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New Spanish regulations governing settlement systems

The Spanish Parliament has enacted Law 41/1999, dated November 13 1999, which implements Directive 98/26/CE, dated May 19 1998 on settlement finality in payment and securities settlement systems. The main features of Law 41/1999 are as follows:

(a) The law applies to the payment and securities or other financial instruments settlement systems, to participants in such systems and to collateral security provided in connection with the participation in a system or with the transactions of the European Central Bank and the central banks of the Member States in their functions as central banks.

(b) The law establishes the requirements to be complied with by any Spanish settlement system in order to apply for its recognition as a system entitled to the benefit of the provisions of the law.

(c) According to the law, transfer orders and netting will be binding on third parties in the event of an insolvency proceeding being brought against a participant, provided that the transfer order was entered into and accepted by the relevant system before the opening of such proceedings or, if entered after such time, provided that the managers of the system can prove that they were not aware nor should have been aware of the opening of such proceedings. In addition, the law establishes that collateral security provided by a participant in order to secure fulfilment of its obligations will not be affected by any insolvency proceedings against such a participant, and that the managers, settlement agent and other participants in such system will have a right of separate enforcement (derecho absoluto de separación) in connection with such collateral security.

Luis de Carlos / Javier Redonet

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