A Guarantee Fund has been set up to cover losses incurred by HKSCC as a result of guaranteeing the CNS trades in Eligible Securities, including China Connect Securities, or acceptance of defective securities deposited by Clearing Participants who subsequently defaulted in Hong Kong and/or China Connect Market(s).
The Guarantee Fund is mainly made up of contributions by Clearing Participants and HKD200 million appropriated from HKSCC's reserves.
Clearing Participants’ contributions to the Guarantee Fund are in two parts, Basic Contribution and Dynamic Contribution and are in proportion to their average daily CNS positions* for the previous month. The minimum amount of Basic Contribution to be made by each Direct Clearing Participant (DCP) shall be HKD50,000 or HKD50,000 in respect of each Stock Exchange Trading Right held by such DCP in the Exchange, whichever is the higher. The minimum amount of Basic Contribution to be made by each General Clearing Participant (GCP) shall be HKD150,000 or the aggregate of HKD50,000 in respect of each Stock Exchange Trading Right held by it and HKD50,000 in respect of each Non-Clearing Participant with whom such GCP has entered into a Clearing Agreement, whichever is the higher.
The minimum aggregate amount of Basic Contributions is HKD100 million. There is no minimum aggregate amount for Dynamic Contributions. Generally, each Clearing Participant is allowed a HKD1 million Dynamic Contribution Credit in arriving at its required Dynamic Contribution. Clearing Participants’ required contributions are reviewed at least monthly.
The size of the Guarantee Fund is reviewed at least once a month.
* In the context of Guarantee Fund calculations, CNS positions of a Clearing Participant refer to the higher of (i) the aggregate of the value of the total cross-day net long CNS stock positions of the Clearing Participant and the money settlement obligations of the Clearing Participant on that day and (ii) the value of the total cross-day net short CNS stock positions of such Clearing Participant on that day, each subject to adjustments which HKSCC may from time to time consider appropriate. The values of the CNS stock positions in Eligible Securities, including positions in China Connect Securities, are computed with reference to the Mark-to-market value of the relevant CNS stock positions determined by HKSCC. “Money settlement obligations” of a Clearing Participant refers to the amounts payable by the Clearing Participant for the settlement of its Market Contracts.