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Law and Regulation of Central Counterparties - Jiabin Huang

Law and Regulation of Central Counterparties

Hardcover Published: 20th October 2010
ISBN: 9781849460514
Number Of Pages: 225

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The Law and Regulation of Central Counterparties provides a detailed analysis of the legal and regulatory aspects of Central Counterparties (CCPs) with an introduction to their role and functions in modern financial markets. The book begins by describing in detail the basic elements of modern post-trade infrastructure, exploring the modern functional and operational aspects of CCPs in the markets. It moves on to discuss: the relationships between CCPs and their members, as well as clients of clearing members as non-members * legal issues concerning collateralization * netting and set-off * default arrangements that are primarily embedded in the form of the rules and regulations of CCPs. With regard to regulatory issues, the book examines the regulatory framework with reference to the UK and the EU. As to the case for a single CCP for various different types of markets, the analysis covers the advantages and disadvantages of CCP clearing and carries out an assessment of the risks and benefits of a single multi-market CCP. The Law and Regulation of Central Counterparties will be of interest to commercial practitioners, city law firms, and financial institutions.

Dr. Huang's book is the first legal scholarly work which covers all the main issues in one place. This landmark piece of work comes at a time when CCPs have become a hot topic for debate and have caught the attention of policy-makers around the globe as a mechanism for reducing risk in the international financial markets. His work strikes a delicate balance between the legal aspects of the CCP system both in theory and practice, thereby serving as a useful manual for practicing lawyers, policy-makers and academics interested in this increasingly important field...it transcends boundaries and can be used as a manual for CCPs by lawyers, regulators ad policy-makers in any jurisdiction. ...this book is well-written...and the concepts are easy to grasp for anyone who is initiated in clearing and settlement systems. The book is accessible to anyone familiar with commercial, banking or financial law. It will remain a classic piece of work that will be remembered as the first of its kind. It could not have been published at a more opportune time, and it contains years of scholarly research that will be of great aid to regulators and public policy-makers in the years to follow. Christian Chamorro-Courtland Banking and Finance Law Review Volume27:3

Introduction
The Purpose and Scope
The Chapters in Outline
Basic Elements of Post-trade Infrastructure
Introduction
The Importance of Post-trade Infrastructure
The Changing Landscape of Post-trade Infrastructure
Central Counterparty
Clearing
Settlement
Payment Systems and Securities Settlement Systems
Introduction
Payment Systems
Securities Settlement Systems
Modern Indirect-holding Structure and Book-entry Securities
Introduction
Indirect-holding Structure
Book-entry Securities
Transfer of Book-entry Securities
Concluding Remarks
Relevant Developments in Shaping the Future of Post-trade Infrastructure
Delivery Versus Payment (DVP): Horizontal Linkage between Payment and Securities Settlement Systems, Various Forms of DVPA. UK CREST
CREST DVP Process
Self-collateralisation in CREST
Straight-Through Processing (STP): Vertical Linkage between Different Tiers of Holding Systems
The Drive towards STP
Benefits
Challenges
The Role of CCPs in STP Process
Market Development
Concluding Remarks
The Future of Post-trade Infrastructure
The Functional and Operational Aspects of Central Counterparties
Origins and Historical Development
Cheque Clearing
Commodity Clearing
Central Counterparty Clearing
Concluding Remarks
The Functional Aspects of CCPs
CCP as Risk Manager
CCP as Fund Manager
CCP as Payment and Settlement System Operator
CCP as Post-trade Market Facilitator
The Operational Aspects of CCPs
Risk Operations
Treasury Operations
Specially Arranged Payment Scheme
Margining Operations
Operations for Other Services
Settlement Operations for CCPs
Trade Registration
Pre-netting
Netting Process
Post-netting
Settlement
Major Factors that Affect Settlement Operations
UK CREST
Concluding Remarks
Legal Issues: The Key Relationships
Introduction
Trading Rules and Clearing Rules
Trading
Trading/Exchange Rules v CCP Clearing Rules
The Timing Issue
The Conditions for Transaction Acceptance/Registration
The Results
Overview of the Key Relationships
The Relationship between CCPs and Their Members
The Relationship between Clearing Members Themselves
The Relationship between Clearing Members and Their Clients
The Nature of the Relationship
Implied Terms and The Relationship between the Two Different Clearing Arrangements
The Legal Position of Clearing Members affected by CCP Clearing
The Position of Clients of Clearing Members
The Effectiveness and Implications of Implied Terms: Clearing Rules and Regulations as Implied Terms
The Rights of Clients of Clearing Members
The Relationship between CCPs Themselves
Concluding Remarks
Default Procedures and Default by a CCP
Collateralisation and Financial Collateral Arrangements
Types of Collateral
The Use of Collateral
Collateralisation in DVP Arrangements
Collateralisation in Payment Systems
Collateralisation in CCPs
The Limitation of Collateralisation
Characterisation and Realisation
Netting and Set-off
Netting
Definition and Distinctions
Settlement Netting
Novation Netting
Close-out Netting
Default by A Clearing Member
Commencement of Default Procedures
The Prescribed Events that Trigger Default Procedures
Procedures to be Followed
Close-out of Positions
The Effect of Default Procedures on Other Clearing Members and Third Parties
Default by a CCP
Concluding Remarks
Regulatory Issues
The Purposes and Objectives of Financial Regulation
The Purposes and Objectives of Financial Regulation
The Interaction between Financial Regulation and the Markets
Regulatory Approaches
The Modes of Financial Regulation
The Risk-based Functional Approach
The Interest of Central Banks
CCPs and the Regulatory Regime
The Need for Separated Treatment for CCPs
CCPs as Self-Regulatory Organisations
The UK Regulatory Regime
Market Contracts, Market Charges and Default Rules
Roles of Relevant Authorities
Competition Issues: A Special Competition Regime
The Effect of Recognition
Current Situation in the European Union
The Current EU Initiatives
The EU Directives
Directive on Settlement Finality
Directive on Financial Collateral Arrangements
Markets in Financial Instruments Directive (MiFID)
The Challenges to the EU Regulators and Supervisors
Concluding Remarks
The Case for a Single Multi-market Central Counterparty
Advantages and Disadvantages of CCP Clearing
From the Markets' Perspective
From Members' Perspective
From Non-members' Perspective
Concluding Remarks
The Case for a Single Multi-market Central Counterparty
The Raison D'etre for a Single Multi-market CCP
The Benefits of a Single Multi-market CCP
The Risks of a Single Multi-market CCP
The Global CCP Initiative
European Union Developments
The Current Situation
The Argument for a Single Pan-European CCP
Future Prospects
Concluding Remarks
Conclusions
Modern Post-trade Infrastructure
The Legal and Regulatory Framework
A Single Multi-market CCP Select Bibliography Index
Table of Contents provided by Publisher. All Rights Reserved.

ISBN: 9781849460514
ISBN-10: 1849460515
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 225
Published: 20th October 2010
Publisher: Bloomsbury Publishing
Country of Publication: GB
Dimensions (cm): 23.4 x 15.6  x 1.7
Weight (kg): 0.5
Edition Number: 1