September 21, 2019      
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MSM Price

Settlement Guarantee fund

Definition of Settlement Guarantee Fund

Is a financial base in which the settlement members contribute to ensure the fulfillment of obligations arising from securities trading processes executed in the trading system at Muscat Securities Market (MSM). The Fund includes in its membership all settlement members whom the settlement is performed directly on their accounts in the commercial banks through the Settlement Account registered in the name of MCD at the CBO.
 
Objectives and Responsibilities of the Settlement Guarantee Fund
  • Ensure that the settlement obligations arising from the trading of securities listed in MSM are fulfilled (through the Guarantee Fund ensures the settlement of all trading processes on the Settlement Day).
  • Encourage domestic and foreign investments to trade in the MSM (by ensuring that they receive their rights at the specified time).
  • To fulfil the obligations arising from the dealing in securities for which clearing and settlement operations are executed by MCDC as follows:
    • 1- Covering the cash deficit resulting from the failure of the buyer member in payment.
    2- Covering the deficit in securities resulting from the failure of the seller member in delivery.
Fund Management
The Fund`s management and supervision shall be operated by a committee, formed in accordance with the provisions of Article (26) of the Clearing and Settlement Regulation, of (6) members headed by a representative of Muscat Clearing Depository Company, members representatives of each of CMA and MSM, two representatives of the companies working in securities and another member of the Company, as follows:
 

No

Name

Position

Represent

1

Abdullah bin Ahmed Al Nabhani

Chairman of the Committee

Muscat clearing & Depository

2

Khalfan bin Mohammed Al Sharji

Vice President

Capital Market Authority

3

Bader bin Homood Al Hinai

Member

Muscat Securities Market

4

Salem bin Khamis Al Balushi

Member

Muscat clearing & Depository

5

Ahmed bin Marhoon Al Farsi

Member

Securities companies

6

Hamad bin Mohammed Al Salti

Member

Securities companies

7

Al Julanda Khalid Al Mawali

Secretary

Muscat clearing & Depository
Competency and duties of the Settlement Guarantee Fund Committee
    • Approve the general policies of the Fund.
    • Ensure that the Fund`s money is used for the purposes for which it was established and to invest its money in the aspects specified in this Regulation.
    • Open accounts in the name of the Fund at the banks in which the balances of the Fund are deposited, and grant authorizations on such accounts on behalf of the Fund.
    • Obtain an insurance policy against risks of the Fund if it deemed necessary.
    • Issue instructions to the banks in which moneys of the Fund are deposited, to withdraw money from the Fund’s accounts, within the limits of the deficit, to complete the financial settlement process between the members.
    • Follow-up collection of Fund’s claims at the members and others.
    • Selling or liquidating any of the Fund`s assets to serve the interest of the Fund.
    • Borrow or obtain credit facilities to pay the settlement obligations with the guarantee of the assets of the Fund, and each member shall bear the cost attributed to it of such loans.
    • Submit any proposal that it deems appropriate for the development of the Fund`s business and present it to the concerned authorities for approval.
    • Appoint qualified staff required to manage the Fund and execute the related work.
    • Settle the administrative expenses of the Fund.
    • Determine the amounts owed by members who failed to settle their obligations which the Fund has covered on their behalf.
Governing Regulations of the Fund

The Regulation of Clearing and Settlement includes the provisions governing the Settlement Guarantee Fund in Chapter V of the Regulation.
Chapter Five (Regulation of Clearing & Settlement Provisions)
Settlement Guarantee Fund


Article (24)A fund called "Settlement Guarantee Fund" shall be established and shall enjoy legal personality and financial and administrative independence. It shall aim to ensure timely settlement of trading operations. The Fund shall include in its membership all companies operating in the field of securities licensed for brokerage activity. The Committee may grant memberships to other licensed companies in the field of securities.
Article (25)
The Responsibility of the Fund is limited to fulfilling the obligations arising from dealing in securities for which clearing and settlement trades are carried out by the Company as follows:
  • Covering the cash deficit resulting from the failure of the buyer member in payment.
  • Covering the deficit in the securities resulting from the failure of the seller member in delivery.
Article (26)
The Fund shall be managed and supervised by a committee formed by a decision of the General Manager of the Company headed by a representative of the Company and the membership of:
  • A representative of the Authority.
  • A representative of the Market.
  • Another representative of the company.
  • Two members of the companies working in the field of securities and are nominated by the Association of companies working in the field of securities.
  • The Committee shall be formed for a period of three renewable years, and in the forming resolution Vice-President and the Secretary of the Committee shall be determined. The Vice-President shall replace the President in case of absence. The Resolution shall also set the remuneration and attendance allowance of the members and the Secretary.
  • The Committee shall hold its meetings at the request of its Chairman. The Secretary shall convene the meetings, prepare the necessary minutes and correspondence, follow up the implementation of the Committee’s decisions, and any other tasks assigned to him by the Chairman of the Committee.
  • The meeting of the committee shall not be valid unless it is attended by at least three members, including the president or his deputy. The committee shall take its decisions by a relative majority. In the event of a tie, the President of the Meeting shall be deemed to have the same vote.
Article (27)
The Committee shall undertake the following tasks:
  • Approve the general policies of the Fund.
  • Ensure that the Fund`s money is used for the purposes for which it was established and to invest its money in the aspects specified in these Regulation.
  • Opening accounts in the name of the Fund at the banks in which the balances of the Fund shall be deposited, and grant authorizations on such accounts on behalf of the Fund.
  • Obtain an insurance policy against risks of the Fund if it deemed necessary.
  • Issue instructions to banks in which moneys of the Fund are deposited, to withdraw money from the Fund’s accounts, within the limits of the deficit, to complete the financial settlement process between the members.
  • Follow-up collection of Fund’s claims at the members and others.
  • Selling or liquidating any of the Fund`s assets to serve the interest of the Fund.
  • Borrowing or obtaining credit facilities to pay the settlement obligations with the guarantee of the assets of the Fund, and each member shall bear the cost attributed to it of such loans.
  • Submit any proposal that it deems appropriate for the development of the Fund`s business and present it to the concerned authorities for approval.
  • Appoint qualified staff required to manage the Fund and carry out the related work.
  • Settle the administrative expenses of the Fund.
  • Determine the amounts owed by members who failed to settle their obligations which the Fund has covered on their behalf.
  • The Committee may delegate any of its powers to its Chairman or to any of its members. The Committee may also use experts to perform some of its functions except supervision on the Fund.
Article (28)
Each members of the Fund shall commit to the following:
  • Contribution to the capital of the Fund at the rate of 5% of its paid up capital, provided that it is not less than (45,000) forty five thousand Omani Riyal and not more than (135,000) one hundred and thirty five thousand Omani Riyal, In the event of an increase in its capital, the member shall pay the additional contribution resulting from such increase.
  • The additional contribution determined by the Committee.
Article (29)
The Committee shall review and evaluate the adequacy of the Fund`s capital every three (3) months in light of the risks specific to each member in accordance with the criteria and controls established by the Committee and approved by the Authority.
Article (30)
If the amount paid by the Fund on behalf of the defaulting member in accordance with Article 23 of these Regulations is equal to or less than the value of its contribution to the Fund, the full amount of the Member`s contribution to the Fund shall be deducted.
If the amount paid exceeds the value of its contribution to the Fund, the Fund may take the following actions:
  • Deduct of the amounts paid by the member from his contribution to the Fund.
  • The Fund shall own the purchased securities for which the member has not paid, according to the data and documents submitted to the Fund.
Article (31)
The Fund shall notify the defaulting Member that it has been replaced by the Fund in settling its obligations arising from the coverage of the cash deficit or deficit in securities, and that the Fund shall claim it to cover such obligations in favour of the Fund within a maximum period of nine o`clock morning of the next day that follows the payment date.
If the member failed on the due date of payment and the client does not pay the value of the securities referred to the Fund, the Market shall assign a member to sell the securities registered in the name of the Fund and to deposit the sale output in the Fund’s account. Any differences arising thereof shall be beard by the defaulting member to the favour of the Fund, and any profits may come out the sale process shall be to the favour of the Fund, besides to any profits or returns due to the securities during the period of their registration in the name of the Fund.
Article (32)
If the default member fails to pay its due amounts to the Fund on time, the Market shall, at the request of the Fund, suspend the Member from trading until it pays its obligations. The Fund may also coordinate with the Company to discontinue its services to the default member.
Article (33)
The money of the Fund shall be invested in order to maintain, develop and increase it in the following aspects of investment:
  • Bank Deposits
  • Bonds
  • Any other short, medium and high-liquidity financing tools.

An investment decision is taken by the committee after reviewing the appropriate alternatives available, and it should focus on the liquidity and risk factors mainly when choosing between available alternatives and taking into account ensuring sufficient liquidity in the Fund to settle any claim received.

Article (34)Financial statements of the Fund shall be prepared separated from the accounts of the Company and shall be audited by an external auditor appointed for Company’s audit.
Article (35)The Fund`s fiscal year begins on January 1st and ends on December 31st of each year.
Article (36)At the end of each fiscal year, the dividend shall be distributed by adding it to the contributions of the members of the Fund in proportion to the cash share of each member in relation to the total contributions to the Fund.
The Committee may decide to distribute cash dividends to the members if the financial position of the Fund so allows.
Article (37)The member shall be entitled to receive its net rights in the Fund within ninety (90) days from the expiry of the date of its membership in the Market after fulfilling all its obligations towards the Market, the Fund, the Authority and the Company.
 
 
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