CMA LAW: Resolution No. (72) of 2016 Regarding Implementing Post-Trade Model (Transitional Phase)

Having Perused:

- Law No. (7) of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities and its Amendments; and

- CMA Board of Commissioners’ Resolution No. (51) of 2015 regarding establishing a team to manage the regularization of the licensing of  Kuwait Clearing Company and to manage the implementation of a new Post-Trade Model.

- CMA Board of Commissioners’ Resolution No. C.B.C (19-8) of 2016;

- CMA Board of Commissioners’ Resolution passed in its meeting No. (24) of 2016 held on 28/07/2016;

The following was resolved:

Article 1: The application of the Post-Trade Model shall be in line with international standards and practices, therefore, all entities subject to the Authority’s supervision and any other participants affected by the Post-Trade Model must comply with the following practices when each comes into force:

a) Unify the settlement cycle for all traders in the Exchange to be Trading day plus three business days (“T+3”), and the consequent change in timelines to acquire ownership rights relating to securities (“Corporate Actions”).

b) Work in compliance with a “Delivery versus Payment” system, as approved by the Bank for International Settlements (“BIS”).

c) Complete cash settlements relating to securities through financial institutions licensed by the Central Bank of Kuwait.

d) Licensed persons shall segregate their clients’ accounts within Omnibus Accounts, using the appropriate numbering to identify each client in accordance with the rules to be issued.

e) Clients of Qualified Brokers registered on the Exchange shall be exempt from fees payable for the transfer of their assets to the Qualified Broker’s Omnibus Accounts, during a maximum period of two months from the commencement of the Qualified Broker’s activity.

f) The settlement of all obligations arising from securities transactions shall be conducted in accordance with mechanisms approved by the Authority. In case of failure to settle any securities transaction, the broker, custodian, or clearing agency, as appropriate, shall cover all obligations through financial guarantees provided by them and at the least the following tools shall be implemented:

1. A Buy- in Board with a specific maximum time to allow a roll-over;
2. Provide enough cash to complete a Cash Close-out.

g)  Custodian can verify clients’ transactions, with the right to approve or reject each trade during a specified period, according to the rules of clearing and settlement approved by the Authority.

Article 2: All licensed persons affected by the Post-Trade Model shall set up adequate Internal Controls and IT Systems to ensure their ability to carry out their activities according to the practices mentioned in Article 1 of this resolution, and according to the timelines specified by the Authority for the Model to come into force.

Article 3: The Exchange and The Clearing Agency must ensure full coordination between themselves and with the Authority in preparing the rules and regulations to implement the practices mentioned in Article 1 of this resolution according to the timelines set by the Authority, and shall provide the Authority with the Trading Rules and the Clearing and Settlement Rules during the period set by the Authority to approve them.

Article 4: The concerned bodies shall execute this Resolution, each within its jurisdiction. This Resolution shall come into force from the date of its issuance

Dr. Nayef Falah Al-Hajraf
Chairman of CMA Board of Commissioners 

Issued on: 03/08/2016 

Copy of the Official Document

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