Practice Note 2.28A.1.3 — Pre-Execution Checks

Issue Date Cross Reference Enquiries
Added on 15 March 201315 March 2013 amended on 14 November 201614 November 2016 and 29 July 2022. Rule 2.28A.1.3 Please contact Member Supervision:

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1. Introduction

1.1 This Practice Note provides further details on the pre-execution checks contemplated in Rule 2.28A.1.3.

2. Pre-Execution Checks

2.1 Rule 2.28A.1.3 requires a Clearing Member, in order to clear the trades of a Trading Member, to satisfy the Clearing House that it has in place automated pre-execution credit control checks to monitor the Trading Member's trades and manage its risk exposure to such trades. The purpose of this is to prevent overtrading and for credit risk management purposes. As such, the checks must be appropriately set to effectively limit the firm's risk exposure to Trading Members to prevent the taking on of excessive risk.
2.2 [This paragraph is deleted.]
2.3 Clearing Members will be able to meet the requirement in Rule 2.28A.1.3 by using the appropriate pre-execution checks hosted by the Exchange, or the Connect Broker for the Connect Market, or by directly setting and controlling the appropriate pre-determined automated limits in the Trading Member's system, having automated alerts whenever such limits are altered, and by conducting regular post-execution reviews of trades. Clearing Members should assess and continue to ensure that the pre-execution risk management control checks are robust on an ongoing basis.

Added on 15 March 201315 March 2013 and amended on 14 November 201614 November 2016 and 29 July 2022.