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Netting in securities and currency trading

The Finnish Act on Certain Terms in the Securities and Currency Trade, establishing the rules for netting in the securities and currency markets, entered into effect on July 1 1997. The previous uncertainty surrounding the permissibility of netting under Finnish insolvency laws has largely been abolished by expressly making netting (including close-out netting and multi-party netting) and certain related arrangements enforceable, provided such netting is based on terms customarily used in securities and currency trading, such as those of the ISDA Master Agreement.

The new legislation provides that bankruptcy or other insolvency events in relation to a party to a netting agreement do not prevent the netting of mutual obligations arising from trading before the bankruptcy or other insolvency event of a party.

Further, under the new legislation, netting effected or security granted during the three-month suspect period as set forth in the Finnish insolvency laws, preceding the bankruptcy or reorganization of a Finnish party participating in the netting or granting the security, cannot, as a general rule, be revoked under the Finnish rules of voidable preferences.

The new legislation will also apply retroactively to netting based on agreements made before July 1 1997, unless the insolvency proceedings had started before that date.

Stock Exchange and Options Market to merge

The operations of two major Finnish marketplaces and clearing houses, the Helsinki Stock Exchange and the Finnish Options Market are to be combined. The new exchange, HEX Oy, is intended to be more cost-effective and to provide investors with a better service than the two units are able to do separately.

It is also expected that the cooperation between the new exchange and the Swedish Options Market will by the end of 1997 enable trading in the derivatives of the Swedish Options Market on HEX Oy and vice versa.

After the merger the principal owners of the new exchange would be three Finnish commercial banks, a Swedish exchange company (OM Gruppen AB), a number of Finnish listed companies and various Finnish investment service firms.

Unlike those of many European exchanges, the shares in the new exchange are not intended to be publicly listed or otherwise subject to public trading.

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