Clearing, Settlement & Depository’s Legal Protection in the Case of Participant’s Insolvency – The Malaysian Persp

1. 11TH ACG CROSS-TRAINING SEMINAR Dhaka, 4 July 2009 Clearing, Settlement & Depository’s Legal Protection in the Case of Participant’s Insolvency – The Malaysian Perspective Bursa Malaysia

2. CSD STRUCTURE (1) Bursa Malaysia Berhad Bursa Malaysia Derivatives Berhad Bursa Malaysia Depository SdnBhd Bursa Malaysia Securities Berhad • Equity Derivatives • Financial Derivatives • Commodity Derivatives • Main Market • ACE Market • Central Depository Bursa Malaysia Derivatives Clearing Berhad Bursa Malaysia Securities Clearing SdnBhd • Derivatives clearing and settlement • Securities clearing and settlement 2

3. CSD STRUCTURE (2) Bursa Malaysia Depository SdnBhd Bursa Malaysia Securities Clearing SdnBhd • Central Depository • Securities clearing and settlement Merely acts to facilitate the book entry delivery of securities in the securities account of the depositors Clears, settles and acts as the central counter party for trades executed on Bursa Securities. 3

4. POWERS OF BURSA SECURITIES CLEARING IN THE EVENT OF A PARTICIPANT’S INSOLVENCY – SOURCES RULES OF BURSA SECURITIES CLEARING CAPITAL MARKETS AND SERVICES ACT 2007 4

5. POWERS OF BURSA SECURITIES CLEARING IN THE EVENT OF A PARTICIPANT’S INSOLVENCY – EXAMPLES • To close out (liquidate all existing novated contracts of the defaulting participant with an equal and opposite transaction) at what Bursa Securities Clearing determines to be the best prevailing market price and terms available. • To dispose such securities held under lien without further reference to the defaulting participant. • To apply all sums obtained from disposing securities held under lien or any other sum standing to the credit of the defaulting participant. • To take any action as Bursa Securities Clearing deems necessary for the protection of its interest with respect to novated contracts to which a defaulting participant is a party, at the defaulting participant’s expense and if appropriate in its name. 5

6. HOW ARE THE DEPOSITORS AND BURSA SECURITIES CLEARING PROTECTED FROM A PARTICIPANT’S INSOLVENCY (1) • Securities accounts are maintained at “client level” – the securities account holders are considered the owners of the securities who are entitled to all rights even in the event of a participant’s insolvency. • The clients’ monies with the trading participating organisation are required to be kept in a trust account where the monies can only be withdrawn from the trust account only in specified circumstances. 6

7. HOW ARE THE DEPOSITORS AND BURSA SECURITIES CLEARING PROTECTED FROM A PARTICIPANT’S INSOLVENCY (2) • Clearing Guarantee Fund • Consists of contributions from Trading Clearing Participants and Bursa Malaysia • Currently at RM100 million (approximately USD 28.5 million) • To cover obligations and liabilities of Bursa Securities Clearing arising out of contracts cleared and settled by Bursa Securities Clearing 7

8. HOW ARE THE DEPOSITORS AND BURSA SECURITIES CLEARING PROTECTED FROM A PARTICIPANT’S INSOLVENCY (3) • Section 43 of the CMSA: None of the following shall be regarded to any extent 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 a person: • a market contract; • the rules of Bursa Securities Clearing relating to the settlement of a market contract; • any proceedings or other action taken under the Rules of Bursa Securities Clearing relating to the settlement of a market contract; • a market charge; • the default rules of Bursa Securities Clearing; or • any default proceedings. 8

9. THANK YOU If you need further information of clarification, please contact: Sharon Barbosa Head, Participants – Clearing, Settlement & Depository Regulatory Policy & Regulation Regulation Bursa Malaysia Berhad Tel +603 2034 7295 sharonbarbosa@bursamalaysia.com www.bursamalaysia.com