· Document Number：No. 69 [2017] of the Clearing House Financial Markets Co., Ltd.

· Area of Law： Banking & Finance

· Level of Authority： Industry Regulations

· Date issued：04-28-2017

· Effective Date：04-28-2017

· Status： Effective

· Issuing Authority： Shanghai Clearing House

Notice of the Clearing House Financial Markets Co., Ltd. on Issues concerning the Registration, Custody, Clearing and Settlement of Credit Risk Mitigation Instruments
(No. 69 [2017] of the Clearing House Financial Markets Co., Ltd.)
All market members:
To conduct the?registration, custody, clearing and settlement?of credit risk mitigation instruments on the interbank market? in a standardized manner, and guarantee the lawful rights and interests of market members, in accordance with the relevant provisions of the National Association of Financial Market Institutional Investors (“NAFMII”) and with the approval of the People's Bank of China, Clearing House Financial Markets Co., Ltd. (hereinafter referred to as “Shanghai Clearing House”) provides market members with such business as ?registration, custody, clearing and settlement?of credit risk mitigation instruments, information disclosure, interest payment and principal redemption, and follow-up services for credit events. You are hereby notified of the relevant matters as follows:
I. The “credit risk mitigation instruments” involved in this Notice include agreement-based and warrant-based products. Agreement-based products include but are not limited to credit default swap, credit risk mitigation agreement and other products; and warrant-based products include but are not limited to credit-linked notes, credit risk mitigation warrants and other products.
II. A product issuer shall, when applying for handling the warrant-based product issuance registration, conclude a registration service agreement with Shanghai Clearing House, and open an issuance account. A product issuer shall submit the issuance registration materials to Shanghai Clearing House prior to the date of registration, and Shanghai Clearing House shall, on the basis of the materials submitted by the issuer and the system distribution results, handle the initial registration for the warrant-based products.
III. Shanghai Clearing House provides clearing and settlement services for credit risk mitigation instruments. Market participants may handle the credit risk mitigation instrument transactions under bilateral clearing through Shanghai Clearing House or on their own. The clearing and settlement of credit risk mitigation instrument transactions under centralized clearing shall be handled by Shanghai Clearing House.
IV. The clearing and settlement of credit risk mitigation instruments?on a transaction by transaction basis in full amount shall be conducted according to the following steps:
(1) Shanghai Clearing House receives the real-time data on the credit risk mitigation instrument transactions concluded through National Interbank Funding Center. Both parties to transactions need to complete the confirmation of the clearing and settlement of the credit risk mitigation instrument transaction completed through Shanghai Clearing House before the designated time point.
(2) Shanghai Clearing House will, on the basis of the effective instructions of both parties to transactions and the relevant business provisions, calculate the amounts receivable and payable by market members, and organize the completion of the clearing and settlement of credit risk mitigation instrument transactions on a transaction by transaction basis in full amount.
(3) After the occurrence of credit events, both parties to transactions need to reach a consensus on the relevant elements and clearing and settlement conditions concerning the credit events through Shanghai Clearing House. Where the deliverable debts as agreed on by both parties to transactions comply with the requirements of Shanghai Clearing House, Shanghai Clearing House will generate and issue credit event settlement documents, and organize both parties to complete the confirmation and settlement of credit events on this basis.
(4) The physical settlement involved in credit events may be handled by means of non-transaction transfer.
(5) The clearing and settlement of credit risk mitigation instrument transactions and credit events, once completed, are irrevocable. Where settlement fails as a result of the insufficiency in the funds or products of one party to a transaction, the responsible party shall assume the liabilities for breach of contract for its counterparty, and Shanghai Clearing House shall not assume the relevant liabilities.
V. Market members shall designate or open accurate and effective fund settlement accounts in Shanghai Clearing House, and authorize Shanghai Clearing House to make a direct debit or credit entry under such accounts. Shanghai Clearing House, as a franchised participant in the high value payment system of the People's Bank of China, provides market members with the credit risk mitigation instrument settlement services.
VI. Shanghai Clearing House may provide market members with collateral management, mark-to-market?valuation and other value-added services.
VII. The website (www.shclearing.com) of Shanghai Clearing House is the information disclosure platform designated by the People's Bank of China. The relevant information on the initial registration for the issuance of warrant-based products, interest payment and principal redemption, duration of credit risk mitigation instruments, credit event trigger and the follow-up settlement, among others, shall be disclosed to the market or the investors within the scope of directional issuance through the website of Shanghai Clearing House. The contents of information disclosure shall be governed by the relevant business guidelines of the NAFMII.
VIII. From the date of issuance of this Notice, Shanghai Clearing House will begin to accept the information registration of the participants in the clearing of credit risk mitigation instruments.
IX. The centralized clearing of credit risk mitigation instruments shall be prescribed separately by Shanghai Clearing House.
X. The initial registration, clearing and settlement of credit risk mitigation instruments, information disclosure, interest payment and principal redemption, and charging standards, among others, shall be governed by reference to the Rules on the Registration and Settlement of?Credit Risk Mitigation Warrants, the Rules on the?Registration, Custody, Clearing and Settlement of Bonds and other provisions issued by Shanghai Clearing House.
XI. This Notice shall be developed, interpreted and amended by Shanghai Clearing House and shall come into force on the date of issuance. Matters not included herein shall be governed by reference to the relevant provisions of Shanghai Clearing House.
Contract persons for agreement-based products:
Cai Yue: 021-23198587; caiyue@shclearing.com
Du Yi: 021-23198597; duyi@shclearing.com
Contract persons for warrant-based products:
He Songyang: 021-23198722; hesongyang@shclearing.com
Zhou Xinyue: 021-23198685; zhouxinyue@shclearing.com
Clearing House Financial Markets Co., Ltd.
April 28, 2017