Chapter 1 General Provisions

 

Article 1 These measures are formulated in accordance with the relevant laws and regulations and the relevant rules of SHCH,in order to strengthen the management of clearing members, coordinate the involvement of clearing members of Shanghai Clearing House (SHCH) to take part in the central counterparty clearing (CCP) business, and guarantee the legitimate rights and interests of clearing members.

 

Article 2 SHCH CCP services adopts a clearing membership system.

 

Article 3 Clearing members are divided into General Clearing Members, Direct Clearing Members, and Special Clearing Members.

 

General Clearing Members can apply for all or part of CCP clearing services for their own business or for client clearing. General Clearing Members are further divided into SHCH General Clearing Members and Product General Clearing Members. SHCH General Clearing Members can apply for all CCP clearing services for client clearing, while Product General Clearing Members can offer certain client clearing services to its clients.

 

Direct Clearing Members can apply for all or part of CCP clearing services for their own business. There are 3 types of Direct Clearing Members, namely Class A, Class B and Class C. Class A members can apply for all CCP clearing services, Class B members can participate in two or more CCP clearing services, and Class C members can only participate in one CCP clearing service.

 

Special Clearing Members are approved to clear the types of CCP clearing services stipulated by SHCH separately.

 

Chapter 2 Application Criteria

 

Article 4 To apply for Direct Clearing Membership, applicants shall meet requirements listed below:

 

1. Be a legal entity or other types of entity that are registered according to the law;

 

2. To apply for A-class Direct Clearing Membership, banking financial institutions shall have a minimum net assets of 5 billion RMB (or equivalent in foreign currency) for the most recent two financial years, and meet the requirements of regulators on capital adequacy ratio; Non-banking financial institutions shall have a minimum net assets (net capital for securities companies) of 4 billion RMB for the most recent two financial years. To apply for B-class or C-class Direct Clearing Membership, applicants shall meet relevant net asset (net capital for securities companies) requirements set by SHCH, and specific standards will be determined when SHCH provides relevant CCP clearing services;

 

3. Meet internal rating standards set by SHCH for A-class, B-class or C-class Direct Clearing Membership;

 

4. Establish relevant rules and regulations of business management and risk management, and IT system to support proprietary clearing operations;

 

5. Obtain relevant business operation qualifications;

 

6. Comply with relevant rules and regulations stipulated by regulators, without any record of violation of laws or regulations for two years prior to application, and without any record of major default with respect to risk management;

 

7. Have sustainable operation capability, without any record of close-down, custody, take-over, reorganization, or other events that may affect sustainable operation capability by administrative, judicial or regulatory agencies;

 

8. Meet other requirements set by SHCH.

 

Article 5 To apply for SHCH General Clearing Membership and Product General Clearing Membership, applicants shall meet requirements listed in Article 4 as well as the requirements listed below:

 

1. To apply for SHCH General Clearing Membership: banking financial institutions shall have a minimum net assets of 20 billion RMB for the most recent two financial years; Non-banking financial institutions shall have a minimum net assets (net capital for securities companies) of 10 billion RMB for the most recent two financial years. To apply for Product General Clearing Membership, applicants shall meet relevant net asset (net capital for securities companies) requirements set by SHCH. Specific standards will be determined when SHCH provides relevant CCP clearing services;

 

2. Meet internal rating standards set by SHCH for SHCH General Clearing Membership and Product General Clearing Membership;

 

3. Establish relevant rules and regulations of business management and risk management and IT system to support the client clearing operations;

 

4. Meet other requirements set by SHCH.

 

Interbank market-makers meeting requirements listed above have the priorities to become Product General Clearing Members.

 

Article 6 In cases where net assets (or net capital) requirement is not met, but guarantees satisfying certain conditions are provided by the applicants, it shall be deemed as that the net assets (net capital for securities companies) requirement is met.

 

Chapter 3 Application Procedures

 

Article 7 To apply for clearing membership, applicants shall submit documents required by SHCH in a combination of paper and electronic forms.

 

Article 8 Application documents include but are not limited to:

 

1. Application Letter for clearing membership(contents include but are not limited to the overview of applicants, specific type of clearing membership, rules and regulations of business management and risk management and the development of IT system, statements about capability of conducting CCP clearing business, plan of developing CCP clearing business, written declaration to comply with all rules and regulations on clearing member management set by SHCH, etc. Applicants for General Clearing Membership shall provide plans to enhance client clearing business).

 

2. Basic Information Form for Clearing Member Applicants.

 

3. Copies of Business License of Enterprise Legal Person after latest renewal;

 

4. Copies of Organization Code Certificate;

 

5. Copies of business licenses and relevant approval documents;

 

6. Audited financial statements for the most recent two financial years, including balance sheets, cash flow statement, income statement and notes, etc.;

 

7. Relevant rules and regulations on internal operation process, business management and risk management to support proprietary clearing business (applicants for General Clearing Membership shall also include relevant documents for client clearing business);

 

8. Other documents required by SHCH.

 

All the above-mentioned documents shall be affixed with applicants' official seal.

 

Article 9 Applicants shall take all the legal responsibilities for the authenticity, completeness and accuracy of the submitted documents.

 

Article 10 After receiving all the requested application materials, SHCH shall review and reply with the assessment result in a timely manner. Approved applicants will receive a notification in written form.

 

Article 11 Applicants who have received written notifications about the approval of membership application shall complete the following procedures in time:

 

1. Sign clearing member agreement and relevant documents with SHCH.

 

2. Connect IT system with SHCH and complete other technical preparations.

 

3. Pay clearing membership fees and other relevant fees to SHCH.

 

4. Arrange relevant staff to attend CCP clearing trainings organized by SHCH to obtain training certificates.

 

5. Other procedures required by SHCH.

 

Article 12 SHCH will issue qualification documents to the applicants who have completed the above procedures, and announce to the market. Applicants who do not complete the required procedures are deemed to waiver the application of clearing membership.

 

Article 13 Before participating in relevant CCP clearing business, clearing members shall submit relevant documents to SHCH and go through necessary procedures.

 

Class-C Direct Clearing Members applying to participate in a second CCP clearing business shall submit applications to change to Class-A or Class-B Direct Clearing Members.

 

Chapter 4 Change and Termination of Clearing Membership and Annual Assessment

 

Article 14 Clearing members may apply for changing and terminating clearing membership, but cannot transfer membership to other institutions, except for inheriting clearing membership in cases where changes take place such as reorganization, restructuring, merger, spin-off, renaming, etc.

 

Article 15 Clearing members who apply for changing the type of clearing membership should meet the basic criteria for changing clearing membership, and submit the application of changing the type of clearing membership which is signed by legal representative and affixed with official seal, as well as other documents required by SHCH.

 

Article 16 After receiving the requested documents of changing the type of clearing membership, SHCH shall review and reply with the assessment result in a timely manner. Approved applicants will receive a notification in written form.

 

Article 17 After applying to change the type of clearing membership and approved upon verification by SHCH, or requested by SHCH to change the type of clearing membership according to these measures, clearing members should carry out the relevant procedures within 15 business days after receiving relevant written documents from SHCH.

 

After clearing members complete relevant procedures to change its type of clearing membership, SHCH will officially change the type of clearing membership and announce to the market.

 

Article 18 Clearing members who apply for terminating clearing membership should submit the application of terminating clearing membership, which is signed by legal representative and affixed with official seal, as well as other documents required by SHCH.

 

Article 19 After receiving the requested documents of terminating clearing membership, SHCH shall review and reply with the assessment result in a timely manner. SHCH will take the following factors into consideration:

 

1. Whether clearing members have the ability to settle liabilities and claims with SHCH in the CCP clearing services or not;

 

2. Whether clearing members' resigning would significantly affect the market or not;

 

3. Other circumstances identified by SHCH.

 

For those approved upon verification, SHCH will send written notice to clearing members.

 

Article 20 Clearing members should complete the relevant procedures within 15 business days after receiving relevant written documents about termination from SHCH, and settle all liabilities and claims with SHCH for CCP clearing business.

 

After clearing members complete relevant procedures to terminate or resign clearing membership, SHCH will officially terminate their clearing membership and announce to the market.

 

Article 21 SHCH carries out annual assessment for clearing membership. Clearing membership annual assessment, which is based on the audited financial statements, risk report and other relevant information of the clearing members, will determine whether the clearing members are qualified or unqualified.

 

The assessment result will be sent to clearing members in written form after SHCH finishes clearing membership annual assessment.

 

Chapter 5 Rights and Obligations

 

Article 22 Clearing members shall have the following rights:

 

1. To participate in the CCP clearing services provided by SHCH;

 

2. To obtain information relevant to CCP clearing services provided by SHCH;

 

3. To use the terminals provided by SHCH;

 

4. To receive interests of margin contributed according to relevant provisions;

 

5. To receive interests of default fund contributed according to relevant provisions;

 

6. To attend business qualification trainings and other relevant trainings organized by SHCH;

 

7. To have other rights as agreed by both parties.

 

Article 23 In addition to the rights as described in Article 22, General Clearing Members shall also have the following rights:

 

1. To collect relevant clearing fees from their clients;

 

2. To collect margins from their clients, which must be equivalent to or higher than that required by SHCH;

 

3. To recover penalties from their clients when clients default, and results in General Clearing Members making advances to SHCH for client's default;

 

4. To have information relevant to the clients' positions on condition that confidential regulations are complied with;

 

5. To have other rights as agreed by General Clearing Members and their clients.

 

Article 24 Clearing members shall perform obligations as below:

 

1. Comply with regulations relevant to CCP clearing services;

 

2. Assume responsibilities of settlement and delivery for the CCP clearing business that they are involved in;

 

3. Make full contributions of margins and default funds on time;

 

4. Make full payment of clearing member fees, clearing fees and other relevant fees as required on time;

 

5. Keep files relevant to CCP clearing as appropriate;

 

6. Cooperate with SHCH in clearing members' membership assessment and CCP clearing business inspection;

 

7. Within five months of the financial year end, submit annual financial statements for the most recent financial year and other financial information as required by SHCH. At the request of SHCH, submit quarterly or semiannual financial statements and other financial information. Clearing members shall guarantee the authenticity, completeness and accuracy of the financial information submitted;

 

8. Notify SHCH of basic information change and provide relevant supporting materials in a timely manner. Basic information change include changes of legal representative, business scope, registered address, registered capital, and shareholders, etc.

 

9. Notify SHCH of any material event that may jeopardize their ability to perform obligations in a timely manner. In this case, clearing members shall submit reports and relevant supporting materials related to the material event in a timely manner. Such material events include, but are not limited to, any restructure, merger, spinoff, name-change, registered capital reduction, acquisition, reorganization, dissolution, liquidation, bankruptcy; implementing regulatory measures such as suspension of business for rectification, trusteeship, take-over, revoke and closure; any investigation or punishment by regulatory authorities due to material violations of laws and regulations; deterioration of operating or financial conditions, or judicial enforcement that would or may jeopardize clearing members' ability to perform its obligations;

 

10.  Assume other relevant obligations as required by SHCH.

 

Article 25 In addition to the obligations as described in Article 24, General Clearing Members shall also perform the following obligations:

 

1. Segregate proprietary clearing businesses, accounts and staff from those of client clearing services; maintain an independent team for carrying out client clearing services;

 

2. Provide relevant information of client clearing services to clients as needed;

 

3. Establish sound rules and regulations of business management, keep files and information of client clearing services in accordance with relevant rules and regulations. Keep clients information confidential, except in such circumstances as are required by laws and regulations of P.R.C. or by relevant rules and regulations of SHCH;

 

4. Conduct assessments and inspections on clients in areas relevant to CCP clearing on a regular basis; assist SHCH in conducting inspections on clients in areas relevant to CCP clearing;

 

5. Notify SHCH of clients' violation, default and other relevant events in a timely manner;

 

6. Assume other relevant obligations as required by SHCH.

 

Chapter 6 Contact Person Arrangement

 

Article 26 Clearing members shall assign particular persons to contact SHCH. Contact persons are composed of member representatives and business contacts.

 

Article 27 Each clearing member shall appoint a member representative, who is at least a middle-level manager in the clearing member to organize and coordinate business activities between the clearing member and SHCH on behalf of the clearing member.

 

Clearing members shall provide facility for member representatives to perform their duties.

 

Article 28 Clearing members shall appoint several business contact persons based on the need of their CCP clearing services and the requirements of SHCH. The business contact persons shall assist the member representative to perform duties in accordance with the authorization of the clearing members.

 

Article 29 Regarding the nomination of a member representative, clearing members shall submit required documents to SHCH, including nomination files affixed with the official seal, certificate of employment as a middle-level manager or above, contact information of the nominee. Regarding the nomination of business contact persons, clearing members should submit the nomination files and contact information of the nominees to SHCH.

 

After receiving the documents regarding the nomination of member representatives and business contact persons from clearing members, SHCH will make assessment and provide feedback to the clearing members in a timely manner.

 

Article 30 Member representatives and business contact persons shall perform the following duties:

 

1. Organize and handle issues related to the clearing membership qualifications.

 

2. Organize and handle issues for the clearing members to participate in the CCP clearing services of SHCH.

 

3. Organize and submit materials and documents required by SHCH.

 

4. Organize relevant personnel of the clearing members to participate in training and conferences held by SHCH, and the internal business trainings of SHCH.

 

5. Cooperate with SHCH, in modification and testing of relevant IT system.

 

6. Log in the system and official website of SHCH in a timely manner, and receive the notifications and business documents sent by SHCH.

 

7. Inform SHCH of any information changes of the clearing members in a timely manner.

 

8. Urge clearing members to fulfill reporting and other obligations in a timely manner.

 

9. Urge clearing members to pay CCP clearing fees and other fess in a timely manner.

 

10.  Coordinate within the clearing members to conduct work related to SHCH.

 

11.  Perform other duties as required by SHCH.

 

Article 31 In cases of the following circumstances, the clearing members shall replace the original member representatives and business contact persons and submit required written materials to SHCH:

 

1. Member representatives or business contact persons will not assume their positions.

 

2. Member representatives no longer work as middle-level manager or above.

 

3. Member representatives or business contact persons are not able to perform their duties.

 

4. Member representatives or business contact persons make major mistakes and cause serious consequences when performing their duties.

 

5. Other circumstances that SHCH perceives as inappropriate to continue their duties as member representatives or business contact persons.

 

Article 32 When applying to change member representatives or business contact persons, clearing members should provide SHCH with the applications affixed with official seals, together with the materials specified in Article 29.

 

After receiving the required application materials, SHCH will make assessment and provide feedback in a timely manner.

 

Chapter 7 Default Management

 

Article 33 In cases where clearing members breach the Measures or other rules and regulations when participating in SHCH CCP clearing services, SHCH shall take the following measures: verbal warning, written warning, admonitory interviews, submitting an information note within required time, rectification, publishing a notice of criticism and charging penalties, etc. In some serious circumstances, SHCH can restrict, suspend or cancel the qualification of the clearing members to participate in relevant clearing services.

 

Article 34 SHCH is entitled to cancel clearing membership in the following circumstances if the clearing members:

 

1. Are shut down, closed or dissolved in accordance with the law;

 

2. Or undergo administrative or judicial procedures of take-over, bankruptcy, rectification and liquidation or are imposed on regulatory measures such as suspension of business for rectification, trusteeship, take-over, shut-down and closure;

 

3. Or undergo a revocation of Business License of Enterprise Legal Person or other business licenses;

 

4. Or are punished by regulatory authorities due to material violations of laws and regulations, causing significant adverse effects of fulfilling clearing members' duties;

 

5. Or are unable to pay off due liabilities or obviously lack of solvency due to the continuous deterioration of operating or financial conditions;

 

6. Or act fraud and be mala fide in concealing information when applying for the clearing membership;

 

7. Or fail to comply with the provisions of SHCH clearing member qualification or fail to pass the annual assessment of clearing members, and remain unqualified within required time defined by SHCH;

 

8. Or severely violate the Measures, regulations of business management, risk management and other relevant rules, causing significant adverse effects;

 

9. Or are under other circumstances that result in the cancelation of the membership as defined by SHCH.

 

Article 35 In cases where General Clearing Members have the following circumstances, SHCH is entitled to cancel the qualification of General Clearing Members to participate in the CCP clearing business of SHCH as an agent, and may even cancel the General Clearing Membership if the General Clearing Members:

 

1. Severely violate the Measures or other rules of client clearing stipulated by SHCH, causing significant adverse effects;

 

2. Or make mistakes in client clearing business frequently and cause severe adverse effects;

 

3. Or are under other circumstances that SHCH regards appropriate to cancel the qualification of the clearing members to take part in the CCP clearing services as agent, or cancel the General Clearing Membership.

 

The clearing members can apply for changing the type of clearing membership when their General Clearing Membership is canceled while meet the requirements of other types of clearing membership.

 

Chapter 8 Supplementary Provisions

 

Article 36 This Measure shall be explained by SHCH.

 

Article 37 The CCP clearing rules (including but not limited to business rules, business guidance, measures, notices, announcements, guidance and operation procedures) formulate membership management measures in accordance with this Measure.

 

Article 38 This Measure shall take effect as of the date of its promulgation.