7.03A.1 Trust Arrangements
7.03A.1.1 Subject to all rights and remedies of the Clearing House against or in respect of Collateral under this Rules, the Security Deed and the SFA, Collateral held by or otherwise deposited with or provided to the Clearing House shall be held on trust by the Clearing House for the benefit of:
a. Clearing Members, except where such Collateral is held by or otherwise deposited with or provided to the Clearing House solely in respect of Customer Contracts; and
b. the relevant customers of the Clearing Member pursuant to the SFA, where such Collateral is held by or otherwise deposited with or provided to the Clearing House solely in respect of Customer Contracts.
7.03A.1.2 The Clearing House shall have the right to commingle any or all Collateral held by or otherwise deposited with or provided to it by Clearing Members, except where such Collateral is held by or otherwise deposited with or provided to the Clearing House solely in respect of Customer Contracts, in the same account.
7.03A.1.3 The Clearing House shall have the right to commingle any or all Collateral held by or otherwise deposited with or provided to it by Clearing Members solely in respect of Customer Contracts, except where such Collateral is Cleared Swaps Customer Collateral, in the same account.
7.03A.1.4 The Clearing House shall have the right to commingle any or all Cleared Swaps Customer Collateral held by or otherwise deposited with or provided to it by FCM Clearing Members in the same account.
Added on 26 April 201326 April 2013 and amended on 31 December 201331 December 2013.
7.03A.2 Security Deed
Prior to the Clearing House commencing any clearing activities in respect of any Clearing Member, the Clearing Member shall execute and deliver a Security Deed in the form and on terms prescribed by the Clearing House, setting out the terms under which its Collateral are provided to, and held by, the Clearing House.
Added on 26 April 201326 April 2013.
7.03A.3 General Lien
Without prejudice and in addition to any Security Interest or other right or remedy which the Clearing House may have under this Rules, contract, law or equity, and subject to any applicable restrictions pursuant to the provisions of the SFA and/or imposed by the Authority, the Clearing House shall have a lien on all Collateral deposited with or provided to the Clearing House and on any other monies and/or assets of the Clearing Member which may be or become available to the Clearing House.
Added on 26 April 201326 April 2013.
7.03A.4 Collateral Deposit
A Clearing Member shall deposit or otherwise provide to the Clearing House such Collateral, in such acceptable form and denomination as may be prescribed by the Clearing House from time to time, and may deposit or otherwise provide to the Clearing House Collateral in excess of the amount required by the Clearing House, subject to such terms and conditions prescribed by the Clearing House from time to time.
Added on 26 April 201326 April 2013 and amended on 31 December 201331 December 2013.
7.03A.5 Collateral Withdrawal
7.03A.5.1 Where any obligation under this Rules, the Security Deed or as may otherwise be owing to the Clearing House remains outstanding on the part of a Clearing Member, such Clearing Member shall have no right to withdraw any Collateral or request for the repayment of any credit balance held with or subject to the control of the Clearing House without the Clearing House's prior consent.
7.03A.5.2 Any withdrawal of Collateral consented to by the Clearing House under this Rule shall not be deemed to be a release of the existing or future Security Interest over any remaining Collateral held with or subject to the control of the Clearing House, other than the withdrawn Collateral.
7.03A.5.3 A request for withdrawal of Collateral may only be made by a Clearing Member subject to Rule 7.03A.5.1. Without prejudice to Rule 2.18.3, a Third Party may not withdraw or request for the withdrawal of any Collateral held with or subject to the control of the Clearing House, other than through the Third Party's Clearing Member. All Collateral permitted by the Clearing House to be withdrawn shall be returned only to the Clearing Member.
7.03A.5.4 In the case of a defaulted or suspended FCM Clearing Member, any unused Collateral withdrawn and returned to such FCM Clearing Member is intended to be treated in accordance with applicable U.S. laws, including the U.S. Bankruptcy Code, the CEA and the CFTC Regulations.
Added on 26 April 201326 April 2013 and amended on 31 December 201331 December 2013.
7.03A.6 Valuation of Collateral
7.03A.6.1 The Clearing House shall value such Collateral as it deems appropriate. The Clearing House shall, at its sole discretion, determine (i) what monies and/or assets will be acceptable as Collateral and (ii) when will such monies and/or assets cease to be acceptable as Collateral, and determine the valuation to be attributed thereto.
7.03A.6.2 If any Collateral deposited or provided by any Clearing Member is found in any way to be unacceptable by the Clearing House, the Clearing House shall have the right to immediately give a zero value to such Collateral for the purposes of satisfying such Clearing Members' obligations under this Rules or as may otherwise be owing to the Clearing House, pursuant to which such Collateral was deposited or provided.
7.03A.6.3 Following revaluation of any Collateral deposited with or provided to the Clearing House, where such Collateral is found by the Clearing House to be insufficient to meet any obligation of the Clearing Member under this Rules or as may otherwise be owing to the Clearing House, pursuant to which such Collateral was deposited or provided, the Clearing Member shall deposit with or provide to the Clearing House such additional Collateral as may be required to meet such obligation, within such time as the Clearing House may require.
7.03A.6.4 In the event of any dispute as to any matters covered in this Rule, the Clearing House's decision shall be final and binding.
Added on 26 April 201326 April 2013.
7.03A.7 Investment and Use of Collateral
7.03A.7.1 The Clearing House may invest, manage and use Collateral in such manner as it shall deem fit, provided that:
a. Collateral in respect of Customer Contracts shall be invested in accordance with this Rules, the Security Deed, the SFA and any applicable laws; and
b. the Clearing House shall not use any Collateral received and notified to it as Collateral in respect of a Customer Contract to settle any obligations that are incurred in relation to a House Contract, except in accordance with this Rules, the Security Deed, the SFA and any applicable laws.
c. the Clearing House shall not use any Collateral received and notified to it as Collateral in respect of an Affiliate Contract to settle any obligations that are incurred in relation to a House Contract that is not an Affiliate Contract, except in accordance with this Rules, the Security Deed, the SFA and any applicable laws.
7.03A.7.2 Each Clearing Member shall secure contractual waivers in favour of the Clearing Member from its Customers waiving their respective rights to all interest and investment earnings from the Collateral held with or otherwise provided to the Clearing House in respect of Customer Contracts, in the form and manner as may be prescribed by the Clearing House, as may be necessary to give effect to the Clearing House's rights in relation to interest and fees under Rule 7.03A.8.
7.03A.7.3 All Collateral deposited or provided by each Clearing Member to the Clearing House shall be subject to this Rules, the Security Deed, the SFA (each as amended or supplemented from time to time) and any applicable laws. Each Clearing Member shall ensure that all Collateral deposited or provided to the Clearing House are deposited or provided only on the foregoing basis and shall also ensure that, prior to depositing or providing any Collateral to the Clearing House for the account or for the Contracts of any person, such person has been notified of and has accepted the foregoing.
Added on 26 April 201326 April 2013 and amended on 31 December 201331 December 2013 and 2 May 20162 May 2016.
7.03A.8 Fees and Interest
7.03A.8.1 The Clearing Member shall pay the Clearing House such administrative fees as may be prescribed by the Clearing House and notified to the Clearing Member from time to time for the investment and management of the Collateral. Administrative fees may be deducted from the investment earnings arising from or in connection with the Collateral or paid directly to the Clearing House as determined by the Clearing House.
7.03A.8.2 Unless otherwise provided for in this Rules, the Clearing House shall pay the Clearing Member interest on the Collateral at such rate and in such manner as prescribed by the Clearing House and notified to a Clearing Member.
7.03A.8.3 Except as set forth in this Rule, the Clearing House shall have no obligation to make payment of any other fees, interest and investment earnings arising from or in connection with the Collateral to any person.
Added on 26 April 201326 April 2013.
7.03A.9 Safekeeping Indemnity
7.03A.9.1 Any Collateral accepted by Clearing House shall be deposited with the appropriate custodian(s) designated by the Clearing House for safekeeping in a Clearing House account for House Contracts or in a Clearing House account for Customer Contracts, as the case may be, and the Clearing House shall retain control over such Collateral.
7.03A.9.2 The Clearing House shall not have any obligation or responsibility to preserve, protect, collect or realise, and under no circumstances shall the Clearing House be liable for any loss or diminution in value or depreciation in or in connection with, the Collateral maintained pursuant to this Rule.
7.03A.9.3 A Clearing Member who maintains Collateral with the Clearing House pursuant to this Rule shall indemnify and hold the Clearing House harmless from any loss, damage, costs, charges and/or expenses of whatsoever nature and howsoever arising ("Loss") suffered or incurred by the Clearing House to any designated custodian which may result from or arise with respect to:
a. any act, delay or omission in connection with Collateral (whether by such Clearing Member or the Clearing House) deposited with such designated custodian; or
b. any contract or agreement between the Clearing House and any designated custodian, or any representation, warranty or undertaking given by the Clearing House to any designated custodian, in relation to or otherwise in connection with Collateral deposited with such designated custodian, provided that this indemnity shall not cover any Loss and/or liability of the Clearing House attributable or referable to the gross negligence or wilful misconduct of the Clearing House or any of the Clearing House's officers, agents and/or employees.
7.03A.9.4 If any loss of Collateral occurs, or any Collateral becomes unavailable to the Clearing House, such that any obligation of the Clearing Member under this Rules or as may otherwise be owing to the Clearing House, pursuant to which such Collateral was deposited or provided, cannot be sufficiently met as determined by the Clearing House, the Clearing Member shall deposit with or provide to the Clearing House such additional Collateral as may be required to meet such obligation, within such time as the Clearing House may require.
Added on 26 April 201326 April 2013.
7.03A.10 Regulatory Information
Clearing Members shall provide the Clearing House with any information necessary in relation to such Collateral deposited with or provided to the Clearing House to enable the Clearing House to meet its reporting obligations to the Authority and/or other relevant governmental or regulatory authorities or for any other regulatory purposes, including but not limited to for withholding tax purposes.
Added on 26 April 201326 April 2013.
7.03A.11 Permitted Depositories for Cleared Swaps Customer Collateral
7.03A.11.1 The Clearing House shall deposit Cleared Swaps Customer Collateral with a permitted depository in accordance with the CFTC Regulations and ensure that the Cleared Swaps Customer Collateral is segregated in accordance with the CEA and CFTC Regulations. The Cleared Swap Customer Account and Cleared Swaps Customer Collateral shall be part of the cleared swaps account class for the purposes of Part 190 of the CFTC Regulations.
7.03A.11.2 Each FCM Clearing Member shall maintain written records of the authorisation of each Cleared Swaps Customer for the deposit of its Cleared Swaps Customer Collateral outside of the United States with a permitted depository in accordance with Rule 7.03A.11.1.
Added on 31 December 201331 December 2013.