A Recognised Clearing House should be able to demonstrate to the Regulator that the legal basis on which it operates, including in multiple jurisdictions, is well founded. This would general include:
(a) well-defined rights and obligations of the Recognised Clearing House, its Members and other users, including its service providers such as custodians and settlement banks, or would provide a mechanism by which such rights and obligations can be ascertained. This would enable the Recognised Clearing House to identify and address risks that arise from its operations involving such parties;
(b) adequately addressing legal risks faced by a Recognised Clearing House, particularly where it operates in multiple jurisdictions including a situation where an unexpected application of a law or regulation may render a contract between itself and counterparty void or unenforceable, thereby leading to a loss; and
(c) obtaining independent legal opinions as appropriate to its activities in order to form clear views about the legally binding nature of its contractual arrangements in the relevant jurisdictions. Such legal opinions should, to the extent practicable, confirm the enforceability of the rules and procedures of the Recognised Clearing House in the relevant jurisdictions and be made available to the Regulator upon request.