Actions Following Default of a Clearing Participant 

Grounds for Declaration of Default

HKSCC may declare a Clearing Participant a defaulter for various reasons including Participant’s failure to pay any sum due to HKSCC.

Actions on Default

If a Clearing Participant fails to meet its obligations to HKSCC in Hong Kong and/or China Connect Market(s), the Participant has defaulted as stipulated in the General Rules of CCASS and HKSCC has a range of measures it can take in response to such default including informing the Stock Exchange and declaring the Clearing Participant a defaulter. The Stock Exchange will take action under its rules, including suspending the Clearing Participant which is an Exchange Participant from trading. HKSCC will also request the Stock Exchange to suspend from trading any of the defaulter’s Non-Clearing Participants which does not have in place immediately upon suspension of the defaulter a valid, binding and effective Clearing Agreement with another General Clearing Participant. The Securities and Futures Commission will also be notified.

After HKSCC declares a Clearing Participant a defaulter, it will close-out the defaulter’s outstanding stock positions  by buy-in and  selling allocated but not paid for stocks. The effect of this action is to arrive at a net sum payable by or to the defaulting Clearing Participant. The cost of closing-out transactions will be borne by the defaulting Clearing Participant.

Marks, Margin, collateral, admission fee, Mainland Settlement Deposit, Mainland Security Deposit as well as Basic Contribution and Dynamic Contribution to the Guarantee Fund of a defaulting Clearing Participant will be used to offset its indebtedness incurred in Hong Kong and/or China Connect Market(s).

HKSCC may also seek recovery of closing-out loss from the Guarantee Fund in layers.