Chapter 8 Mutual Offset System
This Chapter sets out the rights and responsibilities of Clearing Members with respect to a Mutual Offset System.
The procedures of the Clearing House, including the duties of a Clearing Member to members of the Participating Markets for whom the Clearing Member provides clearing services or with whom the Clearing Member has an agreement for Inter-Exchange Transfer (as defined in Rule 8.03.1.3), that are not specifically covered herein, shall be governed by the other provisions of this Rules that are consistent with this Chapter.
If the Clearing House has reason to believe that the access to or usage by a Clearing Member of the Mutual Offset System adversely affects the Clearing House or the Mutual Offset System, the Clearing House may suspend the Clearing Member's access to and/or usage of the Mutual Offset System.
8.02 Designated Futures Contracts
The Mutual Offset System may be utilised for only those of the Designated Futures Contracts which may be prescribed by the Clearing House from time to time. The Clearing House may at any time and from time to time delist any contract as a Designated Futures Contract.
8.03 Governing Rules
For the purposes of a Mutual Offset System and this Rules, the following additional definitions shall apply:8.03.1.1 Originating Clearing Member
An Authorised Clearing Member of a Participating Market and/or its clearing house which:a. initiates an order for execution by an Executing Clearing Member of the other Participating Market; orb. is deemed with respect to such Executing Clearing Member to be responsible for orders to be executed,on the other Participating Market pursuant to the Mutual Offset System.8.03.1.2 Executing Clearing Member
An Authorised Clearing Member of a Participating Market and/or its clearing house that accepts and is responsible for executing and/or clearing of a trade on such Participating Market requested and/or initiated by an Originating Clearing Member of the other Participating Market pursuant to the Mutual Offset System.8.03.1.2A Authorised Clearing Member
A clearing member of a Participating Market and/or its clearing house that is authorised to gain access to and use, the Mutual Offset System.8.03.1.3 Inter-Exchange Transfera. The transfer pursuant to the Mutual Offset System to a Participating Market and/or its clearing house of a position as a result of a trade executed on another Participating Market. For the avoidance of doubt, Inter-Exchange Transfer does not apply to a trade executed as a result of private negotiation.b. All orders received by members of a Participating Market ("Originating Participating Market") for execution on another Participating Market shall (if a Mutual Offset System Agreement subsists between the two (2) Participating Markets and the orders relate to a Designated Futures Contract for the purposes of such agreement) be deemed to be for the purposes of such Mutual Offset System, and the resulting positions shall (if satisfying the prerequisites for Inter-Exchange Transfer set out below) automatically be transferred to the other Participating Market unless upon receipt of an order the member of the Originating Participating Market receives instructions to the contrary.c. All trades of an Originating as well as those of an Executing Clearing Member who is a Clearing Member for the purposes of the Mutual Offset System shall be promptly reported to the Clearing House in the form of a memorandum provided by the Clearing House (the "Inter-Exchange Transfer Memorandum"). In this connection, it shall be the responsibility of such a Clearing Member to ensure that it receives such information as may be necessary and in due time from such members of a Relevant Market (for whose trades such Clearing Member is deemed to be the Originating Clearing Member or for whose executed trades such Clearing Member is to be the Executing Clearing Member under the Mutual Offset System) for it to promptly effect its reporting obligation as aforesaid.
8.04 Conditions for Inter-Exchange Transfer
So long as a Mutual Offset System is in effect as between the relevant Participating Markets, a trade will be transferred between Participating Markets and/or their respective clearing houses if all of the following conditions are satisfied:8.04.1.1 The trade has cleared in the ordinary course on the Participating Market where it is executed.8.04.1.2 An Inter-Exchange Transfer Memorandum has been duly delivered to the Clearing House in respect of the trade.8.04.1.3 In relation to a transfer of a trade under the Mutual Offset System to the Clearing House, the Clearing House has received confirmation of the Inter-Exchange trade data (being trade information supplied in an Inter-Exchange Transfer Memorandum) from the other Participating Market.8.04.1.4 The Originating Clearing Member and the Executing Clearing Member has, prior to the execution of the trade entered into a written agreement with the Authorised Clearing Member which may have such terms and conditions as the contracting Authorised Clearing Members shall determine, but in any event shall provide in substance as follows:a. Until such time as Inter-Exchange Transfer occurs with respect to a trade executed pursuant to the Mutual Offset System, each Authorised Clearing Member shall remain liable to the other Authorised Clearing Member for such trade in the same manner and to the same extent as if the Executing Clearing Member had executed such trade for a customer outside of the Mutual Offset System; andb. Upon the occurrence of Inter-Exchange Transfer with respect to any trade executed pursuant to the Mutual Offset System, each Authorised Clearing Member shall have no further liability (other than with respect to the payment of commissions or fees agreed to by such Authorised Clearing Members) to, or relationship with, the other Authorised Clearing Member with respect to the position created by such trade, and thereafter the Originating Clearing Member shall look only to the clearing house which the trade is transferred to, with respect to the position created by such trade; notwithstanding the foregoing, the Executing Clearing Member shall continue to be fully liable to the Originating Clearing Member with respect to the execution of such trade including fraud or the breach of any obligation or duty ordinarily borne by the party executing a commodity futures contract trade on the Participating Markets, and for any unmatched trades.
8.05 Exchange Transfer
8.05.1 Clearing Members
The Clearing Member who is the Executing Clearing Member with respect to a trade executed on the Exchange pursuant to a Mutual Offset System shall have the same responsibilities to the Clearing House for such trade as for any other trade made on the Exchange until the trade is transferred to another Participating Market.
After a trade executed on the Exchange is transferred to another Participating Market, the Executing Clearing Member shall have no further responsibility to the Clearing House for such trade and shall have no further responsibility to or relationship with the Originating Clearing Member with respect to the position created by such trade.
After a trade executed on a Participating Market other than the Exchange, is transferred to the Exchange, the Originating Clearing Member who is a Clearing Member shall have no further responsibility to or relationship with the Executing Clearing Member of the other Participating Market with respect to the position created by the trade, and the Originating Clearing Member who is a Clearing Member shall have a position on the Exchange and the same responsibilities to the Clearing House for such a position as it would have had if the trade creating the position had been executed on the Exchange and cleared by the Clearing Member.
8.05.2 Other Participating Markets Other Than Exchange
At such time as a trade executed on the Exchange is transferred to another Participating Market, the other Participating Market and/or its clearing house shall be substituted for the Executing Clearing Member who is a Clearing Member with respect to the position created by such trade.
At such time as a trade executed on a Participating Market, other than the Exchange, is transferred to the Exchange, the other Participating Market and/or its clearing house will have a position equal and opposite to the position created by such trade subject to the Inter-Exchange Transfer.
8.05.3 Trade Not Transferred Between Participating Exchanges
Until and unless a trade executed on the Exchange is transferred under the Mutual Offset System to the other Participating Market, the Executing Clearing Member (who is a Clearing Member) shall be and shall remain responsible to the Clearing House to the full extent as with any trade cleared and/or carried by the same.
Notwithstanding the foregoing, the Clearing House shall be entitled, as between the Clearing House and the Clearing Members, to make such rules as the Clearing House deems necessary in relation to any matter concerning the Mutual Offset System and the rights and obligations of the Clearing Members thereto whether by way of Directives or in such other manner as the Clearing House considers appropriate.