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HKFE Clearing Corporation Limited Principles for Financial Market Infrastructures Disclosure December 2014

HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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Page 1: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

HKFE Clearing Corporation Limited

Principles for Financial Market

Infrastructures Disclosure

December 2014

Page 2: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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HKF

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Page 3: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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Page 4: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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Page 5: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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Table

Gloss

I. E

II. S

III. G

IV. P

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ember 2014

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Executive Su

Summary of

General Bac

Principle-by-

Principle 1:

Principle 2:

Principle 3:

Principle 4:

Principle 5:

Principle 6:

Principle 7:

Principle 8:

Principle 9:

Principle 10:

Principle 11:

Principle 12:

Principle 13:

Principle 14:

Principle 15:

Principle 16:

Principle 17:

Principle 18:

Principle 19:

Principle 20:

Principle 21:

nts

....................

ummary .......

Major Chan

ckground on

-principle Sum

Legal Bas

Governan

Framewo

Credit Ris

Collateral

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Liquidity R

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Money Se

Physical D

Central S

Exchange

Participan

Segregati

General B

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mmary Discl

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rk for the Co

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Risk .............

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ettlements ....

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ecurities Dep

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nal Risk ........

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omprehensive

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ettlement Sys

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HKCC ument

Page 5

....... 3

....... 7

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.. 38

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.. 45

.. 46

.. 47

.. 48

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.. 50

.. 53

.. 56

.. 58

.. 60

.. 63

.. 65

.. 67

.. 68

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P

P

P

V. L

ember 2014

Principle 22:

Principle 23:

Principle 24:

List of Public

Communi

Disclosure

Disclosure

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ication Proce

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Resources o

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Page 7: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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I. E

1. H

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4 ThDeTra

ember 2014

Executive S

HKFE Clear

subsidiary of

exchange co

HKCC is re

statutory reg

Securities a

recognised c

limited excep

“recognised

recognised b

HKCC and is

As an RCH,

SFO, which

published gu

that these ap

HKCC provid

operates the

comprehens

settlement o

liquidity risks

the additiona

general busi

HKCC’s app

this disclosu

guidelines se

CPSS-IOSC

KCC was firstouses) Ordina

be effective mains in force

Controller” is deorporation) or orporation).

hree of the 24 eliveries, Princrade Repositor

Summary

ing Corporat

f Hong Kong

ompany who

ecognised by

gulator for t

nd Futures

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HKCC is req

are further d

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ive risk ma

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s. HKCC ha

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efined to mear an “indirect

PFMI principlciple 11: Centries.

tion Limited

g Futures Exc

lly-owned by

y the Secur

the securitie

Ordinance (

se (RCH). S

erson shall b

controller” 3 .

HKEx, thr

blic company

quired at all t

described in

uiring RCHs

tral counterp

and settlem

nised futures

anagement f

erivatives co

as appropriat

its services

ustody and in

observing eac

t. This docu

he Disclosure

ber 2012.

as an RCH inognition underthe transitionate of this docu

n a “shareholdcontroller” (i

les are not apptral Securities

(HKCC)2 is

change Limi

y Hong Kong

rities and Fu

es and futur

(Cap. 571 o

Section 59(1

become a “co

Currently,

rough HKFE

y in Hong Ko

times to com

this disclos

to observe o

party (CCP).

ment services

s exchange in

framework w

ontracts, by

te policies, p

are expose

nvestment ris

ch applicable

ument is writ

e framework

n 1995 under r the SFO (whal provisions iument.

der controller”(i.e. a person

plicable to HKDepositories

a Hong Kon

ted (HKFE),

g Exchanges

utures Com

res markets,

of the Laws

1) of the SFO

ontroller” of a

, HKEx is t

E, owns the

ong.

mply with var

ure docume

on an ongoin

s for the con

n Hong Kong

which is de

adequately

rocedures an

ed to, includ

sks, and ope

e principle4 i

tten pursuant

k and Assess

the repealed hich came intoin Schedule 1

” (i.e. a personn controlling

KCC as a CCP.and Principle

PFMI DisclExe

ng incorpora

which is a r

and Clearin

mission (SF

under Sec

of Hong K

O provides th

an RCH unle

the only exc

entire issued

ious statutory

nt. In Augu

g basis the P

tracts traded

g. HKCC h

signed to e

controlling c

nd controls in

ing legal risk

rational risk.

n the PFMI a

t to and in ac

sment metho

Securities ano force in April10 of the SFO

n controlling 355% or more

P. They are P24: Disclosur

Hlosure Docuecutive Sum

P

ated wholly-o

recognised fu

g Limited (H

FC), Hong K

ction 37(1) o

Kong) (SFO)

hat subject to

ess the perso

xchange con

d share cap

ry duties und

ust 2013, the

PFMI, to the e

d on HKFE,

has implemen

ensure the

credit, marke

n place to ma

k, settlemen

are summari

ccordance w

odology issu

nd Futures (Cll 2003) was deO. The reco

5% voting righvoting rights

Principle 10: Phre of Market D

HKCC ument

mmary

Page 7

owned

utures

HKEx).

Kong’s

of the

as a

o very

on is a

ntroller

pital of

der the

e SFC

extent

which

nted a

timely

et and

anage

nt risk,

sed in

ith the

ued by

learing eemed gnition

hts of a s of a

hysical Data by

Page 8: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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II. S

5. T

ember 2014

Summary o

This is HKCC

of Major Ch

C’s first PFM

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MI disclosure

nce the Las

document.

st Update o

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losure

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Page 8

Page 9: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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III. G

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ember 2014

General Ba

eral Descrip

HKCC was

settlement sy

CCP provid

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As an RCH o

HKCC acts

further detail

the derivativ

managemen

anisational S

As mentione

exchange co

including the

HKEx is thus

functioning o

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(SEHK). It

houses in Ho

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ackground

ption of HKC

incorporated

ystem (DCA

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ollateral rece

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below. It a

ves market

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ontroller und

e duty to en

s legally oblig

of HKCC.

sted compan

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ong Kong an

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ong Securitie

HK Options

earing Hong

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CC and the M

d in 1984.

SS) and the

and settlem

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in Hong Ko

market part

HKCC

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er Division 4

nsure that an

ged to take o

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nd the United

Exchange;

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common co

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ny RCH con

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work under D

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PFMI DisclGen

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CC);

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Hong Kong L

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Page 9

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Page 10: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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o provide le

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gement Com

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nvestment po

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y Committee

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try experts in

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ectively.

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ary and Dis

e board of d

member(s) o

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or other pers

with membe

n the clearin

nt to provide

HKSCC, HKC

department

ent of HKCC

nk of England ich come into n Securities annnounced its s

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CC Board w

rages the bo

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ory Committe

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irectors and

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d has delega

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directors of

of the HKFE

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ers selected

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pertise

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rations

ible to

nancial August uthority nch on

Page 11: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

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ember 2014

uct Coverag

HKCC clear

derivatives p

(a) equity in

(b) equity p

(c) currency

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(f) metal pr

All derivative

namely Renm

are settled u

The average

interest of 1.

cipants of H

HKCC Partic

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42. A

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Dece

IV.

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Dece

1.4

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Page 21: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

Dece

Prin

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ember 2014

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Dece

2.5

2.6

2.7

15 Di

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Dece

2.8

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Dece

2.12

HKCC

2.13

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Dece

Prin

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Dece

Risk

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Dece

3.3

Reco

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Dece

Prin

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Dece

4.2

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Dece

Stres

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Dece

4.18

Use o

4.19

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Dece

4.24

Reco

4.25

4.26

ember 2014

no cap o

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Dece

Prin

An F

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5.1

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5.4

ember 2014

nciple 5:

FMI that req

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information v

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Dece

5.5

5.6

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5.7

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5.8

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5.10

5.11

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ne the colla

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PFMI DisclPrinc

atility of the c

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exceptional s

be conduct

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nd internal p

ateral require

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collateral bas

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ateral type.

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ank in Luxem

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procedures.

rements of H

CMS also faci

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at only acce

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entration limit

d manageme

HKCC ument ateral

age 37

sed on

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ss the

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in the

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Page 38: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

Dece

Prin

A C

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6.1

Varia

6.2

CH M

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on

ember 2014

nciple 6:

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exposure

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majority o

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cover its cre

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its current cr

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of HKCC pro

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ark Rates wit

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assessmen

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Page 39: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

Dece

Marg

6.5

6.6

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6.7

6.8

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6.9

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AcnaAc

ember 2014

in Rate (Mar

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market fa

situations

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circulars.

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a gross b

net basis

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instrumen

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after the e

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following

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million.

he minimum ra

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rgin Rate)

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age 39

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Dece

6.10

Holid

6.11

Conc

6.12

Price

6.13

ember 2014

In additio

HKCC pr

intra-day

market pr

HKCC co

(please r

monitorin

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of lodged

within one

day Margin

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designed

markets

movemen

holidays.

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to mitigate

after a hol

nts or the o

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all will be trigg

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description

close of the m

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notification.

arrangement

the potenti

iday break

occurrence o

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llect Holiday

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all futures a

price data ne

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prices with r

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ment on eac

ciple 4: Cre

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used if neces

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ticipants with

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events during

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more than 30

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ssary.

Hlosure Docurinciple 6: M

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cted based o

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y market vol

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HKCC ument

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age 40

in any

on the

vailing

latility,

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CBPL

HKCC

ls (net

mount

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retion,

Page 41: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

Dece

Back

6.14

6.15

6.16

6.17

ember 2014

k-testing and

HKCC co

Margin R

HKCC Pa

with the M

HKCC pe

how the

conditions

closing-o

conducte

concentra

A high lev

the public

HKCC wi

2015. T

the mode

d Sensitivity

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articipants’ C

Margin.

erforms sens

level of Mar

s with diffe

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c via the HKE

ll arrange an

The validation

el as well as t

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y Margin bac

e actual daily

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sitivity analys

gin coverage

erent assum

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n will include

the back-test

of the Margi

k-testing to t

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counts by co

sis of the ma

e and risk e

mptions and

periods of d

the market is

an individua

-testing and

on a monthly

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the assessm

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test (a) Marg

ements; and

omparing the

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xposures ar

model pa

different dur

s unusually v

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sensitivity an

basis.

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ment of the ro

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PFMI DisclPr

gin coverage

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del on a mo

e affected b

rameters su

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volatile, less

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margining m

obustness an

Hlosure Docurinciple 6: M

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by comparin

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closing-out l

nthly basis t

by different m

uch as a l

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liquid or whe

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ts are disclos

model starting

nd effectiven

HKCC ument

Margin

age 41

ng the

on all

osses

to test

market

longer

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en the

cantly.

sed to

g from

ess of

Page 42: HKFE Clearing Corporation Limited Principles for … · Del N Hon Exc Ent Fin Sec Hon E Hon CL Hon A Hon Inve ... rinciple 15: rinciple 16: rinciple 17: rinciple 18: ... and Mar e

Dece

Prin

An

sho

and

high

incl

gen

mar

Sour

7.1

Liquid

7.2

ember 2014

nciple 7:

FMI should

ould maintai

d, where app

h degree of

ude, but no

nerate the la

rket conditio

rces of Liqu

The majo

(a) Defa

prim

loss;

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selec

henc

(c) Ope

HKC

Marg

Bank

asso

Settl

Parti

(d) Illiqu

that

desc

Resources

The liquid

SEOCH b

HKEx com

the HKEx

Adjustme

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d effectively

n sufficient

propriate, int

confidence

ot be limited

argest aggre

ons.

idity Risks

or sources of

ault of HKC

arily in relati

;

ault of liquid

cted liquidity

ce HKCC fac

rational or

CC also faces

gin and RF

k(s)/custodia

ociated with t

ement Bank

icipant; and

uidity of inv

investment

cription unde

s

dity requirem

by HKEx at

mpares the

x Group inclu

ents to the ma

isk

y measure,

liquid resou

traday and m

under a wid

d to, the defa

egate liquidi

HKCC’s liqu

CC Participa

ion to the fun

dity provider

y providers t

ces the risk o

financial fa

s liquidity risk

collateral o

an bank(s).

the default o

k is also a

estments or

portfolios ar

r Principle 16

ment of HKC

the HKEx G

availability o

uding HKCC

aturities of th

monitor, a

urces in all

multiday se

de range of

ault of the p

ity obligatio

uidity risks ar

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nding of the

rs – HKEx h

to meet the

of default of o

ailure of Se

ks related to

of HKCC P

HKCC als

of any entity

a liquidity pr

r collateral –

re sufficiently

6: Custody a

CC is mana

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of respective

C on a daily

he funds inve

nd manage

relevant cur

ettlement of

potential st

participant a

on for the FM

re as follows

CCP, HKC

defaulting H

as arranged

liquidity nee

one or more

ettlement B

the inability

Participants

so takes in

that takes o

rovider and/

– HKEx’s Inv

y liquid at a

and Investme

aged togethe

but in segreg

funds again

basis when

ested will be

PFMI DisclPrinciple 7

e its liquidit

rrencies to e

payment ob

tress scena

and its affili

MI in extrem

:

C is expose

HKCC Partici

committed c

eds at the H

liquidity prov

Bank(s)/cust

to meet the

due to failu

to account

on multiple ro

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vestment Pol

all times. P

ent Risks.

er with those

ated and de

nst the liquid

making inve

made where

Hlosure Docu7: Liquidity

Pa

ty risk. An

effect same

bligations w

rios that sh

iates that w

me but plaus

ed to liquidit

ipant’s closin

credit facilitie

HKEx Group

viders;

todian bank

release of s

ure of Settle

the liquidity

oles, e.g. wh

ate of an H

icy aims to e

lease refer

e of HKSCC

edicated acco

dity requirem

estment deci

e necessary.

HKCC ument y Risk

age 42

FMI

e-day

with a

ould

ould

sible

ty risk

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k(s) –

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ent of

sions.

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Dece

7.3

7.4

7.5

7.6

Mana

7.7

7.8

25 Gu

ember 2014

HKEx inv

with low c

Investme

concentra

sufficient

To mitiga

of the Ma

HKCC, t

systemica

In additio

on its ow

the liquid

however,

facilities w

USD and

situation,

HKCC an

next two

facilities o

pursuant

HKEx ha

HKEx Gro

be utilised

fixed-term

facility dra

tests on

committe

aging Liquid

HKCC me

collateral

volatility

collateral

The liqui

accordan

HKEx ma

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credit, marke

nt Policy als

ation limit for

liquid resour

te issues rela

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that can be

ally importan

n to using th

wn corporate

dity needs of

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with options

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these faciliti

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business d

of HK$6 billio

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med bank de

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liquidity pro

d bank facilit

dity Risk and

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on a daily b

is taken into

needed for r

dity requirem

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number of po

d is the default

funds, RF,

et and liquidit

so sets out m

r each Settle

rces to meet

ating to coun

RF, guarante

e deposited

nt HKD note-

he Margin, R

funds (inclu

f HKCC. H

arranged a

to draw dow

m selected l

es, together

porate funds

ays following

on are also a

.

d procedure

sal to comple

tional resour

posits, sales

sed on the p

oviders are

ties are read

d Stress Tes

money oblig

basis. Infor

o considerat

release.

ment related

redefined str

iquidity fund

otential stres

t fund of HKSC

guarantee f

ty risks in acc

minimum liqu

ement Bank/

t projected an

nterparty con

ee fund and

with any

issuing bank

F and HKCC

ding the RM

KEx does n

a total of H

wn on the s

liquidity prov

with the defa

would be av

g the occur

available in c

es in applying

ete its payme

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prevailing ma

conducted

dily available

sting

gations arisin

rmation on o

tion, which h

d to HKCC

ress testing

ding at the H

ss scenarios,

CC.

fund25 and c

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uidity require

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nd stressed f

ncentration, a

corporate fu

one of its

ks.

C corporate f

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not have acc

K$10 billion

ame day in

viders. In

aulting HKCC

vailable to me

rence of the

case of need

g different ty

ent obligation

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nvestment ho

arket conditio

on an annu

when neede

ng from relea

pen interest

has an impa

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policy, assu

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PFMI DisclPrinciple 7

corporate fun

th the Investm

ements on in

ank to ensur

funding requ

a cap is set o

nds of HKEx

counterpart

fund on hand

d liquidity fa

cess to centr

unsecured

different cur

an HKCC P

C Participant

eet the liquid

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d, but do not

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ual basis to

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ases of surpl

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Hlosure Docu7: Liquidity

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nds only in a

ment Policy.

nvestments

re that HKC

uirements.

on the total am

x Group, inc

ties includin

d, HKEx may

acilities to ad

ral bank ser

committed

rrencies, inc

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t’s Margin, th

dity needs ov

Uncommitted

t count as liq

d resources

h on hand w

arly-terminat

or committed

ounced draw

o ensure tha

us Margin an

day-to-day m

amount of M

measured da

d procedures

daily assess

the participan

HKCC ument y Risk

age 43

assets

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and a

C has

mount

luding

g the

y draw

ddress

rvices;

credit

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default

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quidity

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aily in

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sment

nt and

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Dece

7.9

7.10

Cont

HKCC

7.11

Reple

7.12

ember 2014

its affiliat

HKCC an

(such ass

sufficienc

Risk). T

HKSCC,

period.

default of

Group lev

The Risk

HKCC’s s

monthly b

model to

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methodol

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tingency Arr

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Under HK

HKCC ar

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amount d

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when and

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different c

as HKCC

enishment of

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Dece

Prin

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8.1

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nciple 8:

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Dece

Prin

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Dece

Prin

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Phys

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nciple 10:

FMI should

truments or

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erivatives co

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Dece

Prin

A C

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ember 2014

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Dece

Prin

If an

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12.1

12.2

12.3

27 Tra

pr

ember 2014

nciple 12:

n FMI settle

mple, secur

conditioning

er.

HKCC se

the settle

settlemen

settling of

expiries in

For the fin

CMU27 to

simultane

mechanis

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correspon

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RMB/USD

CCMS Co

settlemen

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have bee

ransactions serotected by the

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ettles EFN fut

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nal settlemen

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leg constitut

bligations by

nt day. HKC

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ollateral Acc

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nal settlemen

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ettled throughe CSSO.

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of-value Set

ons that inv

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tures contrac

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ntracts, and t

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nt of EFN fut

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transaction

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tes linked ob

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nt day, if and

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Dece

Prin

An

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13.1

13.2

28 HK

AcClbe

ember 2014

nciple 13:

FMI should

ticipant defa

can take ti

et its obligat

nt of Default

The HKC

event of d

Default in

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and

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HKCC Pa

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pant’s failure

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C Participant’s

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stipulate that CC Participanut the amount f House Collat

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early define

procedures s

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ault events a

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under HKCC

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faulting HKC

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any amount t may be applstanding to th

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articipant-de

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should be d

nd liquidity

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y payment o

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CC Participan

Default, HKC

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ipant’s part

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with the ass

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d procedure

designed to

pressures a

ns that can b

n HKCC Rule

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sition limits im

nt.

CC may decl

and, in its ab

icipantship

lities;

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ant to meet t

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and continu

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he House Coilities in respecteral Account

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Dece

Defau

13.3

13.4

Total

13.5

13.6

29 Cu30 Cu

ember 2014

ult Procedu

HKCC ha

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The deta

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contributions

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aterial chan

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any insuranc

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e arrangemen

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KCC Particip

the open co

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procedures,

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Dece

13.7

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13.8

ember 2014

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vent of an H

obligations, H

cription unde

ed default los

fault Losses

vent of an HK

ons to the

o share the d

e contributio

articipants to

plication with

by HKCC

ulting HKCC

period specif

r information

Prin

HKCC Partic

HKCC may a

er Principle

ss.

s and Reple

KCC Particip

RF are used

default loss o

ons to the RF

o replenish t

hin three bu

. Similarly

Participants

fied. Please

n.

nciple 13: Pa

ipant defaul

apply funding

4: Credit R

enishment/R

pant default

d to cover a

on a pro-rata

F immediate

the deficienc

usiness days

y, if the fu

s are required

e refer to the

articipant-de

t and that th

g available u

Risk for furth

Repayment A

where non-

a default los

a basis by re

ly prior to th

cy of their R

s or such o

unding ava

d to repay HK

e description

PFMI Disclefault Rules

he RF is ins

under the CA

her informat

Arrangemen

defaulting H

ss, such con

ference to H

he default. H

F Contributio

other time p

ilable under

KCC on a pro

under Princ

Hlosure Docus and Proced

Pa

sufficient to

AC (please re

tion) toward

nts

HKCC Partici

ntributions w

HKCC Partici

HKCC will re

ons as a res

period as m

r CAC is

ro-rata basis

ciple 4: Cred

HKCC ument dures

age 52

cover

efer to

s any

pants’

will be

pants’

equire

sult of

ay be

used,

within

it Risk

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Dece

Prin

A C

pos

resp

14.1

14.2

Acco

14.3

14.4

31 Th

byof Ac

ember 2014

nciple 14:

CP should h

sitions of a

pect to thos

The SFO

safeguard

HKCC Pa

routine m

HKCC re

positions

Accounts

descriptio

HKCC op

Contracts

registered

to open

recording

positions

recipient

(please r

relationsh

ount Structu

HKCC of

Participan

Participan

Accounts

arising fro

Market M

Omnibus

Individua

same clie

The SFO

trade and

here is anothey an HKCC Paf the same beccount.

Segregation

have rules a

participant

se positions

O lays out var

ding of client

articipants.

market interm

equires HKC

and collate

s and CCMS

ons under pa

perates a pri

s with HKCC

d in their Cle

various Cle

g of their cl

and collate

HKCC Parti

refer to the d

hip with any c

ure

ffers differen

nts and the

nt to record i

s to record its

om market m

Maker Accoun

Client Acco

l Client Acco

ent are eligib

O requires HK

d whether it w

er net marginearticipant to reeneficial owne

n and Porta

and procedu

t’s custome

.

rious require

t positions a

Compliance

ediaries’ sup

CC Participa

ral from the

S Collateral

aragraphs 14

incipal-based

C Participant

earing Accou

aring Accou

ients’ positio

eral to anoth

icipant and t

description u

client of HKC

nt types of C

eir clients.

its house po

s clients’ pos

making activi

nt are margin

ount are ma

ounts31 are m

le to be main

KCC Particip

was executed

ed client accouecord positionser whose pos

P

ability

ures that en

ers and the

ements for re

and collateral

e with these

pervision pro

ants to prop

eir own by m

Accounts o

4.3 and 14.5

d clearing m

ts as princip

nts. HKCC

unts and CC

ons and ass

her HKCC P

their complia

under parag

CC Participan

Clearing Ac

HKCC prov

sitions, Omn

sitions, and M

ties. Positio

ned on a net

argined on a

margined on

ntained in an

pants to iden

d as principa

unt called Clies which are ofsitions would

Principle 14:

nable the seg

e collateral

ecording clien

l by all licens

requiremen

ogram condu

erly identify

making use

offered by H

for more det

model. As th

pal in respec

C provides HK

CMS Collate

sociated col

Participant s

ance with re

raph 14.4),

nts.

counts to re

vides a Hou

nibus Client A

Market Make

ons maintain

t basis. Cli

a gross bas

a net basis.

n Individual C

ntify each tra

al or agent a

ent Offset Claf an offset natuotherwise be

PFMI Discl Segregatio

gregation an

provided to

nt trades and

sed corporat

ts is assess

cted by the S

and segreg

of different

HKCC. Ple

ails.

he CCP, HKC

ct of each de

KCC Particip

eral Accounts

llateral, and

subject to th

elevant provi

but has no

ecord the po

use Accoun

Accounts an

er Accounts t

ned in the Ho

ent positions

sis while tho

Only positi

Client Accoun

ade as being

nd this inform

im Account. Ture (e.g. a cal recorded in

Hlosure Docuon and Porta

Pa

nd portabili

o the CCP

d segregatin

tions includin

sed as part

SFC. In ad

gate their c

types of Cle

ease refer t

CC settles M

erivatives co

pants with fac

ts to facilitat

porting of

he consent o

isions of the

direct contr

ositions of H

t to each H

nd Individual

to record pos

ouse Accoun

s maintained

ose maintain

ions owned

nt.

g a house or

mation is rec

This account ilendar spreadan Omnibus

HKCC ument ability

age 53

ty of

with

ng and

ng the

of the

dition,

clients’

earing

to the

Market

ontract

cilities

te the

these

of the

e SFO

actual

HKCC

HKCC

Client

sitions

nt and

d in an

ned in

by the

client

corded

s used d trade)

Client

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Dece

14.5

14.6

14.7

Porta

14.8

32 W

ember 2014

in contra

Participan

As menti

different t

Collatera

them to s

and them

own colla

arising fro

Account o

Collatera

all clients

all client

Client Acc

with the H

collateral

conducte

positions

Maker C

Participan

Collatera

of client p

the credit

applied b

amount s

liabilities

Details of

their pos

which is p

ability Arran

HKCC off

if necessa

the recipi

powers u

defaulting

HKCC Pa

consent f

While there is

act notes p

nt’s records.

oned in Prin

types of CCM

l Account an

separately id

mselves. Th

ateral and c

om positions

of the HKCC

l Account is f

s of an HKCC

accounts of

counts) to th

HKCC Partic

and collate

d by an HKC

in the Marke

ollateral Acc

nt.

l in client acc

positions only

t of the Hou

by HKCC to s

standing to th

of House Co

f the accoun

itions and c

publicly avail

ngements

fers facilities

ary, the asso

ent HKCC P

under its def

g HKCC Part

articipant to

from the recip

no specific r

rovided to

nciple 5, HK

MS Collatera

nd Market Ma

entify and ha

e House Co

collateral mo

s of an HKCC

Participant a

for recording

C Participant

an HKCC P

is Client Col

cipant. The

ral moveme

CC Participan

et Maker Acc

count of the

counts of an

y. HKCC R

se Collatera

set off liabilit

he credit of a

ollateral Acco

nt structure

collateral are

able on the H

to support H

ociated Marg

articipant.

fault procedu

ticipant, at th

gether with

pient HKCC

restriction on

P

the clients

KCC manage

al Account, i

aker Collate

andle collate

llateral Acco

ovement tra

C Participant

and settles n

g the collater

t. HKCC po

Participant (i.

lateral Accou

e Market Mak

ent transactio

nt or its client

count of an H

e HKCC Pa

HKCC Parti

Rules 415 and

al Account of

ties in respec

any Client Co

ount.

available for

e documente

HKEx websit

HKCC Partici

in to other H

In the event

ures to facili

he request of

the Margin

Participant a

transfer of p

Principle 14:

and mainta

es collateral

including Ho

ral Account

eral relating t

ount is for rec

ansactions.

t’s House Ac

net with the H

ral and collat

osts all obliga

e. Omnibus

unt of the HK

ker Collatera

ons arising f

t. HKCC po

HKCC Partic

rticipant and

cipant will be

d 416 stipula

f the default

ct of its Clien

ollateral Acc

r HKCC Par

ed in Chapte

te.

pants to tran

HKCC Particip

of an HKCC

tate the tran

f the clients,

in respect

and other con

positions for a

PFMI Discl Segregatio

ained as pa

via CCMS.

use Collater

to HKCC Pa

to their client

cording an H

HKCC pos

ccount to this

HKCC Partic

eral moveme

ations arising

Client Acco

KCC Participa

al Account is

from market

osts all obliga

cipant to the

d settles ne

e used for co

te that any a

ing HKCC P

nt Collateral

ount cannot

ticipants to

er I of the H

nsfer their clie

pants subjec

Participant d

nsfer of clien

to a nominat

of such pos

nditions32.

an Omnibus

Hlosure Docuon and Porta

Pa

art of the H

HKCC pro

ral Account,

articipants to

ts, market m

HKCC Partici

sts all oblig

s House Col

cipant. The

ent transactio

g from positio

ount and Indi

ant and settl

s for recordin

t making act

ations arising

applicable M

et with the H

overing oblig

amount stand

Participant m

Accounts, b

be used to s

use for man

HKCC Proce

ents’ position

ct to the cons

default, HKC

nt positions

ted non-defa

sitions, subj

Client Accoun

HKCC ument ability

age 54

HKCC

ovides

Client

allow

makers

pant’s

ations

lateral

Client

ons of

ons of

vidual

es net

ng the

tivities

g from

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HKCC

ations

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may be

but the

set off

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edures

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sent of

CC has

of the

aulting

ect to

nt and

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Dece

14.9

Indthe

ember 2014

HKCC ha

portability

opinions

dividual Cliene positions in

as also confir

y arrangeme

procured fro

t Account, anythat account p

rmed the lega

nts provided

m an indepe

y transfer in apursuant to Se

P

al soundnes

d by HKCC

endent law fir

a Client Offsetection 1.4.3 of

Principle 14:

s and enforc

under Hong

rm in Hong K

t Claim Accouf HKCC Proce

PFMI Discl Segregatio

ceability of th

Kong law b

Kong.

unt must be foedures.

Hlosure Docuon and Porta

Pa

e segregatio

based on the

or all, but not p

HKCC ument ability

age 55

on and

e legal

part, of

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Dece

Prin

An

suff

so t

mat

reco

Ident

15.1

15.2

Finan

15.3

ember 2014

nciple 15:

FMI should

ficient liquid

that it can

terialise. Fu

overy or ord

tification of

HKCC us

material

identificat

an evalua

implemen

and mana

HKCC ha

including:

(a) the

jurisd

HKC

(b) mark

prod

com

(c) the e

(d) oper

(e) the

Princ

ncial Resou

In its ann

forecast t

scenarios

financial

and expe

HKCC, to

obligation

General Bu

d identify,

d net assets

continue o

urther, liquid

derly wind-d

Business R

ses the HKE

risks includi

tion of intern

ation of their

nts key finan

age the risks

as identified

:

pace and d

dictions and

CC;

ket condition

ucts, a dev

petitive adva

effectiveness

rational issue

investment

ciple 16: Cus

rces for Bus

nual budget

the operating

s. In additi

position thro

enses, cash

o ensure suf

ns.

siness Risk

monitor, an

s funded by

perations a

d net asset

down of criti

Risks

Ex Group’s

ng its gener

al and exter

impacts and

cial and inte

s.

external an

direction of

the impact

ns and the p

veloping ma

antage;

s of HKCC’s

es that may i

risk in its o

stody and Inv

siness Oper

planning, HK

g and capital

on, HKEx m

ough monthly

in and out flo

fficient liquid

k

nd manage

equity to co

and services

ts should a

ical operatio

ERM framew

ral business

nal factors th

d the likelihoo

ernal controls

d internal fa

legislative

this may ha

pace of dev

arket segme

business str

mpact HKCC

own assets.

vestment Ris

rations

KEx takes in

budget unde

monitors the

y reviews of

ows, both at

net assets

Principl

its genera

over potenti

s as a goin

at all times

ons and serv

work to iden

risk. The

hat could imp

od of occurre

s and plans t

actors that p

reform in H

ve on user-p

velopment o

ent in which

rategy;

C’s expenditu

Please re

sks.

nto account i

er normal, low

e impact of

profit and lo

t HKEx and

are maintain

PFMI Discle 15: Gener

al business

ial general b

ng concern

be sufficie

vices.

ntify, monitor

ERM framew

pair HKCC’s

ence. HKC

to mitigate, e

pose busines

Hong Kong

participation

f offshore R

h HKCC ex

ure and inves

efer to the

ts three-yea

w and high tr

general bus

oss, actual an

its subsidiar

ned to meet

Hlosure Docural Business

Pa

s risk and

business los

if those los

ent to ensu

r and mana

work require

s financial po

CC establishe

eliminate, mo

ss risks to H

and in ove

in the servic

RMB denom

xpects to ha

stments; and

description

ar strategic p

ransaction vo

siness risk

nd budget in

ry levels, inc

general bus

HKCC ument s Risk

age 56

hold

sses

sses

ure a

age all

es the

osition,

es and

onitor,

HKCC,

erseas

ces of

inated

ave a

d

under

plan to

olume

on its

ncome

luding

siness

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Dece

15.4

15.5

15.6

15.7

33 Th

su

ember 2014

Furtherm

complianc

going con

amount s

following

being sho

projected

HKCC ha

required t

services u

default a

replenish

could inje

raise cap

would be

In the eve

were ava

of HKCC

defaulting

HKCC w

include c

Effective

market in

respective

Hong Kon

arrangem

he calculation ouch as HKCC’s

ore, as part

ce with the P

ncern, HKCC

sufficient to

six months,

ort-term loan

total operat

as determine

to achieve a

under stress

and applicat

ments of RF

ect capital int

pital via the c

subject to th

ent that HKC

ilable at the t

C. This wo

g HKCC Part

ill discuss it

onsideration

Resolution

nfrastructures

ely in Octobe

ng on new le

ments for fina

of the net currs contribution

t of its ongo

PFMI, and to

C maintains a

cover its p

and net cur

ns or loans t

ing expendit

ed that thes

a recovery or

ed market co

ion of the

F contributio

to HKCC if re

capital mark

he approvals

CC could no

time, HKEx w

ould involve,

ticipants.

s recovery a

of the new

Regimes fo

s” published

er 2014. Th

egislation tar

ncial instituti

rent assets exto the RF.

oing complia

o ensure it c

at all times n

rojected tota

rrent assets

that are rep

ure for at lea

e financial r

r orderly win

onditions if th

RF, HKCC

ons so as to

equired. HK

kets if neede

s of the HKEx

ot continue a

would be res

, among ot

and resolutio

recovery an

or Financial

d by the Fin

his will also t

rgeted for 20

ions includin

xcludes those

Principl

ance require

can continue

net current as

al operating

funded by e

ayable on d

ast the follow

resources ar

nd-down of H

his is necess

would sust

enable a re

KEx, as a list

ed. Any pla

x Board and

s a viable e

sponsible for

her things,

on plans fur

nd resolution

Institutions”

nancial Stab

take into con

015 to provid

g FMIs in Ho

being set asid

PFMI Discle 15: Gener

ements as a

operations

ssets33 fund

expenditure

quity or loan

emand) suff

wing 12 month

re sufficient

HKCC’s critic

ary. For ex

tain its oper

ecovery of o

ted company

n for raising

SFC.

ntity and no

ensuring a s

pursuing am

rther with the

standards,

” and “Reco

ility Board a

sideration th

de for recove

ong Kong.

de for risk man

Hlosure Docural Business

Pa

an RCH, inc

and services

ded by equity

e for at lea

ns from HKE

ficient to cov

hs.

to cover the

cal operation

xample, follow

rations and

operations.

y, could pote

g additional c

other altern

smooth wind

mounts due

e SFC. Th

“Key Attribu

overy of fin

and CPMI-IO

he work ongo

ery and reso

nagement pur

HKCC ument s Risk

age 57

luding

s as a

y in an

st the

Ex (not

ver its

e time

ns and

wing a

seek

HKEx

entially

capital

atives

down

from

his will

utes of

ancial

OSCO

oing in

olution

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Dece

Prin

An

loss

inst

16.1

Cust

16.2

16.3

Inves

16.4

ember 2014

nciple 16:

FMI should

s on and d

truments wit

HKCC ha

HKCC on

internal c

HKCC inv

ody of Asse

HKCC ho

and regu

above, in

(a) cash

(b) EFB

(c) US T

In openin

assessme

in those a

stment Strat

HKCC’s

approved

(a) Ris

min

con

(b) Pre

Inve

the

(c) Liq

liqu

Custody an

safeguard

delay in acc

th minimal c

as a compre

nly appoints c

controls that

vests its own

ets

olds its asset

lated low cr

bank and se

h assets with

N as collater

Treasuries as

ng the acco

ents to ensur

assets kept in

tegy

investment

d by the HKE

sk managem

nimise the ri

ntrols;

eservation o

estment Poli

preservation

uidity – inv

idity manage

nd Investme

its own and

cess to the

credit, mark

ehensive fram

custodians w

ensure opti

n assets unde

ts and HKCC

edit risk ent

ecurities acco

selected ba

ral with CMU

s collateral w

ounts with C

re the enforc

n the accoun

strategy foll

x Board as f

ment – inves

sks. All inv

of capital – s

cy. Investm

n of capital;

vestment por

ement is tigh

Princ

ent Risks

d its particip

ese assets.

ket, and liqu

mework to m

with accounti

mal protectio

er a conserv

C Participant

ities with a

ounts in the

anks in Hong

U; and

with Clearstre

CMU and C

ceability of th

nts.

ows the Inv

follows:

stments are

vestments a

safety of prin

ments are un

rtfolios have

htly controlled

ciple 16: Cu

pants’ asset

An FMI’s

uidity risks.

manage its c

ing practices

on of the as

ative investm

ts’ assets un

minimum cre

name of HK

Kong;

eam.

Clearstream,

e rights and

vestment Po

diversified

are subject t

ncipal is one

dertaken in a

e to be suffic

d on a daily b

PFMI Disclustody and I

ts and minim

investments

custody and

s, safekeepin

ssets being p

ment strategy

der its contro

edit rating of

CC. Curren

HKCC has

interests of H

olicy set out

and in high

to limits and

of the priorit

a manner tha

ciently liquid

basis; and

Hlosure DocuInvestment

Pa

mise the ris

s should b

investment

ng procedure

placed with

y described b

rol with supe

of A3 (Moody

ntly, HKCC h

s conducted

HKCC, partic

t by the IAC

h-quality ass

d appropriat

ty principles

at seeks to e

d at all time

HKCC ument Risks

age 58

sk of

be in

risks.

es and

them.

below.

rvised

y’s) or

holds:

legal

cularly

C and

ets to

te risk

of the

ensure

s and

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Dece

16.5

16.6

34 Cu

su

ember 2014

(d) Ret

of th

HKEx ma

of HKEx

banks in

availabilit

principles

liquid and

pre-accou

assesses

supervisio

by the IAC

Investme

HKEx, wh

urrently, HKExubject to applic

turn – return

he HKEx Gro

anages cash

(HKEX Trea

Hong Kong.

ty subject to

s of the Inve

d minimise

unt opening d

s whether the

on, credit rat

C and appro

nt strategy is

hich is public

x holds over 9cable limits an

on investme

oup.

assets centr

asury). HKE

HKCC can

the banks’ c

stment Polic

risk while o

due diligence

e bank meets

tings of A3 (M

ved by the H

s disclosed to

cly available o

0% of the cas

nd concentratio

Princ

ents should b

rally at the H

Ex Treasury

n withdraw th

customary n

cy, with an a

ptimising ret

e in respect o

s the explicit

Moody’s) or a

HKEx Board.

o the public t

on the HKEx

sh assets in thon ratios.

ciple 16: Cu

be optimised

KEx Group le

places mos

hese deposit

otice periods

aim to prese

turn on inve

of a prospec

standards, w

above and o

through the p

x website.

he form of cash

PFMI Disclustody and I

at the appro

evel through

t cash asset

s promptly a

s. HKCC a

rve capital, r

estments. A

tive custodia

with selection

perational ef

periodic finan

h or deposits w

Hlosure DocuInvestment

Pa

oved risk tole

the treasury

ts as deposit

and with sam

pplies the pr

remain suffic

As part of H

an, HKEx Tre

n criteria bas

fficiency, end

ncial stateme

with selected

HKCC ument Risks

age 59

erance

y team

ts34 in

me-day

rimary

ciently

HKEx’s

easury

sed on

dorsed

ents of

banks,

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Dece

Prin

An

exte

proc

sec

Bus

fulfi

disr

Oper

17.1

17.2

17.3

ember 2014

nciple 17:

FMI should

ernal, and m

cedures, an

urity and o

siness cont

ilment of th

ruption.

rational Risk

HKCC’s o

(a) ERM

ident

and

sour

and

(b) MCP

and

spec

a

d

m

a

When des

with HKC

Settlemen

extensive

premises

and extre

various st

Participan

HKCC m

centres

telecomm

minimise

Operationa

d identify th

mitigate the

nd controls

operational

inuity mana

he FMI’s ob

k Manageme

operational r

M framework

tify, assess,

operational p

rces, on an

treatment pla

P – HKCC ha

recovery pro

cific continge

llow rapid re

isruptive eve

minimise any

s a whole.

signing the M

CC Particip

nt Banks an

e range of d

, power outa

eme market

takeholders,

nts, third-par

maintains sec

in different

munication e

any impact

l Risk

he plausible

ir impact th

. Systems s

reliability

agement sh

bligations, i

ent Framew

isk managem

k – HKCC ap

monitor and

processes in

ongoing bas

ans to mitiga

as developed

ocedures foll

ency scenario

ecovery and

ents; and

damage cau

MCP, HKCC

ants, other

nd communic

disruptive ev

ages, system

movements.

including th

rty service pr

condary bac

t districts

exchanges fr

t to HKCC P

e sources o

hrough the

should be d

and should

hould aim fo

including in

work

ment framew

pplies HKEx

control/mitig

ncluding oper

sis. HKCC

ate, eliminate

d and mainta

lowing a disr

os. HKCC’s

d timely resu

used by disr

took into acc

FMIs and

cations netw

vent scenario

m failures (bo

It sets out

he HKEx Boa

roviders and

ckup sites fo

of Hong K

from HKCC’

Participants

Pr

of operation

use of app

designed to

d have ade

or timely re

n the event

work consists

Group’s ER

gate materia

rational risk f

establishes

e, monitor, or

ains a MCP, w

ruption to HK

s MCP aims

umption of c

ruptions to th

count interde

third-party

work supplie

os, such as

oth internal a

t escalation a

ard, RMC, HK

market parti

or business

Kong that

s primary p

and the ma

PFMI Disclrinciple 17:

nal risk, bo

ropriate sys

o ensure a

equate, sca

ecovery of

of a wide-

of the follow

M framework

l risks inhere

from both int

and implem

r manage the

which sets ou

KCC’s critica

to:

critical functio

he market an

ependencies

service pro

ers. The MC

loss of acc

and external)

and reporting

KCC Board,

cipants wher

operations

have diffe

production s

arket in cas

Hlosure DocuOperationa

Pa

oth internal

stems, polic

high degre

alable capa

operations

-scale or m

wing element

k to systema

ent in the bus

ternal and ex

ments key co

e risks; and

ut the contin

al functions,

ons followin

nd all stakeho

and externa

oviders, suc

CP address

cess to work

), natural dis

g procedure

regulators, H

re appropria

and system

rent power

sites, in ord

e of conting

HKCC ument l Risk

age 60

and

cies,

ee of

acity.

and

major

ts:

atically

siness

xternal

ontrols

gency

under

g any

olders

al links

ch as

es an

kplace

asters

s with

HKCC

te.

m data

r and

der to

gency.

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Dece

Revie

17.4

17.5

17.6

Oper

17.7

17.8

17.9

ember 2014

Productio

backup s

DCASS/C

business

ew, Audit an

HKCC rev

annual M

critical bu

those bus

develops

procedure

in case o

agreemen

HKCC pe

changes

procedure

drills whe

Participan

operation

changes.

In addition

Governme

issues wi

and servic

rational Reli

The opera

its third-p

Quantitati

targets.

achieved

The syste

volumes a

The Infor

utilisation

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considera

on data of D

site for bus

CCMS syste

operations w

nd Testing

views the M

MCP review

siness proce

siness proce

measures

es with other

of failure of

nts with them

erforms conti

to systems

es and contr

re appropria

nts, and co

al flows, co

n, HKCC par

ent which pr

th cross-ma

ce providers

ability Obje

ational reliab

arty service

ive objective

The primary

within two ho

em capacity

and a capaci

rmation Tech

on a daily ba

performs cap

ation to ensu

DCASS and

siness opera

ms in the se

would be res

MCP on an a

exercise, H

esses, interna

esses. HKC

to manage

r FMIs and th

f DCASS/CC

m.

ngency drills

s and/or se

rol measures

te. HKCC a

nducts mark

ntingency an

rticipates in t

rovides an o

rket implicat

when neede

ectives and C

bility objective

providers, H

es include s

y resilience

ours.

of DCASS/

ty buffer has

hnology Div

asis and con

pacity planni

ure that suffi

CCMS is re

ations in re

econdary da

sumed at the

annual basis

KCC condu

al and extern

CC assesses

e the disrup

hird-party ser

CMS or the

s on selectiv

ervices to a

s. HKCC P

also provide

ket rehearsa

nd fallback

the Market W

opportunity t

tions. HKC

ed.

Capacity Sc

es of HKCC

HKCC’s MCP

system ava

objective is

/CCMS is sc

s been put in

vision of HK

nducts a syst

ing taking th

cient system

Pr

eplicated to

eal-time. I

ata centre wo

secondary b

s or more fr

cts business

nal resources

s the impac

ptions. HK

rvice provide

ir systems.

ve scenarios

assure the

articipants a

s continuous

als with HK

plans before

Wide Rehears

o rehearse o

C also partic

calability

are defined i

P, and its inte

ilability and

to ensure

caled based

place to han

KEx (ITD) m

tem capacity

e peak volum

m capacity is

PFMI Disclrinciple 17:

the system

n case of

ould become

backup site w

requently as

s impact an

s and depend

ts in case o

CC agrees

ers, such as S

These are

regularly an

effectivenes

are invited to

s operational

KCC Particip

e the rollout

sal coordinat

our respons

cipates in dr

in the service

ernal policies

resilience

that system

on the proj

ndle potentia

easures the

review at lea

mes and bus

s in place to

Hlosure DocuOperationa

Pa

in the seco

contingency

e operationa

within two ho

required.

nalyses to id

dencies to su

of disruption

the contin

Settlement B

e included i

nd after sign

ss of opera

o participate

l training to H

pants to tes

t of major s

ted by the H

ses to high i

rills of other

e agreement

s and proced

and perform

recovery ca

jected trans

al stress volu

e system ca

ast semi-ann

siness growt

o meet the a

HKCC ument l Risk

age 61

ondary

y, the

al, and

ours.

In the

dentify

upport

s and

gency

Banks,

in the

ificant

ational

in the

HKCC

st the

ystem

KSAR

mpact

r FMIs

ts with

dures.

mance

an be

action

umes.

apacity

nually.

th into

agreed

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Dece

Phys

17.10

ember 2014

business

and plann

changing

new syste

meet the

sical and Inf

0 HKCC fo

assess, a

physical s

attacks a

physical s

secondary

Departme

policy for

policy set

managem

service-leve

ning for the la

business en

em enhancem

business ser

formation Se

llows HKEx

and manage

security meas

and intrusion

sites (i.e. all

y backup s

ent, which is

r all applicat

ts out imple

ment and is d

el requiremen

aunch of new

nvironment.

ment or upgr

rvice level re

ecurity Polic

Group’s ph

e potential p

sures have b

ns, and to m

business o

sites). HKE

independent

tion systems

ementation s

esigned with

nts. The IT

w services or

HKEx will p

rade to ensu

equirements.

cies

hysical and

hysical and

been establis

minimise the

operations of

Ex’s Informa

t of ITD, ove

s within the

safeguards

h reference to

Pr

TD also cond

r unforeseeab

perform syst

ure the adequ

information

system vuln

shed to guard

e impact of

ffices and da

ation Secur

rsees the inf

HKEx Grou

in relation t

o internation

PFMI Disclrinciple 17:

ducts ad hoc

ble business

tem performa

uacy of the s

security poli

nerabilities a

d against una

potential na

ata centres,

rity and Bu

formation sec

up. The inf

to system c

al standards

Hlosure DocuOperationa

Pa

c capacity re

s growth due

ance tests fo

system capa

icies that id

and threats.

authorised a

atural disaste

both primar

siness Con

curity strateg

formation se

configurations

s.

HKCC ument l Risk

age 62

eviews

to the

or any

city to

entify,

The

access,

ers to

ry and

tinuity

gy and

ecurity

s and

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Prin

An

part

Parti

18.1

18.2

18.3

18.4

18.5

ember 2014

nciple 18:

FMI shou

ticipation, w

cipation Re

HKCC ha

requireme

its service

Participan

Capital un

HKCC a

Participan

HKCC se

addition to

aspects o

its complia

The admi

the HKCC

must com

continue t

HKCC m

requireme

Procedure

breaches

monitors

regulatory

refer to th

process.

HKCC rev

result of th

the admis

approvals

Access and

ld have o

which permit

quirements

as establish

ents for two

es fairly and

nt; and (b) h

nder the FRR

pplies differ

nts based on

ets a higher R

o good finan

of the applica

ance and ris

ssion criteria

C Rules, whic

mply with the

to comply wit

monitors ong

ents, and ha

es for facilita

or no longe

HKCC Part

y reports sub

he description

views particip

he changing

ssion criteria

s of the HKCC

Pr

d Participati

bjective, ri

t fair and op

and Ongoin

hed a set

categories o

openly. A

ave a minim

R, or HK$5 m

rent financia

the services

RF Fixed Co

cial standing

ant including

k manageme

a applicable t

ch are public

HKCC Rules

th the criteria

oing compli

as defined a

ating the sus

er meets the

icipants’ ong

bmitted, such

n under Princ

pant admissi

market envi

and require

C Board and

rinciple 18: A

on Requirem

isk-based,

pen access.

ng Monitori

of objective

of HKCC Par

An HKCC Pa

mum Liquid C

million for CP

al requirem

s received fro

ontribution le

g, HKCC con

the experie

ent policies a

to each cate

cly available o

s and HKCC

a for admissi

iance of HK

and publicly

spension and

e participatio

going financ

h as the FRR

ciple 4: Cred

ion, access r

ironment and

ments as de

d SFC.

Access and

ments

and public

ng

e, risk-base

rticipants, na

articipant mu

Capital of the

P and HK$20

ments to dif

om, and the p

evel for a GC

nsiders key o

nce of its ke

and systems

egory of HKC

on the HKEx

Procedures

ion.

KCC Particip

y disclosed t

d orderly exi

on requireme

cial standing

R reports and

dit Risk for th

restrictions a

d regulatory

etailed in the

PFMI Discld Participatio

cly disclos

d and tran

amely CP an

st (a) be an

e higher of i

million for G

fferent cate

potential risk

CP as comp

operational a

y personnel

.

CC Participan

x website. H

in force from

pants with

the HKCC R

t of an HKC

ents. HKCC

g through pe

d annual rep

he counterpa

nd eligibility

requirements

HKCC Rule

Hlosure Docuon Requirem

Pa

sed criteria

nsparent elig

nd GCP, to a

n HKFE Exch

its required

GCP respecti

egories of H

ks posed to, H

pared to a CP

and internal c

and the qua

nt are stipula

HKCC Partic

m time to time

their partici

Rules and H

CC Participan

C, as a CCP

eriodic revie

ports, etc. P

arty risk mon

requirement

s. Any cha

es is subject

HKCC ument ments

age 63

for

gibility

access

hange

Liquid

vely.

HKCC

HKCC.

P. In

control

ality of

ated in

ipants

e, and

pation

HKCC

nt that

P, also

ews of

Please

itoring

ts as a

nge in

to the

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Dece

Susp

18.6

ember 2014

pension and

As set ou

the partic

Participan

revoke th

circumsta

revocation

or obligat

purpose

revocation

restricted

practicabl

suspensio

d Revocation

t in the HKC

cipation requ

nt, including r

he participan

ances, such a

n of the parti

tions arising

of settlemen

n. Where a

or participa

le notify oth

on or revocat

Pr

n of HKCC P

C Rules, wh

uirements HK

restricting its

ntship of an

as upon the l

icipantship o

out of matte

nt of any c

an HKCC Pa

antship has

her HKCC P

tion.

rinciple 18: A

Participation

here an HKC

KCC may ta

s access to a

HKCC Part

iquidation or

of an HKCC

ers which oc

contracts he

articipant’s ri

been suspe

Participants,

Access and

n

C Participan

ake disciplina

nd/or using H

ticipant forth

r winding-up

Participant d

ccurred prior

eld by the H

ight to acces

nded or rev

the SFC, a

PFMI Discld Participatio

t breaches o

ary action ag

HKCC’s facil

hwith by not

of an HKCC

does not affe

to the revoc

HKCC Partic

ss HKCC’s f

voked, HKCC

and HKFE

Hlosure Docuon Requirem

Pa

or no longer

gainst that H

ities. HKCC

tice under c

C Participant.

ect any of its

cation and f

cipant befor

facilities has

C will as so

of the restr

HKCC ument ments

age 64

meets

HKCC

C may

certain

The

rights

for the

re the

been

on as

riction,

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Dece

Prin

An

tiere

Third

19.1

19.2

Mana

19.3

19.4

ember 2014

nciple 19:

FMI should

ed participa

d-Party Clea

HKCC su

clearing s

participan

HKCC de

relationsh

GCP that

according

Principle

between

condition

the GCP

agreemen

any of its

aging Risk A

As license

under the

Capital le

monitor a

the regula

relevant r

applicable

the rules o

HKCC ma

of the risk

higher ad

Contributi

requires

measures

performs

settlemen

described

Tiered Part

identify, mo

ation arrange

aring Service

upports tiered

service. A G

nt of HKCC (i

eals with the

hip with the N

t clears for

g to the diffe

6: Margin.

a GCP and

that there is

and NCP.

nt with the N

NCP intends

Arising from

ed corporati

e SFO and f

evels for rev

nd supervise

atory oversig

risk monitori

e. In additio

of HKFE.

anages the r

k of the GCP

mission crite

ion to the RF

a GCP, in

s and proced

regular ris

nt capability o

d under Princ

icipation Ar

onitor, and m

ements.

e

d participatio

GCP can cle

.e. Non-clea

e GCP as p

NCPs. Trad

the NCP.

rent Clearing

Chapter III o

d an NCP.

in place a va

The GCP

CP. The G

s to terminate

m Tiered Par

ons under th

file with the

view and mo

e the financia

ght and risk

ng informati

on, NCPs be

isk arising fro

, who is prim

eria for GCP

F (please refe

conjunction

ures on its N

k scoring a

of the GCPs

ciple 4: Credi

Principle

rrangements

manage the

on arrangem

ear on behalf

aring participa

principal and

des of the N

Positions of

g Account ty

of the HKCC

A GCP can

alid, binding

is required

GCP shall als

e the clearin

rticipation A

he SFO, NC

SFC a mon

onitoring. T

al and operat

k manageme

ion on the N

eing Exchang

om an NCP

marily respon

Ps in terms o

er to the des

with HKFE

NCP’s positio

analysis to

based on th

it Risk.

e 19: Tiered

s

e material ris

ments throug

f of an Exch

ant (NCP)).

d not as ag

NCP will be

f an NCP a

ypes as desc

C Rules gove

n clear and

and effective

to inform H

so give prior

g agreement

Arrangement

CPs are requ

nthly financia

The SFC, ac

tional capabi

ent activities

NCPs, such

ge Participan

through activ

nsible for the

of minimum

scription unde

, to impose

ons where ap

assess the

e Counterpa

PFMI Discl Participatio

sks to the F

h the offerin

hange Partici

gent, and ha

registered in

are maintain

cribed in par

erns the clea

settle trade

e clearing ag

KCC after s

written notic

t between th

ts

uired to com

al return refle

cting as fron

lity of NCPs,

s, including

as a risky

nts are requir

ve monitoring

risk of that N

Liquid Capita

er Principle 4

additional

ppropriate.

financial,

arty Risk Ran

Hlosure Docuon Arrangem

Pa

FMI arising f

ng of a third

ipant who is

as no contr

n the name

ed and mar

ragraph 6.7

aring arrange

es of an NC

greement be

signing a cle

ce to HKCC

hem.

mply with the

ecting their

nt-line regula

, is responsib

sending to

broker list, w

red to compl

g and assess

NCP. HKCC

al level and

4: Credit Risk

risk manage

In addition, H

non-financia

nking Method

HKCC ument ments

age 65

from

d-party

not a

ractual

of the

rgined

under

ement

CP on

tween

earing

if it or

e FRR

Liquid

ator to

ble for

HKEx

where

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k) and

ement

HKCC

al and

dology

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Dece

19.5

19.6

ember 2014

HKCC ha

systems t

DCASS o

the NCPs

require a

resources

HKCC ma

limited to

additional

HKCC ha

NCPs to

transfer N

to accept

will not be

as describ

s also put in

to identify, m

on a daily bas

s of a GCP.

a GCP to p

s in meeting

ay impose a

o, applying

l Margin from

as establishe

a new GCP

NCP’s positio

such transfe

e able to clea

bed in Princip

place neces

monitor and m

sis to list the

In addition

rovide furth

g their paym

dditional risk

a more stri

m the GCP, w

ed internal o

P during a G

ons of a GCP

er. NCPs o

ar their trade

ple 13: Partic

Principle

ssary proces

manage the

breakdowns

n, for HKCC

er informatio

ment obligatio

k manageme

ingent posit

when necess

operating pro

GCP default.

P together wi

of the default

es in HKCC a

cipant-defau

e 19: Tiered

sses to gene

risk of NCP

s of the positi

C’s risk asse

on of its N

ons. Based

ent measures

ion limit an

sary.

ocedures to

HKCC Ru

ith the collate

ting GCP, w

and the proc

lt Rules and

PFMI Discl Participatio

rate timely in

s. Reports

ons, Margin

essment purp

CPs, such

d on the as

s on a GCP,

d/or requirin

facilitate th

le 510(f) em

eral to a new

without appoin

cedures in ha

Procedures

Hlosure Docuon Arrangem

Pa

nformation fr

are generat

and VA of e

pose, HKCC

as their fin

ssessment re

, including b

ng and coll

he switching

mpowers HK

w GCP that a

nting a new

andling the d

will apply.

HKCC ument ments

age 66

om its

ted by

ach of

C may

ancial

esults,

but not

ecting

of its

CC to

agrees

GCP,

default

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Dece

Prin

An

man

20.1

20.2

20.3

20.4

ember 2014

nciple 20:

FMI that es

nage link-re

Currently

EFBN as

HKCC ha

link-relate

with CMU

In establis

enforceab

accounts

custody a

manage t

and if the

the link a

HKCC’s p

CMU is th

procedure

HKMA.

operate th

CMU.

FMI Links

stablishes a

lated risks.

, HKCC has

collateral, o

as put in p

ed risks in th

U to define th

shing the link

bility of the ri

with CMU.

and operatio

hose risks a

re are chang

arrangements

policies and s

he issuer CS

es of CMU, a

HKCC is a r

he custody a

a link with

a central se

n behalf of H

place appro

his establishe

e rights, obli

k with CMU,

ghts and inte

Moreover, H

onal, and p

s needed.

ges to the op

s continue to

standards.

D for EFBN.

and the laws

recognised d

accounts with

one or mor

ecurities dep

HKCC Partici

opriate meas

ed CSD link

gations and

HKCC has c

erests of HK

HKCC asses

ut in place

HKCC revie

perational flo

o meet regu

All operati

s of Hong Ko

dealer appoin

h CMU in ac

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