Article 195 - Market contracts

(1) This Part applies to "market contracts". Market contracts are contracts which include financial collateral arrangements and close-out netting provisions, where one party is a person other than a natural person and the other party is a financial institution, credit institution or investment undertaking.
(2) In these Regulations:
(A) "close-out netting provision" means a term of an agreement or arrangement or any legislative provision under which on the occurrence of an enforcement event, whether through the operation of netting or set-off or otherwise:
(i) the obligations of the parties are accelerated to become immediately due and expressed as an obligation to pay an amount representing the original obligation's estimated current value or replacement cost, or are terminated and replaced by an obligation to pay such an amount; or
(ii) an account is taken of what is due from each party to the other in respect of such obligations and a net sum equal to the balance of the account is payable by the party from whom the larger amount is due to the other party;
(B) "credit institution" means an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.
(C) "defaulter" means a person in respect of whom action has been taken by a recognised exchange or recognised clearing house under its default rules; and references in this Part 12 to "default" shall be construed accordingly.
(D) "financial collateral" means:
(i) cash;
(ii) shares in companies;
(iii) bonds and other forms of instrument giving rise to or acknowledging indebtedness if these are tradeable on the capital market; and
(iv) any other securities giving the right to acquire such shares, bonds or instruments.
(E) "financial collateral arrangement" means a title transfer financial collateral arrangement or a security financial collateral arrangement, whether or not these are covered by a master agreement or general terms and conditions.
(F) "financial institution" means an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the following activities:
(i) acceptance of deposits and other repayable funds;
(ii) lending, including, inter alia, consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting);
(iii) financial leasing;
(iv) money transmission services;
(v) issuing and administering means of payment (for example, credit cards, travellers' cheques and bankers' drafts);
(vi) guarantees and commitments;
(vii) trading for own account or for account of customers in:
(a) money market instruments (cheques, bills, certificates of deposit, etc.);
(b) foreign exchange;
(c) financial futures and options;
(d) exchange and interest-rate instruments; or
(e) transferable securities;
(viii) participation in securities issues and the provision of services related to such issues;
(ix) advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings;
(x) money broking;
(xi) portfolio management and advice;
(xii) safekeeping and administration of securities;
(xiii) credit reference services; or
(xiv) safe custody services;
(G) "enforcement event" means an event of default, or any similar event as agreed between the parties, on the occurrence of which, a close-out netting provision comes into effect;
(H) "investment undertaking" means an undertaking which provides services involving the holding of funds or securities for third parties and collective investment funds.
(I) "security financial collateral arrangement" means an agreement or arrangement, including a repurchase agreement, evidenced in writing, where:
(i) the purpose of the agreement or arrangement is to secure the relevant financial obligations owed to the collateral-taker;
(ii) the collateral-provider creates or there arises a security in financial collateral to secure those obligations; and
(iii) the financial collateral is delivered, transferred, held or registered so as to be in the possession or control of the collateral-taker
(J) "title transfer financial collateral arrangement" means an agreement or arrangement, including a repurchase agreement, evidenced in writing, where:
(i) the purpose of the agreement or arrangement is to secure or otherwise cover the relevant financial obligations owed to the collateral-taker; and
(ii) the collateral-provider transfers legal and beneficial ownership in financial collateral to a collateral-taker on terms that when the relevant financial obligations are discharged the collateral-taker must transfer legal and beneficial ownership of equivalent financial collateral to the collateral-provider.
(3) In this Part:
(A) "charge" means any form of security, including a mortgage;
(B) "clearing house" means a person authorised by the laws of any place where it conducts business as such, and may include an exchange where the rules of such exchange effect settlement netting between members;
(C) "exchange" means a person authorised by the laws of any place where it conducts business as such, and may include an exchange where the rules of such exchange effect settlement netting between members; and
(D) "designated" means designated pursuant to criteria published or as otherwise specified by the QFC Authority from time to time.
(4) References in this Part to settlement in relation to a market contract are to the discharge of the rights and liabilities of the parties to the contract, whether by performance, compromise or otherwise.
(5) In this Part the expressions "margin" and "cover for margin" have the same meaning.
(6) For the purposes of this Part a person shall be taken to have notice of a matter if he deliberately failed to make enquiries as to that matter in circumstances in which a reasonable and honest person would have done so. This does not apply for the purposes of a provision requiring "actual notice".
(7) In relation to a designated exchange, this Part 12 applies to:
(A) contracts entered into by a member or designated non-member of the exchange which are made on or otherwise subject to the rules of the exchange; and
(B) contracts subject to the rules of the exchange executed through the facilities of the exchange for the purposes of or in connection with the provision of clearing services.
(8) A "designated non-member" means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.
(9) In relation to a designated clearing house, this Part 12 applies to contracts subject to the rules of the clearing house cleared through the facilities of the clearing house for the purposes of or in connection with the provision of clearing services for a recognised exchange.
(10) The QFC Authority may by rules make further provision as to the contracts to be treated as "market contracts", for the purposes of this Part, in relation to a designated exchange or designated clearing house.
(11) The said rules may add to, amend or repeal the provisions of Article 195(2) and (3).