Related provisions for REC 2.17.1

(1)

The [UK RIE] must ensure that the systems and controls used in the performance of its [relevant functions] are adequate, and appropriate for the scale and nature of its business.

(2)

Sub-paragraph (1) applies in particular to systems and controls concerning -

(a)

the transmission of information;

(b)

the assessment and management of risks to the performance of the [UK RIE'srelevant functions];

(c)

the effecting and monitoring of transactions on the [UK RIE];

(d)

the operation of the arrangements mentioned in paragraph 4(2)(d); and

(e)

(where relevant) the safeguarding and administration of assets belonging to users of the [UK RIE's] facilities.1

The [UK RIE] must ensure that business conducted by means of itsfacilitiesis conducted in an orderly manner and so as to afford proper protection to investors.1

The [UK RCH] must ensure that itsfacilitiesare such as to afford proper protection to investors.1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that -

access to the [UK RIE's ]facilitiesis subject to criteria designed to protect the orderly functioning of the market and the interests of investors;1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that -

(b)

dealings in [specified investments] on the [UK RIE] are limited to [specified investments] in which there is a proper market;

(c)

appropriate arrangements are made forrelevant informationto be made available (whether by the [UK RIE] or, where appropriate, byissuersof the [specified investments]) topersonsengaged indealingin [specified investments] on the [UK RIE];1

In sub-paragraph [4(2)(c)],

"relevant information" means information which is relevant in determining the current value of the [specified investments].1

Paragraph 10 (Default rules in respect of market contracts)

(1)

The [UK RIE] must havedefault ruleswhich, in the event of amemberof the [UK RIE] being or appearing to be unable to meet his obligations in respect of one or moremarket contracts, enable action to be taken in respect of unsettledmarket contractsto which he is party.

(2)

The [default rules] may authorise the taking of the same or similar action in relation to amemberwho appears to be likely to become unable to meet his obligations in respect of one or moremarket contracts.

(3)

The [default rules] must enable action to be taken in respect of all unsettledmarket contracts, other than those entered into by [anRCH] for the purposes of or in connection with the provision of clearing services for the [UK RIE].

Paragraph 11 (Content of rules)

(1)

This paragraph applies as regards contracts falling within section 155(2)(a) of the Companies Act [1989].

(2)

The [default rules] must provide -

(a)

for all rights and liabilities between those party as principal to unsettledmarket contractsto which the defaulter is party as principal to be discharged and for there to be paid by one party to the other such sum of money (if any) as may be determined in accordance with the [default rules];

(b)

for the sums so payable in respect of different contracts between the same parties to be aggregated or set off so as to produce a net sum; and

(c)

for the certification by or on behalf of the [UK RIE] of the net sum payable or, as the case may be, of the fact that no sum is payable.

(3)

The reference in sub-paragraph (2) to rights and liabilities between those party as principal to unsettledmarket contractsdoes not include rights and liabilities -

(a)

in respect of margin; or

(b)

arising out of a failure to perform amarket contract.

(4)

The [default rules] may make the same or similar provision, in relation to [designated non-members] designated in accordance with the procedures mentioned in sub-paragraph (5), as in relation tomembersof the [UK RIE].

(5)

If such provision is made as is mentioned in sub-paragraph (4), the [UK RIE] must have adequate procedures -

(a)

for designating thepersons, or descriptions of person, in respect of whom action may be taken;

(b)

for keeping under review the question whichpersonsor descriptions of person should be or remain so designated; and

(c)

for withdrawing such designation.

(6)

The procedures must be designed to secure that -

(a)

apersonis not, or does not remain, designated if failure by him to meet his obligations in respect of one or moremarket contractswould be unlikely adversely to affect the operation of the market; and

(b)

a description of persons is not, or does not remain, designated if failure by apersonof that description to meet his obligations in respect of one or moremarket contractswould be unlikely adversely to affect the operation of the market.

(7)

The [UK RIE] must have adequate arrangements -

(a)

for bringing a designation or withdrawal of designation to the attention of thepersonor description of persons concerned; and

(b)

where a description ofpersonsis designated, or the designation of a description of persons is withdrawn, for ascertaining whichpersonsfall within that description.

Paragraph 12 (Content of rules)

(1)

This paragraph applies as regards contracts falling within section 155(2)(b) of the Companies Act [1989].

(2)

The [default rules] must provide -

(a)

for all rights and liabilities of the defaulter under or in respect of unsettledmarket contractsto be discharged and for there to be paid by or to the defaulter such sum of money (if any) as may be determined in accordance with the [default rules];

(b)

for the sums so payable by or to the defaulter in respect of different contracts to be aggregated or set off so as to produce a net sum;

(c)

for that sum -

(i)

if payable by the defaulter to the [UK RIE], to be set off against any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property) so as to produce a further net sum;

(ii)

if payable by the [UK RIE] to the defaulter, to be aggregated with any property provided by or on behalf of the defaulter as cover for margin (or the proceeds of realisation of such property); and

(d)

for the certification by or on behalf of the [UK RIE] of the sum finally payable or, as the case may be, of the fact that no sum is payable.

(3)

The reference in sub-paragraph (2) to the rights and liabilities of a defaulter under or in respect of an unsettledmarket contractincludes (without prejudice to the generality of that provision) rights and liabilities arising in consequence of action taken under provisions of the [default rules] authorising -

(a)

the effecting by the [UK RIE] of corresponding contracts in relation to unsettledmarket contractsto which the defaulter is party;

(b)

the transfer of the defaulter's position under an unsettledmarket contractto anothermemberof the [UK RIE];

(c)

the exercise by theUK RIEof anyoptiongranted by an unsettledmarket contract.

(4)

A "corresponding contract" means a contract on the same terms (except as to price or premium) as themarket contractbut under which thepersonwho is the buyer under themarket contractagrees to sell and thepersonwho is the seller under themarket contractagrees to buy.

(5)

Sub-paragraph (4) applies with any necessary modifications in relation to amarket contractwhich is not an agreement to sell.

(6)

The reference in sub-paragraph (2) to the rights and liabilities of a defaulter under or in respect of an unsettledmarket contractdoes not include, where he acts as agent, rights or liabilities of his arising out of the relationship of principal and agent.

Paragraph 13 (Notification to other parties affected)

The [UK RIE] must have adequate arrangements for ensuring that -

(a)

in the case of unsettledmarket contractswith a defaulter acting as principal, parties to the contract are notified as soon as reasonably practicable of the default and of any decision taken under the [default rules] in relation to contracts to which they are a party; and

(b)

in the case of unsettledmarket contractswith a defaulter acting as agent, parties to the contract and the defaulter's principals are notified as soon as reasonably practicable of the default and of the identity of the other parties to the contract.

Paragraph 14 (Cooperation with other authorities)

The [UK RIE] must be able and willing to cooperate, by the sharing of information and otherwise, with the Secretary of State, anyrelevant office-holderand any other authority or body having responsibility for any matter arising out of, or connected with, the default of amemberof the [UK RIE] or any [designated non-member].

Paragraph 15 (Margin)

(1)

Where the [UK RIE] provides clearing services, the [default rules] of the [UK RIE] must provide that in the event of a default, margin provided by the defaulter for his own account is not to be applied to meet a shortfall on aclientaccount.

(2)

This paragraph is without prejudice to the requirements of anyrulesrelating to clients' money made by the [FSA] under sections 138 and 139 of theAct.1

(1) The [UK RIE] must be a fit and properpersonto perform the [ relevant functions ] of a [ UK RIE ].

(2) In considering whether this requirement is satisfied, the [FSA] may (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the [UK RIE's] connection with anyperson.1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that-

where the [UK RIE's ]facilitiesinclude making provision for the safeguarding and administration of assets belonging to users of thosefacilities, satisfactory arrangements are made for that purpose.1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that -

satisfactory arrangements are made for securing the timely discharge (whether by performance, compromise or otherwise) of the rights and liabilities of the parties to transactions effected on the [UK RIE] (being rights and liabilities in relation to those transactions);1

(1) The [UK RIE] must be able and willing to promote and maintain high standards of integrity and fair dealing in the carrying on ofregulated activities by persons in the course of using the facilities provided by the [UK RIE].

(2) The [UK RIE] must be able and willing to cooperate by the sharing of information or otherwise, with the [FSA], with any other authority, body orperson having responsibility in theUnited Kingdom for the supervision or regulation of anyregulated activity or other financial service, or with anoverseas regulator within the meaning of section 195 of theAct.1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that-

satisfactory arrangements are made for recording transactions effected on the [UK RIE], and transactions (whether or not effected on the [UK RIE ]) which are cleared or to be cleared by means of itsfacilities;1

(1) In considering whether a [UK recognised body] or applicant satisfiesrecognition requirementsapplying to it under these [Recognition Requirements Regulations], the [FSA] may take into account all relevant circumstances including the constitution of thepersonconcerned and its regulatory provisions and practices within the meaning of section 302(1) of theAct.

(2) Without prejudice to the generality of paragraph (1), a [UK recognised body] or applicant may satisfyrecognition requirements applying to it under these [Recognition Requirements Regulations] by making arrangements for functions to be performed on its behalf by any otherperson.

(3) Where a [ UK recognised body ] or applicant makes arrangements of the kind mentioned in paragraph (2), the arrangements do not affect the responsibility imposed by the Act on the [UK recognised body] or applicant to satisfy recognition requirements applying to it under these [Recognition Requirements Regulations ], but it is in addition a recognition requirement applying to the [UK recognised body] or applicant that the person who performs (or is to perform) the functions is a fit and proper person who is able and willing to perform them.1

(1) The [UK RIE] must ensure that appropriate procedures are adopted for it to make rules, for keeping its rules under review and for amending them.

(2) The procedures must include procedures for consulting users of the [UK RIE's ] facilities in appropriate cases.

(3) The [UK RIE ] must consult users of itsfacilities on any arrangements it proposes to make for dealing with penalty income in accordance with paragraph 8(3) ... (or on any changes it proposes to make to those arrangements).1

(1) The [UK RIE] must have financial resources sufficient for the proper performance of its [ relevant functions] as a [UK RIE].

(2) In considering whether this requirement is satisfied, the [FSA] may (without prejudice to the generality of regulation 6(1)) take into account all the circumstances, including the [UK RIE's] connection with anyperson , and any activity carried on by the [UK RIE], whether or not it is anexempt activity.1

(1)

The [UK RIE] must have effective arrangements for monitoring and enforcing compliance with -

(a)

its rules (including rules in relation to the provision of clearing services in respect of transactions other than transactions effected on the [UK RIE]); and

(b)

the arrangements made by it as mentioned in paragraph 4(2)(d) . .

(2)

Arrangements made pursuant to sub-paragraph (1) must include procedures for -

(a)

investigating complaints made to the [UK RIE] about the conduct ofpersonsin the course of using the [UK RIE's ] facilities; and

(b)

the fair, independent and impartial resolution of appeals against decisions of the [UK RIE].

(3)

Where arrangements made pursuant to sub-paragraph (1) include provision for requiring the payment of financial penalties, they must include arrangements for ensuring that any amount so paid is applied only in one or more of the following ways -

(a)

towards meeting expenses incurred by the [UK RIE] in the course of the investigation of the breach in respect of which the penalty is paid, or in the course of any appeal against the decision of the [UK RIE] in relation to that breach;

(b)

for the benefit of users of the [UK RIE's ] facilities;

(c)

for charitable purposes.1

(1)

The [UK RIE] must have effective arrangements for the investigation and resolution of complaints arising in connection with the performance of, or failure to perform, any of itsregulatory functions.

(2)

But sub-paragraph (1) does not extend to -

(a)

complaints about the content of rules made by the [UK RIE], or

(b)

complaints about a decision against which the complainant has the right to appeal under procedures of the kind mentioned in paragraph 8(2)(b).

(3)

The arrangements must include arrangements for a complaint to be fairly and impartially investigated by apersonindependent of the [UK RIE], and for him to report on the result of his investigation to the [UK RIE] and to the complainant.

(4)

The arrangements must confer on thepersonmentioned in sub-paragraph (3) the power to recommend, if he thinks appropriate, that the [UK RIE] -

(a)

makes a compensatory payment to the complainant,

(b)

remedies the matter complained of,

or takes both of those steps.

(5)

Sub-paragraph (3) is not to be taken as preventing the [UK RIE] from making arrangements for the initial investigation of a complaint to be conducted by the [UK RIE].1

Without prejudice to the generality of sub-paragraph [4(1)], the [UK RIE] must ensure that-

appropriate measures are adopted to reduce the extent to which the [UK RIE's]facilitiescan be used for a purpose connected withmarket abuseorfinancial crime, and to facilitate their detection and monitor their incidence;1