The China Securities Depository and Clearing Corporation Limited ("CSDC") has recently drafted and issued the Clearing Rules of the China Securities Depository and Clearing Corporation Limited (Draft for Comment) (the "Draft for Comment") for public consultation by August 30, 2019.
Divided into five sections, including the general provisions, management of financial resources for clearing, multilateral netting service, other clearing services, and supplementary provisions, the Draft for Comment mainly clarifies the following key issues. First, these Clearing Rules are temporarily not applicable to the clearing business for on-floor subscription, subscription, redemption, dividend distribution and fund conversion, for some products registered in the CSDC's open-ended fund system. Second, as a set of rules at the higher level, the Clearing Rules highlight the authorization to relevant rules including the Administrative Measures for Clearing Reserves and the Administrative Measures for Clearing Margins, and ensure the Clearing Rules are aligned with other higher-level regulations, such as the Administrative Measures for Securities Settlement Risk Funds. Third, the Clearing Rules set out the provisions in principle for how to deal with settlement defaults, and also clearly state that other special provisions formulated by the CSDC, if any, shall prevail.