amended on 29 July 2022.

7A.01A.2F Application of the Connect Layer upon the declaration of Trigger Event
7A.01A.2F.1 The Connect Layer shall be applied in the following order of priority, with each source of funds to be exhausted before the next source is applied, to meet losses suffered by the Clearing House arising out of the management, including termination or liquidation, of the Connect Broker’s positions in the Connect Contract, when a Trigger Event has been declared, provided the Connect Counterparty’s collateral has been fully applied in accordance with Rule 7A.05.1.6:
a. first, the Clearing House Connect Layer First Loss Contribution;
b. second, the Clearing Member Connect Layer Contribution Requirement, in the manner set out in Rule 7A.01A.2G; and
c. third, any other Clearing House contribution to the Connect Layer.
7A.01A.2F.2 Where the Connect Layer has been exhausted and there are residual losses remaining, the Clearing Fund shall be applied in accordance with Rule 7A.01A.2B.2.

Added on 29 July 2022.

7A.01A.2G Application of the Clearing Member Connect Layer Contribution Requirement

Where the Clearing House Connect First Loss Contribution has been exhausted and there are residual losses outstanding, the Clearing Member Connect Layer Contribution Requirement will be applied to cover the losses. The Clearing Members’ liability for the residual loss will be on a pro-rata basis, calculated based on their respective contribution requirement.

Added on 29 July 2022.

7A.01A.3

Where Clearing Members' Clearing Fund Deposits or Further Assessment Amounts are used and applied in accordance with Rules 7A.01A.2B.2 and 7A.01A.2D, the limits to one or more Clearing Members' liabilities in respect of such funds as set out in Rule 7A.06.6.6 or Rule 7A.06.9 may be reached. As a consequence of the foregoing, the contributions of Clearing Members which remain liable in respect of the relevant source of funds may remain unexhausted, while outstanding losses remain following such use and application of the source of funds. In such instances, the following shall apply:

  1. a. the remaining contributions of Clearing Members in respect of the relevant source of funds shall be applied to meet the outstanding loss, subject to their limits set out in Rule 7A.06.6.6 and Rule 7A.06.9; and
  2. b. the liability of each Clearing Member for such loss shall be determined as described in Rules 7A.01A.2B.2 and 7A.01A.2D, whichever is applicable, subject always to the operation of Rule 7A.06.6.5.

Added on 26 April 201326 April 2013, amended on 30 June 201430 June 2014, 12 November 201812 November 2018, 17 July 201917 July 2019 and 31 October 2024.

7A.01A.4

If the Clearing House is unable to ascertain any of its losses in relation to a potential Flat Rate adjustment promptly after an event of default, the Clearing House may estimate its loss as if such estimated loss has already been ascertained, and apply the Clearing Fund accordingly. Upon ascertaining its actual loss suffered in relation to a Flat Rate adjustment, the Clearing House will debit or credit the monies to the Clearing Fund accordingly.

Added on 26 April 201326 April 2013.

7A.01A.5

An event of default can occur in one or more Contract Classes. Each of the following limbs comprises a Contract Class:

a. Contracts that are listed for trading on the Exchange or Relevant Market and Non-Relevant Market Contracts; or
b. [Deleted]
c. [Deleted].

Added on 26 April 201326 April 2013, amended on 12 November 201812 November 2018 and 17 July 201917 July 2019.

7A.01A.6

An event of default shall be deemed to have fallen within a particular Contract Class if the defaulting Clearing Member had open commitment or outstanding obligations to the Clearing House in that Contract Class at the time of such default.

Added on 26 April 201326 April 2013.

7A.01A.7

An event of default that is due to the insufficiency of a Clearing Member's Collateral deposited with, provided to or otherwise made available to the Clearing House to fully discharge such Clearing Member's obligations to the Clearing House, or is due to the insolvency of a Clearing Member, shall be deemed for the purpose of Chapter 7A to have occurred in each Contract Class that Clearing Member was clearing or had open commitment in at the time of default.

Added on 26 April 201326 April 2013 and amended on 17 July 201917 July 2019.

7A.01A.8

Where an event of default is due to:

(i) the insufficiency of the Collateral of any Relevant Market including a Participating Market, available to the Clearing House to fully meet the obligations of such Relevant Market and/or its clearing house to the Clearing House; or
(ii) the insolvency of the Relevant Market;

a default shall be deemed to have occurred in the class of Contracts that are listed for trading on the Exchange or the Relevant Market.

Added on 26 April 201326 April 2013 and Amended on 29 July 2022.

7A.01A.9

An event of default that is due to conversion, theft, breach of trust or embezzlement of a Clearing Member, or any other cause shall be deemed to have occurred in each Contract Class that Clearing Member was clearing or had open commitment in at the time of default.

Added on 26 April 201326 April 2013.

7A.01A.10

While application of the Clearing Fund shall be mandatory, the detailed implementation of Rule 7A.05 and 7A.06 shall be the responsibility of the Clearing House.

Added on 26 April 201326 April 2013.

7A.01A.11

Without prejudice to the generality of Chapter 1, the Clearing House shall not be liable to any Clearing Member or any Third Party in respect of any damage, loss, cost or expense of whatsoever nature (whether direct, indirect, special or consequential, including without limitation any loss of business, revenue, goodwill, bargain or profit), suffered or incurred by such Clearing Member or Third Party, arising out of or in connection with the declaration or non-declaration of an event of default by the Clearing House.

Added on 26 April 201326 April 2013.