The Banca d'Italia and Consob recently enacted a joint regulation dated February 22 2008 pertaining to post-trading systems. The new text regulates the establishment and operation of systems designed to ensure the good end of transactions in financial instruments, other than derivatives, carried out in regulated markets.
Pursuant to Article 50 of the Regulation, the guarantee systems are managed by joint stock companies that have share capital of at least €12.5 million ($19.46 million) and an organisation to ensure the regular and continuous functioning and high efficiency levels of the guarantee systems.
The most relevant guarantee systems set forth by the Regulation are the contract guarantee funds established by market management companies and financed with contributions from their participants.
The capital of each fund is to be kept separate from that of the body that administers it and from that of other funds. Funds may not be the object of actions, seizures or attachments by the creditors of the body administering them, creditors of the individual participants, or those acting in the interests of such creditors. Funds may not be included in bankruptcy proceedings involving the body administering them or the individual participants. Legal and judicial set-off shall not apply. Voluntary set-off shall not be permitted between credit balances in the deposit accounts of the funds and any debts that the administrator of the funds may have with the custodian.
Under Article 60 of the Regulation the companies managing the contract guarantee funds must adopt specific rules relevant to the fund organisation and functioning. The rules establish categories of participants to the contract guarantee funds and set forth procedures for:
- Joining the funds.
- Calculating and setting up payments, including relevant terms.
- Intervention of the funds in the case of participants' insolvency.
- Retrieval of losses (if any) suffered.
- Reintegrations post losses.
In the case, of a participant's breach of obligations towards the fund, the management company gives notice to Banca d'Italia, Consob and market management companies. In any case the management companies maintain the financial liquidity needed for ensuring the regular functioning of the guarantee systems.
Pursuant to Article 61, Banca d'Italia and Consob can establish liquidation guarantee funds to ensure the good end of set-off and liquidation of transactions in financial instruments other than derivatives. The liquidation guarantee funds are financed through the participants' payments.