• MIR 6.5 MIR 6.5 Regulator supervision of action by Recognised Bodies under their Default Rules

    • MIR 6.5.1 [Deleted]

      Recognised bodies which, under their rules, have market contracts are required to have Default Rules enabling them (among other things) to take action in relation to a Member who appears to be unable to meet his obligations in respect of one or more unsettled market contracts. The detailed Recognition Requirements relating to the Default Rules are set out in Rule 3.10 and Rule 4.5.

    • MIR 6.5.2 MIR 6.5.2 [Deleted]

      The Default Rules for Recognised Clearing Houses are designed to ensure that rights and liabilities between the defaulter and any counterparty to an unsettled market contract are discharged, and for there to be paid between the defaulter and each counterparty one net sum. The Insolvency Regulations contain provisions which protect action taken under Default Rules from the normal operation of insolvency law which might otherwise leave this action open to challenge by a relevant office-holder.

      • Guidance

        Recognised bodies which, under their rules, have Market Contracts are required to have Default Rules enabling them (among other things) to take action in relation to a Member who appears to be unable to meet his obligations in respect of one or more unsettled Market Contracts. The detailed Recognition Requirements relating to the Default Rules are set out in Rule 3.10 and Rule 4.5.

        The Default Rules are designed to ensure that rights and liabilities between the defaulter and any counterparty to an unsettled Market Contract are discharged, and for there to be paid between the defaulter and each counterparty one net sum. The Insolvency Regulations contain provisions which protect action taken under Default Rules from the normal operation of insolvency law which might otherwise leave this action open to challenge by a Relevant Office Holder.

    • MIR 6.5.3

      The Regulator may direct a Recognised Body to take, or not to take, action under its Default Rules (see Rules 6.5.4 and 6.5.6). Before exercising these powers the Regulator must consult the Recognised Body. The Regulator may also exercise these powers if a Relevant Office Holder applies to it.

    • MIR 6.5.4

      The Regulator may issue a "positive" direction (to take action) where in any case a Recognised Body has not taken action under its Default Rules, but it appears to the Regulator that the Recognised Body could take action.

    • MIR 6.5.5

      Before giving such a direction under Rule 6.5.4, the Regulator shall consult the Recognised Body in question, and the Regulator shall not give a direction unless the Regulator is satisfied, in the light of that consultation that:

      (a) failure to take action would involve undue risk to investors or other participants in the market;
      (b) the direction is necessary having regard to the public interest in the financial stability of the Abu Dhabi Global Market; or
      (c) the direction is necessary to facilitate a proposed or possible use of a power under COBS 16 or in connection with a particular exercise of a power under that Part.

    • MIR 6.5.6

      The Regulator may issue a "negative" direction (not to take action) where in any case a Recognised Body has not taken action under its Default Rules, but it appears to the Regulator that the Recognised Body is proposing to take or may take action.

    • MIR 6.5.7

      Before giving a direction under Rule 6.5.6, the Regulator shall consult the Recognised Body in question, and the Regulator shall not give a direction unless the Regulator is satisfied, in the light of that consultation that:

      (a) the taking of action would be premature or otherwise undesirable in the interests of investors or other participants in the market;
      (b) the direction is necessary having regard to the public interest in the financial stability of the Abu Dhabi Global Market; or
      (c) the direction is necessary to facilitate a proposed or possible use of a power under COBS 16 or in connection with a particular exercise of a power under that Part.

    • MIR 6.5.8

      A negative direction cannot be given if, in relation to the defaulter, either:

      (a) a bankruptcy order or an award of sequestration of the defaulter's estate has been made, or an interim receiver or interim trustee has been appointed; or
      (b) a winding‐up order has been made, a resolution for voluntary winding‐up has been passed or an administrator, administrative receiver or provisional liquidator has been appointed,

      and any previous negative direction will cease to have effect on the making or passing of any such order, award or appointment.

    • MIR 6.5.9

      A negative direction may be expressed to have effect until a further direction is given, which may either be a positive direction or a revocation of the earlier negative direction.

    • MIR 6.5.10

      Where a Recognised Body has taken action either of its own accord or in response to a direction, the Regulator may direct it to do or not to do specific things subject to these being within the powers of the Recognised Body under its Default Rules. However,

      (a) where the Recognised Body is acting in accordance with a direction given by the Regulator to take action on the basis that failure to take action would involve undue risk to investors or other participants in the market, the Regulator will not direct it to do or not to do specific things which the Recognised Body has power to do under its Default Rules, unless the Regulator is satisfied that this will not impede or frustrate the proper and efficient conduct of the default proceedings; and
      (b) where the Recognised Body has taken action under its Default Rules without being directed to do so, the Regulator will not direct it to do or not to do specific things which the Recognised Body has power to do under its Default Rules, unless the Regulator is satisfied that:
      (i) the direction will not impede or frustrate the proper and efficient conduct of the default proceedings; or
      (ii) the direction is necessary:
      A. having regard to the public interest in the stability of the Abu Dhabi Global Market Financial System;
      B. to facilitate a proposed or possible use of a power under COBS 16; or
      C. in connection with a particular exercise of a power under COBS 16.

    • MIR 6.5.11

      Where, in relation to a Member (or designated non‐Member) of a Recognised Body:

      (a) a bankruptcy order;
      (b) an award of sequestration of his estate;
      (c) an order appointing an interim receiver of his property;
      (d) an administration or winding‐up order;
      (e) a resolution for a voluntary winding‐up; or
      (f) an order appointing a provisional liquidator,

      has been made or passed and the Recognised Body has not taken action under its Default Rules as a result of this event or of the matters giving rise to it, a Relevant Office Holder appointed in connection with the order, award or resolution may make an application to the Regulator.

    • MIR 6.5.12

      The effect of such an application is to require the Recognised Body concerned to take action under its Default Rules or to require the Regulator to take action.

    • MIR 6.5.13

      The procedure is that the Regulator must notify the Recognised Body of the application and, unless within three business days after receipt of that notice, the Recognised Body:

      (a) takes action under its Default Rules;
      (b) notifies the Regulator that it proposes to take action forthwith; or
      (c) is directed to take action by the Regulator,

      section 268 of the Insolvency Regulations do not apply in relation to Market Contracts to which the Member or designated non‐Member is a party or to anything done by the Recognised Body for the purpose of, or in connection with, the settlement of any Market Contracts.