Rule 8 — Default Rules

(1) a Clearing Member fails duly to perform or is, in the opinion of CDP, in breach of any provision of these Clearing Rules or Clearing Directives or of any agreement, understanding or arrangement which the Clearing Member has from time to time with CDP;

(2) a Clearing Member, not being an Exempt Person, ceases to hold a valid Capital Markets Services Licence under the SFA or ceases to be authorised to conduct banking business in Singapore pursuant to section 4 of the Banking Act 1970;

(3) a Clearing Member is insolvent or is deemed insolvent pursuant to Rule 8.1A.;

(4) in view of the Clearing Member's financial or operating conditions, CDP, in its absolute discretion, considers it necessary or desirable to protect its own interests, the interests of other Clearing Members and/or the interests of the customers of the Clearing Member; or

(5) conversion, theft, breach of trust, embezzlement, or any other similar cause, caused or suffered by or in connection with a Clearing Member,

CDP shall be entitled, at its absolute discretion, then or at any time thereafter, whether or not such event is, in the opinion of CDP, continuing, to declare that an Event of Default has occurred and to give notice thereof to all Clearing Members.

Amended on 1 July 2008 1 July 2008, 21 January 2013 21 January 2013, 22 April 2013 22 April 2013 and 18 January 2022.

8.1.2

Immediately upon CDP declaring that an Event of Default has occurred in respect of any Clearing Member, such Clearing Member (the "Defaulting Clearing Member") shall be deemed:—

(1) to be in breach of its obligations to CDP under its Novated Contracts; and

(2) to be unable to meet its obligations to CDP

and to the extent permitted by law, Rules 8.2 to 8.9 herein shall apply.

Added on 23 January 2009 23 January 2009 and 22 April 2013 22 April 2013.

8.1.3

Without prejudice to the generality of Rule 1 or Rule 10, CDP 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 CDP.

Added on 26 April 2013 26 April 2013.

8.1A Insolvency and Deemed Insolvency

8.1A.1

For the purpose of these Clearing Rules, a Clearing Member becomes insolvent or shall be deemed to be insolvent on the occurrence of any of the following events:—

(1) it fails to fulfil or meet margins or settlement requirements for all or any of its Novated Contracts;

(2) it defaults upon any levy owing to CDP arising out of Rule 7.2.1 or Rule 7.10.3;

(3) it is or is at risk of being in material default under the term of any loan or other agreement relating to its indebtedness;

(4) it fails, is unable, admits its inability, or is deemed for the purposes of any law to be unable, to pay its debts as they fall due;

(5) a composition, assignment or arrangement is proposed or made for the benefit of its creditor;

(6) the value of its assets is less than its liabilities, taking into account contingent and prospective liabilities;

(7) by reason of its financial integrity having been or anticipated to be compromised, it proposes, or commences negotiations with one or more of its creditors, to suspend, stop, defer or reschedule payments on any of its indebtedness, or announces an intention to do so;

(8) it or any of its directors or other officers seeks or gives notice of its or his intention to seek, or if it or any of its assets becomes subject to, the appointment of an administrator, provisional liquidator, receiver, administrative receiver, judicial manager, judicial custodian, compulsory manager, trustee, trustee in bankruptcy, conservator, custodian or other similar officer, whether out of court or otherwise;

(9) a moratorium is declared in respect of any of its indebtedness;

(10) the enforcement of any security over any of its assets, or any distress, execution, attachment, sequestration or other legal process levied, enforced or served upon any of its assets;

(11) any corporate action, legal proceedings or other procedure or step is taken, including without limitation the presentation of a petition, the making of an application, the filing of documents with a court, the convening of a meeting of the Clearing Member, its directors or its members, the giving of a notice of a proposal or the passing of a resolution, in relation to or with a view to:

(a) the winding up, liquidation, dissolution, or seeking of a judgment of insolvency or other relief under any insolvency law or other similar law affecting creditors' rights in respect of the Clearing Member, whether voluntary or involuntary; or

(b) the administration, whether out of court, with a registrar or otherwise, judicial management or reorganisation, whether by way of voluntary arrangement, scheme of arrangement or otherwise, of the Clearing Member, whether voluntary or involuntary;

(12) it causes or is subject to any event which, under the applicable laws of any jurisdiction, has an effect analogous to any of the events specified above;

(13) it takes any action or step in furtherance of, or indicating its consent to, approval of or acquiescence in, any of the foregoing acts; or

(14) if CDP considers in its absolute discretion that the occurrence of any such events or their equivalent is imminent or likely in any jurisdiction.

Added on 22 April 2013 22 April 2013.

8.2 Effect of Default on Novated Contracts other than in respect of Marginable Futures Contracts

Amended on 10 December 2018 10 December 2018.

8.2.1

Except for Rules 8.6A, 8.6AA, 8.6B, 8.6E and 8.7, Rules 8.2 to 8.9 shall apply to Novated Contracts other than in respect of Marginable Futures Contracts.

Amended on 23 January 2009 23 January 2009, 22 April 2013 22 April 2013 and 10 December 2018 10 December 2018.

8.2.2

Immediately upon such breach under Rule 8.1.2:—

(1) [Rule has been deleted.]

(2) [Rule has been deleted.]

(3) [Rule has been deleted.]

(3A) CDP shall be entitled (but not obliged) to settle any or all obligations of the Defaulting Clearing Member to deliver securities to CDP (including any obligation to deliver securities as compensation for corporate action entitlements as provided in these Clearing Rules) where such obligations are in respect of Novated Contracts for House Accounts. Settlement shall be in accordance with these Clearing Rules and shall take place on such day as CDP may determine regardless of the due date for settlement. For the avoidance of doubt, there shall be no such settlement in respect of Novated Contracts for Customer Accounts.

(3B) CDP will be under no obligation to deliver any securities to the Defaulting Clearing Member in respect of any Novated Contract (including as compensation for corporation action entitlements as provided in these Clearing Rules).

(3C) CDP shall be entitled (but not obliged) to set-off, regardless of the due date for settlement, (a) any or all unsettled obligations of the Defaulting Clearing Member to deliver a security in respect of Novated Contracts against (b) any or all unsettled rights that the Defaulting Clearing Member would have had to receive that security in respect of Novated Contracts but for its default.

(3D) Where any rights that the Defaulting Clearing Member would have had to receive securities in respect of Novated Contracts but for its default are not set-off in accordance with Rule 8.2.2(3C):

(a) CDP shall force-sell the securities that the Defaulting Clearing Member would have been entitled to receive to off-set any loss suffered by CDP in connection with the Defaulting Clearing Member’s default.

(b) The Defaulting Clearing Member accepts that securities may be force-sold in such manner (including through agents appointed by CDP), at such time and at such price as CDP or its agents may in their sole discretion deem appropriate, regardless of the due date for settlement of the Defaulting Clearing Member’s right(s).

(c) Any proceeds, costs or expenses resulting from the above, including any costs or expenses incurred by CDP in connection with the force-sale, shall be accounted for and included in the losses suffered by CDP in connection with the Defaulting Clearing Member’s default.

(d) Where any of the securities are not force-sold by the seventh (7th) Settlement Day after an Event of Default is declared under Rule 8.1.2:

(i) CDP shall, on the next Settlement Day, take any purchase consideration paid by CDP for those securities as a loss suffered by CDP due to the Defaulting Clearing Member's default;

(ii) CDP shall thereafter have absolute discretion to deal with those securities as it deems appropriate;

(iii) any amount recovered by CDP shall be applied to make good any loss that was suffered by CDP due to the Defaulting Clearing Member's default and that was not met by the Clearing Fund; and

(iv) any amount that remains thereafter shall be credited to the Clearing Fund in accordance with Rule 7.12.

(e) CDP and its agents shall have no liability for any losses to the Defaulting Clearing Member arising from any force-sale or attempted force-sale, including the manner, time or price of any force-sale or attempted force-sale, of securities.

(3E) Where any obligations of the Defaulting Clearing Member to deliver securities in respect of Novated Contracts are not settled in accordance with 8.2.2(3A) or set off in accordance with Rule 8.2.2(3C):

(a) CDP shall be entitled (but not obliged) to acquire any or all of the securities that the Defaulting Clearing Member would have been obliged to deliver, to meet any obligation of CDP to deliver those securities.

(b) The Defaulting Clearing Member accepts that securities may be acquired in such manner (including through agents appointed by CDP), at such time and at such price as CDP or its agents may in their sole discretion deem appropriate, regardless of the due date for settlement of the Defaulting Clearing Members’ obligation(s).

(c) CDP reserves the right not to attempt any acquisition and to determine for how long, not exceeding seven (7) Settlement Days after an Event of Default is declared under Rule 8.1.2 unless otherwise determined, any acquisition will be attempted. If any securities are not acquired by such time as CDP determines, CDP shall, on the next Settlement Day, cash settle in accordance with these Clearing Rules its obligation to deliver those securities.

(d) Any costs or expenses resulting from the above, including any costs or expenses incurred by CDP in connection with the acquisition, shall be accounted for and included in the losses suffered by CDP in connection with the Defaulting Clearing Member’s default.

(e) CDP and its agents shall have no liability for any losses to the Defaulting Clearing Member arising from any acquisition or attempted acquisition, including the manner, time or price of any acquisition or attempted acquisition, of securities.

Amended on 23 January 2009 23 January 2009, 22 April 2013 22 April 2013, 10 December 2018 10 December 2018, 17 July 2019 17 July 2019 and 6 September 2021.

8.2.2A

Upon such breach under Rule 8.1.2, CDP shall be entitled to take such administrative or operational action as is necessary to manage the default, including to transfer securities from the Defaulting Clearing Member’s Clearing Account to a different Securities Account in the name of the Defaulting Clearing Member.

Added on 22 April 2013 22 April 2013 and amended on 10 December 2018 10 December 2018 and 6 September 2021.