Hong Kong Ordinances

SECURITIES AND FUTURES ORDINANCE - SECT 40

Rules by recognized clearing houses

(1) Without limiting any of its other powers to make rules, a recognized
clearing house may make rules for such matters as are necessary or desirable-

   (a)  for the proper regulation and efficient operation of the clearing or
        settlement facilities which it operates;

   (b)  for the proper regulation of its clearing participants;

   (c)  for the establishment and maintenance of compensation arrangements for
        the investing public.

(2) A recognized clearing house shall make rules which-

   (a)  provide for the taking of proceedings or other action if a clearing
        participant appears to be unable, or likely to become unable, to meet
        his obligations in respect of all unsettled or open market contracts
        to which he is a party; and

   (b)  comply with Part 5 of Schedule 3.

(3) Where a recognized clearing house takes default proceedings, all
subsequent proceedings or other action taken under its rules for the
settlement of market contracts to which the defaulter is a party shall be
treated as taken under the default rules.

(4) The Commission may, by notice in writing served on a recognized clearing
house, request the clearing house-

   (a)  to make rules specified in the request within the period specified in
        that request; or

   (b)  to amend rules referred to in the request in the manner and within the
        period specified in that request.

(5) Before making a request under subsection (4), the Commission shall consult
the Financial Secretary and the recognized clearing house to which the request
relates.

(6) Where the Commission is satisfied that a recognized clearing house has not
complied with a request referred to in subsection (4) within the period
specified in the request, the Commission may make or amend the rules specified
in the request instead of the recognized clearing house.