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  • COB 10.2 COB 10.2 Additional requirements for CSDs

    • COB 10.2.1

      (1) A CSD must have rules and procedures, including robust accounting practices and controls that:

      (a) ensure the integrity of the securities issues; and
      (b) minimise and manage risks associated with the safekeeping and transfer of securities.

      (2) A CSD must ensure that securities referred to in (1)(a) are recorded in book-entry form prior to the trade date.

      (3) For the purposes of (1)(a), a CSD's systems and controls must ensure that:

      (a) the unauthorised creation or deletion of securities is prevented;
      (b) appropriate intraday reconciliation is conducted to verify that the number of securities making up a securities issue or part of a securities issue submitted to the CSD is equal to the sum of securities recorded on the securities accounts of the Members and other participants of the CSD;
      (c) where entities other than the CSD are involved in the reconciliation process for a securities issue, such as the issuer, registrars, issuance agents, transfer agents or other CSDs, the CSD has adequate arrangements for cooperation and information exchange between all involved parties so that the integrity of the issue is maintained; and
      (d) there are no securities overdrafts or debit balances in securities accounts.
      [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]

    • CSD links

      • COB 10.2.2 COB 10.2.2

        (1) A CSD must not establish any link with another CSD (CSD link) unless it:

        (a) has, prior to establishing the CSD link, identified and assessed potential risks, for itself and its members and other participants using its facilities, arising from establishing such a link:
        (b) has adequate systems and controls to effectively monitor and manage, on an on-going basis, the risks identified under (a) above; and
        (c) is able to demonstrate to the DFSA, prior to the establishment of the CSD link, that the CSD link satisfies the requirements referred to in (2).

        (2) The requirements referred to in (1)(c) are that:

        (a) the link arrangement between the CSD and all linked CSDs contains adequate mitigants against possible risks taken by the relevant CSDs, including credit, concentration and liquidity risks, as a result of the link arrangement;
        (b) each linked CSD has robust daily reconciliation procedures to ensure that its records are accurate;
        (c) if it or another linked CSD uses an intermediary to operate a link with another CSD, the CSD or the linked CSD has adequate systems and controls to measure, monitor, and manage the additional risks arising from the use of the intermediary;
        (d) to the extent practicable and feasible, linked CSDs provide for Delivery Versus Payment (DVP) settlement of transactions between participants in linked CSDs and, where such settlement is not practicable or feasible, reasons for non-DVP settlement are notified to the DFSA; and
        (e) where interoperable securities settlement systems and CSDs use a common settlement infrastructure, there are:
        (i) identical moments established for the entry of transfer orders into the system;
        (ii) irrevocable transfer orders; and
        (iii) finality of transfers of securities and cash.
        [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]

        • COB 10.2.2 Guidance

          A CSD should include in its notification to the DFSA relating to the establishment of CSD links the results of due diligence undertaken in respect of the matters specified in Rule 10.2.2(2) to demonstrate that those requirements are met. Where a CSD changes any existing CSD arrangements, fresh notification relating to such changes, along with its due diligence relating to the new CSD link, should be provided to the DFSA in advance of the proposed change.

          [Added] DFSA RM123/2013 (Made 13th June 2013) [VER22/07-13]