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Legal Protection of CSD/CCP in Case of Participants’ Insolvency Presentation for the Legal Task Legal Protection of CSD/CCP in Case of Participants’ Insolvency Presentation for the Legal Task Force Meeting of ACG 14 December 3, 2010 Mumbai, India

Survey Outline Ø Case study Ø Legal issues and risks ü ü Elements analysis Survey Outline Ø Case study Ø Legal issues and risks ü ü Elements analysis Ø ü ü ü ü Ø Securities custody, clearing and settlement system Participants’ breach of settlement obligations Legal environment Legal characteristic of CSD/CCP Legal arrangements and risk disposal Ø Ø Precedence of rules and procedures of CSD/CCP Validity, enforceability of settlement instructions Enforceability of rules and contracts Investors’ protection Creditor and debtor's rights and duties CSD/CCP’s special role and privilege Provisions of Insolvency Law Comments and advice 11 responses (Thailand, India, Vietnam, Korea, Malaysia, Sri Lanka, HK, JASDEC and JDCC, JSCC, Taiwan, China)

Cases Ø CSD/CCP affected by participants’ insolvency No affection, 7 members (Thailand, India, Vietnam, Cases Ø CSD/CCP affected by participants’ insolvency No affection, 7 members (Thailand, India, Vietnam, Korea, JDCC, JSCC, Taiwan) For CCP only, 1 member (Malaysia) For CSD only, 1 member (Sri Lanka) For both CCP and CSD, 2 members (HK, China) ü ü Cases on participant’s insolvency Ø No cases , 4 members (Thailand, India, Vietnam, Sri Lanka) Have cases, 7 cases (Korea, HK, Malaysia, JASDEC and JDCC, JSCC, Taiwan , China) ü ü • • credit squeeze currency crisis breach of settlement obligation bankruptcy rehabilitation

Cases Ø Analysis Although many members had encountered events of participants’ insolvency, a majority Cases Ø Analysis Although many members had encountered events of participants’ insolvency, a majority of CSD/CCP did not be affected by participants’ insolvency. In many areas, laws and regulations have been established to make sure that a CSD/CCP maintains a sound management system and the capability of performing operations and completes its operations in the event of participants’ insolvency/default.

Legal issues and risks (Ⅰ) Ø Do the rules applicable for the process of Legal issues and risks (Ⅰ) Ø Do the rules applicable for the process of securities depository, clearing and settlement take precedence over law of insolvency? ü Type one: Not clearly defined, 6 members • ü China (SD&C), India (CDSL), Kazakhstan (KACD), Pakistan (CDC), Sri Lanka (CDS), Taiwan (TDCC) Type two: Explicitly stipulated in laws, 7 members • Hong Kong (HKSCC), Bursa Malaysia Depository Sdn. Bhd, Thailand (TSD) , Vietnam (VSD), Japan ( JSCC, JDCC), Korea (KSD)

Legal issues and risks (Ⅰ) Ø Analysis: The purpose of this question is to Legal issues and risks (Ⅰ) Ø Analysis: The purpose of this question is to ensure the legal effects of certain provisions in rules from adverse consequences flowing from the insolvency of a system participant. Many members declare that the precedence of rules is explicitly stipulated in laws. This protection is very necessary because the application of the principles of general insolvency law and of certain provisions contained in the rules might lead to inappropriate results. Generally, under most insolvency laws, any dealing involving an insolvent person or entity is halted as from the moment of the commencement of the insolvency proceeding. So the process of securities depository, clearing and settlement will be treated as the same. That is to say, unsettled instructions may be void and book -entries or designating entries may in risk of being undone in order to safeguard the insolvency assets.

Typical legislations Ø HK: Securities and Futures Ordinance ü • • Section 45 - Typical legislations Ø HK: Securities and Futures Ordinance ü • • Section 45 - Proceedings of recognized clearing house take precedence over law of insolvency - 01/04/2003 (1) None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to distribution of the assets of a person on insolvency, bankruptcy or winding up, or on the appointment of a receiver over any of the assets of a person-(a) a market contract; (b) the rules of a recognized clearing house relating to the settlement of a market contract; (c) any proceedings or other action taken under the rules of a recognized clearing house relating to the settlement of a market contract; (d) a market charge; (e) the default rules of a recognized clearing house; or (f) any default proceedings. (2)The powers of a relevant office-holder in his capacity as such, and the powers of a court acting under the law of insolvency, shall not be exercised in such a way as to prevent or interfere with- (a) the settlement in accordance with the rules of a recognized clearing house of a market contract; or (b) any default proceedings.

Typical legislations Ø Malaysia: the Capital Market and Services Act 2007 (CMSA) ü Section Typical legislations Ø Malaysia: the Capital Market and Services Act 2007 (CMSA) ü Section 43 : None of the following will be regarded as invalid on the ground of inconsistency with the provisions relating to the distribution of the assets of a person under the laws of insolvency or on the appointment of a relevant office-holder over any of the assets of the person: (a) a market contract; (b) the rules of Bursa Securities Clearing; (c) any proceeding or other action taken under the Rules of Bursa Securities Clearing relating to the settlement of a market contract; (d) a market charge; (e) the default rules of Bursa Securities Clearing; or (f) any default proceedings.

Typical legislations Ø Thailand: The Securities and Exchange Act ü ü ü SECTION 223/3 Typical legislations Ø Thailand: The Securities and Exchange Act ü ü ü SECTION 223/3 In cases where the clearing house receives any asset from its members or has in its possession of such asset as collateral for settlement and delivery of securities, as a result of securities trading agreements of its members or its members, customers, or asset placed with the clearing house by any member for purposes of maintaining the integrity of the securities trading and settlement and delivery system, the provisions of Section 82 and Section 83 of the Derivatives Act B. E. 2546 shall apply mutatis mutandis to the clearing house in respect of the duty to look after and use of such asset. SECTION 223/4 In cases where a petition is filed against a member in a bankruptcy court and the court issues a receivership order, the provisions of Section 84, Section 85, Section 86 and Section 87 of the Derivatives Act B. E. 2546 shall apply mutatis mutandis to the clearing house or the asset received by or had in possession of the clearing house under Section 223/3. SECTION 223/5 In cases where the clearing house becomes a debtor by judgment, a debtor under receivership or is ordered by the government or any regulatory body to suspend its business either in whole or in part, for purposes of protecting the asset of its members and customers of its members or the settlement and delivery system, the provisions of Section 43, Section 45, and Section 46 of the Derivatives Act B. E. 2546 shall apply mutatis mutandis to the clearing house and asset received by or had in possession of the clearing house under Section 223/3.

Typical legislations Ø Vietnam: Decree 114/2008/NĐ-CP ü Article 9, if securities companies enters into Typical legislations Ø Vietnam: Decree 114/2008/NĐ-CP ü Article 9, if securities companies enters into insolvency process, State Securities Commission is entitled to request them to temporarily seal a part or whole cash account and securities account of customers and securities companies' principal account to apply settlement recovery measures.

Typical legislations Ø Korea: Debtor Rehabilitation and Bankruptcy Act ü Article 120 (Special rules Typical legislations Ø Korea: Debtor Rehabilitation and Bankruptcy Act ü Article 120 (Special rules governing payment and settlement system, etc): (1) Where rehabilitation procedures have commenced for any participant in the payment and settlement system designated by the Governor of the Bank of Korea after consulting with regard thereto with the Financial Services Commission in order to ensure the completeness of the payment and settlement system (hereinafter in this paragraph refers to as “payment and settlement system”), the effects of transfer instructions or payment, execution thereof, settlement, deductions, deposit funds, the furnishing of security, disposition, appropriation and settlement involving the participant shall accrue under the conditions as prescribed by the person who operates the payment and settlement system, notwithstanding the provisions of this Act and they shall not be subject to cancelation, termination, revocation or setting aside. Specific matters concerning the payment and settlement system shall be prescribed by Presidential Decree. (2) Where rehabilitation procedures have commenced for any participant in liquidation and settlement system operated by any person in charge of liquidation and settlement of securities and derivative financial transactions provided for in the Financial Investment Services and Capital Markets Act, and other Acts and subordinate statutes and other persons prescribed by Presidential Decree, the effects of the assumption of obligations, adjustment, deduction, deposit money, the furnishing of security, disposition, appropriation and settlement involving the participant shall occur under the conditions prescribed by the person who operates the liquidation and settlement system, notwithstanding the provisions of this Act and they shall not be subject to such cancellation, termination, revocation and negation.

Typical legislations Ø Korea: Debtor Rehabilitation and Bankruptcy Act ü Article 120 (Special rules Typical legislations Ø Korea: Debtor Rehabilitation and Bankruptcy Act ü Article 120 (Special rules governing payment and settlement system, etc): (3) Where rehabilitation procedures have commenced for either of the parties who effects transactions (hereafter in this paragraph referred to as "qualified financial transaction") falling under each of the following subparagraphs based on a single contract (hereafter in this paragraph referred to as "base contract") that prescribes fundamental matters concerning certain financial transactions, the effects of the termination and the settlement of the qualified financial transaction shall accrue under the conditions prescribed by the parties in their base contract, notwithstanding the provisions of this Act and they shall not be subject to the cancellation, termination, revocation and negation, and transaction referred to in subparagraph 4, and shall not be subject to the suspension order and the general prohibition order: Provided, That the same shall not apply to cases where the debtor and the other party conspire to effect any financial transaction with the aim of prejudicing any rehabilitation creditor or any rehabilitation secured creditor: 1. Derivative financial transaction in forward deliveries, option, swaps, etc. that are prescribed by Presidential Decree and are performed on the prices and the interest rates of currencies, securities, equity shares, general goods, credit risk, energy, weather conditions, freights, frequencies and environment, or the index numbers and the indicators based thereon; 2. Exchange transactions in goods, repurchase transactions in securities, financial transaction in securities and transactions in security calls; 3. The combined transactions referred to in subparagraph 1 through 2; and 4. The furnishing, the disposal and the appropriation of security that are all involved in transactions referred to in subparagraph 1 through 3.

Legal issues and risks (Ⅱ) Ø Does any instruction given by a participant (or Legal issues and risks (Ⅱ) Ø Does any instruction given by a participant (or a debit or credit of securities to a securities account) still have effect despite the commencement of an insolvency proceeding of participants? ü Type one: Not clearly defined, 3 members • ü Kazakhstan (KACD), Sri Lanka (CDS), Vietnam (VSD) Type two: Explicitly stipulated in laws, 9 members • China (SD&C), Hong Kong (HKSCC), India (CDSL), Bursa Malaysia Depository Sdn. Bhd, Pakistan (CDC), Thailand (TSD), Korea (KSD), Japan (JDCC), Taiwan (TDCC)

Legal issues and risks (Ⅱ) Ø Analysis This question concerns about a fundamental principle Legal issues and risks (Ⅱ) Ø Analysis This question concerns about a fundamental principle in universal clearing and settlement system, which often referred to as “finality”. When securities’ trading is reached; the transaction results and the clearing and settlement of securities within a system may not be altered. The term “finality” is often used in reference to a transfer order which is legally binding and enforceable. A transfer of funds, of securities, or of other assets can be final; settlement or netting can be final as well. But under most insolvency laws, the result may be particularly vulnerable, the provision of “finality” in rules can make sure that a clearing and settlement process can be accomplished indubitably and the settlement of instructions can be managed without the risk under insolvency law.

Typical legislations Ø China: the Securities Law ü ü ü Article 167: focuses on Typical legislations Ø China: the Securities Law ü ü ü Article 167: focuses on the general protection of securities and funds before a delivery is completed. Nobody may use the securities, funds or collaterals as involved in the delivery. Article 120: prescribes when securities’ trading is reached; the transaction results may not be altered. Article 139: specifies where a securities company goes through bankruptcy procedures or is under liquidation, the settlement funds or securities of its client shall not be defined as its insolvent assets or liquidation assets. Under any other circumstance as irrelevant to the liabilities of its clients or under any other circumstance as prescribed by law, the settlement funds or securities of its clients shall not be sealedup, frozen, deducted or enforced compulsorily.

Typical legislations Ø India ü Instructions given by an investor are entered into and Typical legislations Ø India ü Instructions given by an investor are entered into and carried out by a participant. They are carried out unless revoked by the investor himself and are not affected by financial soundness of a depository participant. ü Investor himself can invalidate or reverse any instruction given by him before it is executed by a participant.

Typical legislations Ø Pakistan ü Transactions cannot be reversed once effectuated. ü Section 11 Typical legislations Ø Pakistan ü Transactions cannot be reversed once effectuated. ü Section 11 of the Central Depositories Act, 1997 (XIX of 1997) prohibits rectification of Central Depository Register (CDR). The court can only award damages.

Typical legislations Ø Thailand ü According to the clearing house rules and procedural regulations, Typical legislations Ø Thailand ü According to the clearing house rules and procedural regulations, when the securities settlement or payment settlement completes, it becomes finality and irrevocable by any other parties. ü The SEA Section 223/3 -223/5, the CCP shall clear and settle the securities transaction of participants’ clients and participants’ securities transaction, afterwards the CCP shall inform the obligation to participants’ clients and the administrator of the participant estate appointed under the Bankruptcy Act for the purpose of being entitled to file a claim for the difference under the bankruptcy proceedings where the participant is the debtor.

Typical legislations Ø Vietnam ü Based on trading results from stock exchanges, clearing and Typical legislations Ø Vietnam ü Based on trading results from stock exchanges, clearing and settlement are made for transactions. After applying recovery measures for insolvent participants without achieving any better results, VSD is entitled to cancel settlement for those transactions. ü Settlement is cancelled if participants lack securities/cash or violate trading rules such as short-selling securities without guideline from Ministry of Finance.

Legal issues and risks (Ⅲ) Ø Are the rules of the depository or settlement Legal issues and risks (Ⅲ) Ø Are the rules of the depository or settlement system and contracts between CSD/CCP and its participants still effective even if the participant enters into insolvency process? ü Type one: Not clearly defined, 1 member • ü Sri Lanka (CDS), Type two: Yes, 12 members • China (SD&C), Hong Kong (HKSCC), Bursa Malaysia Depository Sdn. Bhd, Kazakhstan (KACD), Pakistan (CDC), Thailand (TSD), Korea (KSD), Japan (JASDEC and JDCC, JSCC) , Vietnam (VSD), India (CDSL), Taiwan (TDCC)

Legal issues and risks (Ⅲ) Ø Analysis: This question concerns about the effectiveness of Legal issues and risks (Ⅲ) Ø Analysis: This question concerns about the effectiveness of rules of the depository or settlement system and contracts between CSD/CCP and its participants. In our understanding, there is relativity with the precedence principle in the above analysis. When the principle of effectiveness is accepted by the law governing a system, such rules and contracts are effective notwithstanding: (i) the commencement of an insolvency proceeding in respect of a participant in the system; or, (ii) that an invalidation, reversal or revocation otherwise would have occurred under a rule applicable in the insolvency proceeding.

Typical legislations Ø China ü Generally speaking the rules and contracts are enforceable in Typical legislations Ø China ü Generally speaking the rules and contracts are enforceable in spite of insolvency of a participant. However, there are some conflicts between the rules of SD&C and Bankruptcy Law and other legal principles. Now seek to coordinate the relevant rules in this regard.

Typical legislations Ø Pakistan ü The Regulations only provide for maintenance of Accounts and Typical legislations Ø Pakistan ü The Regulations only provide for maintenance of Accounts and transfers of book entry securities. The Depository is not concerned with settlements of claims by and against Participants, Account Holders and Stock Exchanges, inter se. However, for admission of CDC elements to the CDC System, as Participants, Account Holders, Issuers, etc. , standardized contracts have been devised by the Depository with protective terms and conditions.

Typical legislations Ø Thailand: the TSD and TCH (Thailand Clearing House Co. Ltd) regulations Typical legislations Ø Thailand: the TSD and TCH (Thailand Clearing House Co. Ltd) regulations ü TSD Regulation chapter 300 the Depositor section 305. 03 (3) and 306 prescribed that TSD can terminate the membership of the participants and the participants continue to have the duty and responsibility to pay fees, interest, fines, and any other expenses that may be incurred in relation to the actions undertaken by TSD. ü TCH Regulation chapter 600: Defaults on securities clearing and settlement section 602. 01 (4) and 603. 07 prescribed the participants’ insolvency is the default event which TCH may take the actions against the participants for probation, penalization, temporary suspension of services, and termination of membership. Moreover, the participants continue to have the duty and responsibility to pay fees, interest, fines, and any other expenses that may be incurred in relation to the actions undertaken by TCH.

Legal issues and risks (Ⅳ) Ø Rights of investors be affected ü No, 7 Legal issues and risks (Ⅳ) Ø Rights of investors be affected ü No, 7 members (Thailand, India, Malaysia, Korea, Japan, Taiwan , China) • • ü separately segregate securities account held separately in investor’s own name Not clear, 1 member (HK) • ü Ø depends on the relationships between investors and participants Yes, 2 members (Vietnam, Sri Lanka) Recall right ü No, 3 members (Korea, Malaysia, Taiwan) ü Not clear, 1 member (HK) ü Yes, 6 members (Thailand, India, Vietnam, Japan, Sri Lanka, China)

Legal issues and risks (Ⅳ) Ø Analysis This question deals with the effectiveness of Legal issues and risks (Ⅳ) Ø Analysis This question deals with the effectiveness of rights and interests of investors in insolvency proceedings which is no doubt effective under normal legal circumstance. The certainty of effectiveness of investors’ rights and interests is minimum requirement at any time including a scenario of an insolvency proceeding of a participant. In general, most of members give positive reply that investors’ rights will be unaffected and they will also exercise recall right to their securities due to their special bussiness arrangement.

Elements analysis Ø CSD/CCP’s obligation of guarantee settlement ü ü Ø DVP models ü Elements analysis Ø CSD/CCP’s obligation of guarantee settlement ü ü Ø DVP models ü ü ü Ø Yes, 9 memebrs (Thailand, Malaysia, HK, Vietnam, Korea, JDCC, JSCC, Taiwan. TWSE, China) No, 1 member (Sri Lanka) Settle transfer instructions for both securities and funds on a trade-by-trade (gross) basis , 3 members (Vietnam, Korea, JDCC) Settle securities transfer instructions on a gross basis, but settle funds transfer instructions on a netting basis, 4 members (Malaysia, Sri Lanka, JDCC, China) Settle transfer instruction for both securities and funds on a netting basis , 6 members (Thailand, HK, Vietnam, Korea, JSCC, Taiwan) Settlement participants ü ü ü Brokers, 10 members (Thailand, Malaysia, HK, Vietnam, Korea, Sri Lanka, JSCC, JASDEC, , JDCC, Taiwan , China ) Custodian banks and financial institutions, 3 membes (Malaysia, Vietnam, Sri Lanka) Banks, trust banks, and other financial firms, 2 members (JSCC, JASDEC and JDCC )

Elements analysis Ø CSD/CCP’s supervision measures ü Yes, 10 members (Thailand, Malaysia, HK, Vietnam, Elements analysis Ø CSD/CCP’s supervision measures ü Yes, 10 members (Thailand, Malaysia, HK, Vietnam, Korea, Sri Lanka, JASDEC, JSCC, Taiwan , China) * * * Ø Informing the stock exchange and applying to stop its securities transaction Holding the corresponding securities/cash Suspending the relative settlement Suspending or canceling his settlement participant qualification Imposing a fine Others: Use the Clearing Fund, Intermediate recovery, Warning participant in writing, Publicizing participant’s breach in website, Temporarily suspending participants’ usage of service, Revoking certificate of depository members, Issuance of letter of warning, Issuance of letter of attention self-disciplined rules ü ü Yes, 6 members (Thailand, Malaysia, Korea, Taiwan , China, JDCC ) No, 4 members (HK, Vietnam, Sri Lanka, JASDEC )

Elements analysis Ø Analysis: ü ü The questions above concern about some institutional causes Elements analysis Ø Analysis: ü ü The questions above concern about some institutional causes to CSD/CCP’ potential risks in case of participant’s insolvency. Similarly, discussion these factors will contribute to deeper comprehensions. In a way, the responsibility of CSD/CCP’s obligation of guarantee settlement may lead to CSD/CCP suffering loss. Just as Recommendations For Securities Settlement System(CPSS/IOSCO, November 2001) indicate, the benefits and costs of a CCP should be evaluated. Where such a mechanism is introduced, the CCP should rigorously control the risk it assumes. A CCP interposes itself between trade counterparties, becoming the buyer to every seller and the seller to every buyer. Thus, from the point of view of market participants the risk of the CCP substitutes for the risk of the other participants. Moreover, there must be a sound and transparent legal basis for the netting arrangements, whether by novation or otherwise. The CCP must also be operationally sound and must ensure that its participants have the intention and the ability to manage the risk they assume. Most Asian clearing and settlement institutions act as CCPs too. They may encounter same situation to avoid risks derived from this mechanism itself.

Legal arrangements and risk disposal Ø Legal relationship (participants and their clients) ü ü Legal arrangements and risk disposal Ø Legal relationship (participants and their clients) ü ü Ø Commission / brokerage relationship, 9 members (Thailand, Malaysia, HK, Korea, Sri Lanka, JASDEC, JDCC, Taiwan , China) Trust relationship , 3 members (Malaysia, HK, Taiwan) Agent relationship , 6 members (India, Malaysia, HK, Sri Lanka, JDCC, Taiwan) Others: Contractual (deposit) Relationship, 3 members (Thailand, Vietnam, Taiwan) Legal relationship (CSD/CCP and participants) ü ü Principal and agent , 1 member (India) Members or Participants, 3 members (Thailand, JASDEC, JDCC) Direct contractual relationship, 6 members (Malaysia, Vietnam, Korea, Sri Lanka, Taiwan , China) According to the agreement, 1 member(HK)

Legal arrangements and risk disposal Ø CSD/CCP’s special role and privilege ü CSD/CCP’s right Legal arrangements and risk disposal Ø CSD/CCP’s special role and privilege ü CSD/CCP’s right of refusing to deliver securities/cash • Yes, 9 members (Thailand, Malaysia, HK, Vietnam, Korea, JDCC, JSCC, Taiwan, China) • ü No, 1 member (Sri Lanka) legal concept of this kind of right • Lien, 1 member (Thailand) • Pledge, 2 members (JSCC, China) • Others: Legal right, 5 members (Malaysia, HK, Vietnam, Taiwan, JDCC)

Legal arrangements and risk disposal Ø Provisions of Insolvency Law ü ü ü without Legal arrangements and risk disposal Ø Provisions of Insolvency Law ü ü ü without any special reference to insolvency of the participant, 3 members (Indian, Taiwan, China) no insolvency law 1 member (Sri Lanka) brief introduction about the concerned provisions • • • Thailand Malaysia HK Vietnam Korea JASDEC and JDCC

Legal arrangements and risk disposal Ø Analysis: ü ü ü Legal relations among CSD/CCP, Legal arrangements and risk disposal Ø Analysis: ü ü ü Legal relations among CSD/CCP, participants and their clients are fundamental legal factors in all markets. According to different legal background, many types relationship will present in laws and rule governing a system, such as Commission / brokerage relationship, Trust relationship, Agent relationship and Others. But common provisions are also in existence , that can be called contractual relationship. As a SRO institution, CSD/CCP usually sign contracts with their participants to carry out daily arrangements besides rules and procedures. Many rules must represent the content of contracts between the operators and the participants. This legal framework defines the relationships, rights and interests of the operators, the participants and their customers, the manner in which rights and obligations should be exercised and the time when the rights and obligations arise from the operation of the system. As to CSD/CCP’s special role and privilege, the common and regular rights can be described simply as refusing to deliver securities/cash, which is defined in legal concept as Lien, Pledge and just Legal right.

Comment and further discussion Ø Ø The legal framework for securities depository and clearing/settlement Comment and further discussion Ø Ø The legal framework for securities depository and clearing/settlement varies from jurisdiction to jurisdiction and reflects a jurisdiction’s entire legal system. The legal framework includes several basic laws, such as securities, property and insolvency laws, and may include laws specifically related to the operation of the system. Furthermore regulations or other administrative acts, rules and procedures of the system are the vast and primary legal resource. In some jurisdictions, the general laws governing property rights and insolvency may not apply to securities depository and clearing/settlement suitably, or may constitute special provisions related to especial securities depository and clearing/settlement. Key aspects of these areas’ legal framework should include: enforceability of transactions, protection of customer assets (particularly against loss upon the insolvency of a participant), finality of settlement, arrangements for achieving delivery versus payment, default rules, and liquidation of assets pledged or transferred as collateral.

Comments and further discussions Ø Suggestions to include these provisions hereinafter in domestic legal Comments and further discussions Ø Suggestions to include these provisions hereinafter in domestic legal framework: ü ü ü the rules of the depository or settlement system and contracts between CSD/CCP and its participants are still effective even if the participant enters into insolvency process. the rules applicable for the process of securities depository, clearing and settlement take precedence over law of insolvency. any provision precludes the revocation of any instruction given by a participant after the instruction having been entered irrevocably into the relevant clearing and settlement process. any provision precludes the invalidation or reversal of a debit or credit of securities to a securities account after the time at which that debit, credit has been done. CSD/CCP has right (lien or other legal rights) of refusing to deliver securities/cash when the participants fail to fulfill his settlement obligation.

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