I. SCOPE OF SERVICE
II. FXCH RULES
IV. RULES ADVISORY COMMITTEE
VI. USE OF WEB BASED INTERFACE
VII. ACCOUNT OPENING DEPOSIT & NET LIQUIDATION VALUE
VIII. MARGIN REQUIREMENTS
IX. CLEARING & SETTLEMENT BETWEEN MEMBERS
X. DEFAULT EVENTS
XI. DEFAULT MANAGEMENT PROCESS
XII. DEFAULT FUND
XIII. BLOCKCHAIN LEDGER
XIV. APPOINTMENT OF ADDITIONAL CUSTODIAN BANKS
XV. CLEARING FEES
XVI. RISK MANAGEMENT
XVII. TERMINATION FOR REASONS OTHER THAN A MEMBER’S DEFAULT
1. SCOPE OF SERVICE
FXCH offers clearing and settlement services to its members for spot FX deals, according to the technical, legal and administrative conditions set forth in these Rules, as well as usages and customs governing the financial services industry. In view of supplying its Members with a transparent and secure clearing and settlement system for their FX trading, FXCH shall not undertake any activity other than clearing and settling trades for its Members. In order to ensure maximum risk reduction, FXCH shall ensure that its own trading account positions are continuously offset in order to maintain a neutral position on an ongoing basis. FXCH shall not take on any commercial activities other than those directly useful and necessary for its core activity of clearing and settling trades for its Members. FXCH operates using blockchain ledger technology in order to enhance security, reduce costs and ensure transparency to its members.
2. FXCH RULES
These Rules govern the standards and the contractual relationship between FXCH and its members. Upon FXCH and the Member contracting this service, the Member declares to have acknowledged and accepted these Rules which form the essence of the relationship and contractual obligations between the Parties. From time to time, as deemed appropriate by the Rules Committee, these Rules may be modified in a commercially reasonable manner and FXCH and the Members shall be bound by such future modifications. For the sake of expedient adaptation of this service to technological, legal and/or customary advancements in financial services, FXCH may make immediate unilateral modifications, provided always that such unilateral changes are justifiable, commercially reasonable, and provide for a better and/or more secure service and/or enhanced administration of the service.
3.1 Unless otherwise defined or the context requires otherwise in the Rules herein;
(i) any reference to the singular includes reference to the plural and vice versa and reference to the masculine gender includes reference to the feminine and neuter genders and vice versa;
(ii) any reference to any statute or statutory provision shall be construed as including a reference to that statute or statutory provision as amended, extended or re-enacted from time to time;
(iii) the headings of the Rules hereof are inserted for convenience of reference only and shall not in any way form part, modify or qualify any of the rights or obligations set forth in such Rules, or be taken into account in the construction or interpretation of any provision of these Rules.
(iv) References to the Rules herein shall be a reference to these Rules, as amended, supplemented or novated from time to time;
4. RULES ADVISORY COMMITTEE
Each Member of FXCH is automatically a member of the Rules Advisory Committee, which is a consultative body whose role is to:
4.1 Propose modifications to these Rules
Each member may, at its sole initiative, communicate to the board of directors of FXCH proposed modifications to these Rules. Such propositions will be reviewed by the board of directors of FXCH and, provided that the proposition is reasonable and tends to provide a positive effect, the proposition will be communicated to other members for opinions regarding the proposed modification of rules.
4.2 Provide expert opinions
Except in the event of Unilateral Modification of Rules by FXCH as described here above, FXCH endeavours to maintain an open forum with its members and shall submit proposed changes in these Rules to its members prior to such changes.
The purpose of this exchange of opinions is to take full advantage of specific skill sets, knowledge and experience that the Members may possess, and to integrate such wisdom into the FXCH service.
To this effect, any changes in these Rules which are not urgent shall be communicated in draft form to each Member, and each member will dispose of a predetermined time to communicate comments pertaining to proposed changes to these Rules.
Following receipt of comments from Members, the board of directors of FXCH will disseminate these comments and invite all Members to discuss the issues at hand either in writing or in a meeting (physical or via teleconference) and the board of directors of FXCH will respond to such comments and may take them into consideration when implementing changes in these Rules.
4.3 Vote on Rule modifications
FXCH shall invite its Members to vote on modifications to these Rules, provided always that a vote for or against a single specific item is compatible with legal requirements, nor would tend to decrease the security of the service.
FXCH may refuse to allow one or several Members to participate in a vote on a given Rule Modification in the event that there is an actual, apparent or potential material conflict of interest.
The member may join FXCH as either a General member (‘GCM’) or an Individual member (“ICM”) subject to the terms and conditions set forth herein;
5.1 General member ‘GCM’: A GCM is a legal entity that;
(a) clears trades for its own account and meets the requirements stipulated in Rules 5.1(ii) herein and 5.3 (‘hereinafter referred to as ‘GCM1’) and/or
(b) clears trades on behalf of its clients and meets the requirements stipulated in Rules 5.1(ii) herein, 5.1.2 and 5.3 (‘hereinafter referred to as GCM2’). Additionally, a GCM2 may trade for its own account.
(ii) Guarantee Fund Contribution Requirements: A Default Fund is maintained by FXCH which consists of contributions from GCM’s and a portion of the Clearing Fees as described in Rule 12 below.The fund secures the obligations of the member and is used to enable FXCH to cover losses sustained in the event of a member’s default.
A GCM must contribute either five (5) million USD or ten (10) million USD to the FXCH Guarantee fund. The fees payable by the GCM will be calculated according to its contribution to the Guarantee Fund as specified in the Schedule annexed hereto. The member represents that it has sufficient financial resources to make the required Guarantee Fund contributions and to sustain any losses that may arise during the course of it’s business relationship with FXCH.
5.1.2 GCM2 Requirements: Membership of FXCH as a GCM2 is permitted only where the following conditions are met:
(i) Anti-Money Laundering (AML) Policies & Procedures: The GCM2 agrees and acknowledges the following:
(a) adequate AML & Anti-Terrorist Financing (ATF) controls, procedures & policies have been implemented which enable it to comply with its regulatory obligations. These controls, procedures & policies will be regularly reviewed and updated to ensure ongoing compliance with applicable regulations. Additionally, to ensure the compliance of its clients with the controls, policies and procedure in place, the GCM2 must monitor the activity of its clients in relation to their use of the FXCH service. The GCM2 will provide FXCH with a copy of the relevant policies and documented proof of ongoing internal reviews promptly and in any event within 5 days following receipt of such request. (b) in accordance with the controls, procedures and Policies referred to in Rule 5 herein, the GCM2 will take reasonable steps to verify the information provided by prospective members in their respective applications. The GCM2 further agrees to carry out risk-based assessments on new and existing clients as part of it’s internal suspicious activity monitoring and reporting system (c) at all times, the GCM2 will conduct its business and its dealings with both FXCH and its own clients fairly, honestly, and in good faith. (d) in the event of a breach of the Rule herein by the GCM2, a penalty will apply as outlined in the attached Schedule. The penalty imposed by FXCH will be in addition to any sanction and/or penalty imposed under applicable legislation governing anti-money laundering and counter-terrorism financing. that may be taken
(ii) Client Agreements: The GCM2 acknowledges and agrees that in addition to meeting the requirements in (a) above, it must take the following steps prior to onboarding a Client for the purposes of availing the FXCH service;
(a) The GCM2 will enter into a contractual relationship with the client in relation to the FXCH service. A valid written GCM2-Client Agreement must be maintained for the entire period during which a GCM2-client relationship exists. Additionally, a copy of the GCM2-Client Agreement must be maintained by the GCM2 for a period of not less than 7 years following termination of such agreement. FXCH does not enter into a contractual relationship with the GCM2’s clients and for the purpose of clarity is not a party to the GCM2-Client Agreements. (b) The GCM2-Client Agreement must contain, at a minimum, provisions stipulating the following; (i) the client’s consent to be a Client of the GCM2 for the purposes of availing the FXCH service. (ii) the client’s consent to the liquidation of its portfolio/positions and the use of deposited margin by FXCH to cover trading losses, fees and penalties. (c) The Client Agreement may include any other terms and conditions agreed between the GCM2 and the Client provided that such terms are not inconsistent with the Rules herein and/or the Clearing Member Agreement. In the event of any inconsistency between the Rules herein (and/or the Clearing Member Agreement) and the GCM2-Client Agreement, the Rules herein (and/or the Clearing Member Agreement) will prevail to the extent necessary to resolve such inconsistency. (d) FXCH may request a copy of the Client Agreements at any time to ensure compliance with the Rules herein.The member must comply any such requests promptly and in any event within 5 days following a request from FXCH. When complying with the request described herein, the member should not reveal the identity of their clients unless this disclosure is specifically requested by FXCH for the purposes of complying a request and/or order from a judicial, administrative, legislative or regulatory body.
(a) The GCM2 will create an underlying sub account with FXCH for each of its Clients. The identity of the Clients will not be revealed to FXCH unless FXCH specifically requests such disclosure in order to comply with a request and/or order from a judicial, administrative, legislative or regulatory body. In any event, a contractual relationship will in no circumstances be deemed to exist between FXCH and Clients of the GCM2, implicitly or otherwise.
(b) Any breach by the GCM2’s Clients of the rules herein and/or any applicable regulations will be treated as a breach by the GCM2 itself and the GCM2 accepts full responsibility for such breaches as if the GCM2 were acting on its own behalf.
5.2 Individual Clearing Member (‘ICM’)
An ICM is a legal entity who clears trades, exclusively for its own account via FXCH and fulfills the criteria stipulated in Rule 5.3 below.
5.3 General Requirements (applicable to all members)
Only those who meet to meet the following criteria are granted FXCH Clearing Member Status, whether as a GCM or an ICM;
(i) Regulatory Requirements:
(a) Professional Clients/ Eligible Counterparties: By virtue of its experience, knowledge and expertise, the member declares that it has the ability to make its own investment decisions and accurately assess and manage the risks involved in such investments. Furthermore due to this experience, knowledge and expertise, the member is/may be defined as either a ‘Professional Client’ (such classification may be automatic or by default) or an ‘Eligible Counterparty’(ECP) in accordance with the Markets in Financial Instruments Directive ‘MiFID’ (Directive 2004/39/EC). FXCH is entitled, during the application process and at any time thereafter, to make enquiries and/or request such information and documentation it may reasonably require to verify that the eligibility requirements have been satisfied. The prospective member /member must promptly furnish FXCH with the requested information/documentation.
The Member is aware that varying levels of regulatory protection are afforded to each category of Client, with Eligible Counterparties receiving the least and Retail Clients receiving the highest level of regulatory protection. The FXCH will send a formal notification to members advising of their classification. The member has the right to request to be re-classified. Such request should be submitted in writing to FXCH. The member acknowledges that re-classification may result in a lower level of regulatory protection.
The FXCH service is available exclusively to Professional Clients and Eligible Counterparties. FXCH may deny, condition, suspend or terminate a prospective member’s/ a member’s access to the FXCH service in the event that it has not satisfactorily demonstrated its ability to fulfill/continue to fulfill the requisite criteria. It is the member’s responsibility to ensure that it meets and continues to meet the criteria to be classified as such, which may change from time to time. FXCH may refuse to accept a member’s request for re-classification. Furthermore, where a member requests to be re-classified as a retail client, FXCH has the right to withdraw that member’s authorisation as a clearing member with immediate effect.
(b) Eligible Contract Participant (US Clients only): The member acknowledges that FXCH is not registered with the U.S. Commodities Futures Trading Commission (‘CFTC’) and as a result, the FXCH service is limited to Eligible contract Participants (‘ECP’). The member declares that it meets the ECP criteria in accordance with Section 1a(18) of the Commodity Exchange Act (‘CEA’) (7 U.S.C. 1(a)18). The member understands that FXCH will rely on such representation in accordance with § 23.402(b)of the aforementioned Act.
FXCH where it deems necessary, in its sole discretion, may request information and/or documentation as it deems fit to determine whether the member/prospective member meets/continues to meet the eligibility requirements and such requests must be promptly complied with by the member/prospective member.
The member must notify FXCH immediately, orally and in writing, where it no longer qualifies as an ECP. The CFTC Regulations may change from time to time and it is the member’s responsibility to ensure that it continues to meet the eligibility requirements.
(c) Denial/withdrawal of membership: As specified herein, FXCH has the right, in its sole discretion to deny, withdraw or condition membership for failure to meet all applicable regulatory requirements. FXCH will provide notice in writing to the member/prospective member specifying the reasons for denial and/or withdrawal. The member/prospective member agrees and acknowledges that it has no recourse against FXCH for denial or withdrawal of membership.
Any denial, withdrawal or condition imposed by FXCH may be appealed by the member/prospective member, The objections raised in such appeal should be considered promptly by FXCH.
6. USE OF WEB BASED INTERFACE
The Member is provided with read only access to the FXCH web based interface enabling it to view the trades it has posted to FXCH and the P&L and equity position held by FXCH. The member will also ……………………………………………….. All cash movements of each Member’s accounts are recorded into a distributed ledger or "blockchain" which enhances security and reduces possibility of corruption to the greatest extent.
Members are provided with a user manual for this web based interface.
Any software, tools, or technology in general provided to a Member by FXCH in relation to FXCH services is not intended to, and shall not be construed as, the transfer of any intellectual property.
7. ACCOUNT OPENING DEPOSIT & NET LIQUIDATION VALUE
7.1 Minimum initial margin deposits
Both General Clearing Members and Individual members are required to post a minimum initial margin/collateral of 1,000,000 USD upon entering as a Member of FXCH and prior to using FXCH services.
7.2 Minimum Net Liquidation value
Members are required to maintain a minimum Net Liquidation Value of at least 50% of the required Minimum Initial Margin Deposit
8. MARGIN REQUIREMENTS
FXCH requires margin to be posted to the Members accounts as it deems necessary, based on a stress-test and risk assessment that it operates regularly on products the Members are trading.
8.1 Super Margin Requirements
In an effort to maintain an efficient and competitive service to its Members, FXCH shall endeavour to maintain competitive margin rates and fees. In parallel, FXCH's primary responsibility is to ensure that risk management and monitoring is of a standard which reduces market and counterparty risk to a commercially acceptable minimum.
Various circumstances and events may tend to increase market risk including, but not limited to, such events as political turmoil, armed conflict, natural disasters, terrorist attacks, changes in monetary policies or legislation.
In the event that FXCH's Risk Monitoring Committee identifies one or more events that, in its assessment, is likely to increase market volatility significantly beyond historical averages, resulting in increased market risk beyond what FXCH's standard margin rates are designed to mitigate against, FXCH may increase its margin rates either for a specified time or until the catalyst event has subsided.
Super Margin requirements may take effect either from a specified future date and time, or may take effect immediately and without prior notice in the event of a sudden and unforeseen catalyst event.
Super Margin requirements may be imposed for one or several currencies, depending on the likelihood of the catalyst event affecting a given currency. Upon implementing Super Margin requirements, FXCH Risk Committee shall continuously monitor the catalyst event and shall withdraw Super Margin Requirements as soon as the catalyst event has subsided.
9. CLEARING & SETTLEMENT BETWEEN MEMBERS
9.1 Trades eligible to be cleared and settled via FXCH FXCH's clearing and settlement services are exclusively made available to Members of FXCH. In consequence, FXCH will only clear trades to which both the buyer and the seller are FXCH Members and FXCH will not clear any trades made with non members of FXCH.
9.2 Novation FXCH clearing and settlement service functions on the basis of a novation process. Upon a Member buyer and seller opening a trade, FXCH is replaced and novated as the counterparty to the trades, with both the buyer and the seller, as soon as the trades are confirmed by both parties to FXCH. Upon novation, FXCH will have an equal yet opposite market position with both the original buyer and seller in the trade. In consequence, Members using FXCH clearing and Settlement Service will only have a legal and economical relationship with FXCH, thus eliminating a multiplicity of counterparties and the associated legal and administrative workload.
9.3 Posting trades to FXCH Members shall post their trades directly to FXCH electronically via straight through processing, or have them posted by an FXCH supported trading platform. FXCH will supply a standard-based proprietary API to its Members in order for this to be accomplished.
9.4 Pre-delivery Roll of positions by default Unless explicit instructions are given by a member to FXCH to deliver the base or term currency of a trade and to pay in the counter currency, or unless the trade is closed out by an opposite offsetting trade, the trade will be rolled into the next “Spot” value date.
When rolling an open position into the next value date, FXCH will apply a reference roll rate plus/minus FXCH's fees. The roll rates will be available on FXCH web based interface.
9.5 Netting Agreement Any purchase and sale of currencies between a Member and FXCH for a given value date is paid/debited on a net basis. - To the fullest extent possible, the Parties shall apply the provisions of the UK Financial Netting Act (Citefull name).
9.6 Settlement time Settlement for trades posted to FXCH takes place each Business Day between the hours of 08:00 and 10:00 London time. Business days are defined by FXCH Business day Calendar, which is available on the FXCH web site and FXCH web based interface.
9.7 Delivery Notifications Trades posted to FXCH will be rolled into the next Spot value date, and will not go to delivery unless a "Delivery Request" message is sent to FXCH via FXCH web based interface. Delivery Notifications for a given value date must be submitted to FXCH before 17:00 New York time, the day prior to the value date attached to the trade. Technical instructions for making a "Delivery Request" are contained in the FXCH web based interface Manual which is available on the FXCH web site.
9.8 Limitations of currency withdrawal FXCH does not offer physical delivery of currencies other than currency accounts supported by FXCH. Whenever a Member makes a Delivery Request, the Member will receive a position in its account for the requested delivery of the purchased currency. However, FXCH does not provide facilities for physical cash transfers of all currencies and a Member therefore may not make withdrawals in other currencies than the currency accounts supported by FXCH.
10. DEFAULT EVENTS
10.1 The following constitute Default events that result in the initiation of the Default Management Process by FXCH;
(i) Failure to meet Margin Requirements: where a member fails to maintain margin above the Closeout Margin Level to cover all open positions in its account and/or any of its sub-accounts/client accounts.
(ii) Insolvency: where a member is or is likely to become insolvent.
11. DEFAULT MANAGEMENT PROCESS
11.1 The purpose of the Default management Process is to limit systemic and counterparty risks in the event of Default by a member.The Default Management Process/Procedure encompasses the following;
(i) Open Positions: All open positions will remain in force and will be binding on the Defaulting Member until liquidated by FXCH.
(ii) Auction: The following terms will apply to all auctions conducted by FXCH;
(a) Declaration of Default & Request for Quote (RFQ): A Declaration of Default and an accompanying RFQ will be sent to all Non-defaulting GCM’s via a FIX message. The members will be informed about the Default Event and advised that an auction of the defaulting member’s portfolio will take place. All members will be treated equally as regards the provision of information relating to an auction. The information contained in the FIX message is confidential and the member must hold all such information in the strictest confidence and in accordance with the Rules herein, unless required to disclose it in accordance with a request and/or order from a judicial, administrative, legislative or regulatory body.
(b) Auction Participation: Participation in the auction is mandatory for all Non-Defaulting GCMs. The requirement to participate also extends to Non-Defaulting GCMs who have advised FXCH of their intention to terminate their membership, in the event that the notice period has not yet expired. The Defaulting Member is prohibited from participating in the auction process.
(c) Submission of Quotes: All quotes submitted by the members must be unconditionally tradeable and reasonably close to the prevailing market rates at the time of auction. FXCH reserves the right to execute quotes that are cross-tradeable against other quotes, once the defaulting portfolio liquidation is executed. The GCM who submits the most competitive quote will receive the portfolio in full.
(d) Breach of Auction procedures: In the event that a GCM breaches any of the terms & conditions of the auction process, including a situation where a valid mandatory quote is not received by FXCH, the member will be subject to a penalty as set out in the schedule annexed hereto and as amended from time to time in accordance with the terms and conditions herein.
(iii) Independent liquidation: FXCH reserves the right to liquidate the Defaulting Member’s Portfolio independently if a higher unconditionally tradable offer is received from an external source than from the non-defaulting members.
(iv) Consequences of Default for a Defaulting Member:
In the event of default, FXCH may in its sole discretion, impose such conditions, restrictions and limitations on the Defaulting Member as it deems necessary or appropriate in the circumstances. These conditions, restrictions and limitations may include some or all of the following;
(a)Suspension: the trading permissions of a defaulting member are immediately suspended until a full review has been conducted FXCH. Such review will take place in a timely manner following the member’s default & the subsequent suspension of trading permissions.
(b) Penalty: FXCH will charge the defaulting member a penalty as outlined in the annexed Schedule. Where the defaulting member’s portfolio is liquidated internally, the sum of this penalty will enure to the benefit of the recipient of the portfolio. In the event that the FXCH liquidates the portfolio independently as described above, the sum of the Penalty will enure to the benefit of FXCH.
(c) Review: a review of the Defaulting member’s trading activity will subsequently be carried out and FXCH will determine whether the trading permissions of the Defaulting Member should be permanently removed. Where FXCH concludes that the financial position of the member is such that to allow it to continue as a member would introduce an unacceptable level of risk to FXCH and/or to the FXCH’s members, the defaulting members trading rights will be terminated. In making such determinations, FXCH will act fairly, honestly and in good faith.
(d) Increase of Margin Requirements: In the event that a Defaulting Member is subsequently permitted to trade with FXCH, margin requirements will be increased to a level that FXCH deems appropriate, in its sole discretion.
(e) Termination: Where FXCH, in its sole discretion determines that a defaulting member’s trading permissions should be removed, the defaulting member’s membership will be terminated with immediate effect.
12. DEFAULT FUND
12.1 As described above a Default Fund is maintained by FXCH for the purposes of ensuring against the insolvency of a Member, above and beyond proceeds recovered via the Default management process herein, in regards to its positions cleared with FXCH.
The Default Fund is constituted through contributions from Members and maintained via ongoing contributions from FXCH clearing fees.
(i) Initial Contributions: In order to enhance the financial security of the FXCH service, Members must contribute to the Default Fund. As described above the fees payable by a member will be dependent upon that member’s contribution to the Guarantee Fund. The collateral deposit remains the property of the contributing Member. The FXCH will hold a fixed charge security interest over the members contributions until the occurrence of either of the following; (a) the sum is consumed by Default Events or
(b) the contribution is withdrawn by the contributing Member.
(ii) Ongoing Contributions: For every market trade posted to FXCH, whether by General members or by Individual members, FXCH will allocate 15% of the Clearing Fees to the Default Fund. Such contributions by way of allocations to the Default Fund from Clearing Fees are and shall remain the Property of FXCH.
(iii) Default Event & Default Fund Mechanism:
(a) Declaration of Default Event: In the event that a member’s account falls below the “Closeout Margin Level” required for its open positions, a Default Event will be declared by FXCH, as a result of the defaulting Member’s account and the Liquidation Auction procedure is triggered as described above. In the event the remaining Account Margin available is insufficient to cover the loss resulting from the Liquidation Auction, the Default Fund will be debited by an amount equal to the shortfall of the defaulting Member's net equity value, to the benefit of FXCH who has novated the trades.
(b) Default Waterfall: The Default Fund will be debited in the following order:
(1)The defaulting member’s contribution to the Default fund
(2) FXCH’s contributions to the Default Fund via the Clearing fees
(3)The remnant of the Default Fund pro-rata of each Member’s contribution until exhaustion
(c) Default Shortfall: The defaulting Member remains liable for the full amount of the default shortfall. The above procedure is an emergency measure used while waiting for insolvency resolution that may recover the sums above that will be restituted in the inverse order.
(iv) Default Fund Administration & Accountability: Contributions to the Default Fund shall be held in trust and administered by FXCH in a manner which ensures the integrity and security of the sums within the Fund.Allocations to the Default Fund allotted from Clearing Fees shall remain the property of FXCH, unless consumed by a Default Event.FXCH shall not withdraw allocations to the Default Fund allotted from Clearing Fees unless such allocations are at least equal to the aggregate amount of Contributions to the Default Fund by Members.FXCH shall report to its members on a monthly basis any events in relation to the Default Fund. Blockchain Ledger entries shall be maintained by FXCH to reflect each contribution to the Default Fund.Blockchain Ledger entries shall be maintained for recording any payments from the Default Fund as a result of Default Events.
(v) Property of sums accounted for in the Default Fund: Contributions to the Default Fund by Members remain the property of the contributing Member so long as such sums are not consumed by Default Events.In case of a Default Event, the sum necessary to cover the Defaulting Member's debt shall be transferred in full property to FXCH, who has novated the trade, and then the property of this same sum shall be immediately transferred from FXCH to the benefit of the ultimate counterparty to the defaulting Member.
(vi) Reimbursement or withdrawal of Contributions:
(a) Termination: In the Event that a General member's membership is terminated, for any reason and regardless of which Party initiated the termination, FXCH shall immediately return such Initial Contributions to the General member, minus any decrease in value as a result of Default Events and minus any outstanding debts to FXCH as a result of being a user of this clearing and settlement service.
(b) Request for Withdrawal: A Member may demand withdrawal of its Contribution to the Default Fund at any time, and FXCH shall promptly return such Contribution, minus any sums consumed by a Default Event, notwithstanding the effect on his membership status.
13. BLOCKCHAIN LEDGER
The ledger is built on a permissioned blockchain. Permission to mutate the ledger is facilitated by public key cryptography, utilizing the Ed25519 implementation of Edwards-curve Digital Signature Algorithm. See http://ed25519.cr.yp.to/ for details.
EdDSA consists of a key pair: a public and a secret key. The public key can be shared and is used to track permissions on the ledger. The secret key is used to sign transactions which correspond to the public key. Without knowledge of the secret key, no such signing is possible.
A signed transaction can be verified using just the public key, the transaction itself and the signature (i.e. without knowledge of the secret key).
Thus, to ensure that only authorized changes are done to the ledger, the public key(s) listed in the required permission for the change is checked against the signature(s) of the transaction.
The ledger permission structure is hierarchical with FXCH controlling the permissions of the hierarchy root, effectively giving FXCH sole authority to add new custodians and members.
(i) Account creation:
FXCH will provide the member with tools to generate a “member creation request” locally. This tool generates the public key and the corresponding secret key, which will only be known to the member. The creation request is signed with the secret key and submitted to FXCH for review.
The member is contacted by FXCH to voice verify the details of the request, most urgently the public key contained therein. This provides certainty that the creation request was created by the member and that the corresponding secret key is in the member’s possession.
Once approved, FXCH countersigns the request with its own secret keys and submits it to the ledger, at which point the member entity is effectively created.
(ii) Safe-keeping of the secret key
The member will be responsible for the safe-keeping of the secret key. FXCH will not be liable for any unauthorised access to the distributed-ledger signed by the secret key. A member may opt to strengthen the security of their ledger access by adding further public keys permissions which they have ownership of.
(iii) Cash only
All cash transactions will be reflected on the ledger but it may not reflect the member’s position at any given time. In order to access information regarding its total consolidated value at a specific time and date, the member should login to its account on FXCH portal.
-Standard of proof
- Errors (notification of contest, audit review, eventual amendment)
- Arbitration (Justin)
14. APPOINTMENT OF ADDITIONAL CUSTODIAN BANKS
FXCH and/or Members may suggest the appointment of a new credit institution to act as an additional Custodian for FXCH service.
In the event that an additional Custodian is proposed to act as a Custodian of FXCH, for the purposes of receiving deposits from Members and FXCH, the majority of the Members must vote favourably for this new addition prior to appointing the proposed credit institution as a Custodian of FXCH.
15. CLEARING FEES
Clearing Members contributing 10,000,000 USD or more to the Default Fund shall be charged 0.60 USD per million cleared through FXCH.
Clearing Members contributing 5,000,000 USD or more to the Default Fund shall be charged 1.00 USD per million cleared through FXCH.
Clearing Members contributing 1,000,000 USD or more to the Default Fund shall be charged 2.00 USD per million cleared through FXCH.
Members posting a 2,000,000 USD contribution to the Default Fund shall be charged 2 USD per million cleared through FXCH.
Members posting a 4,000,000 USD contribution to the Default Fund shall be charged 1 USD per million cleared through FXCH.
Members posting a 5,000,000 USD contribution or greater to the Default Fund shall be charged 0.75 USD per million cleared through FXCH.
Clearing fees are calculated and debited from Members' accounts in USD promptly subsequent to being posted to FXCH.
If the base currency of an FX transaction is not USD, FXCH shall calculate the rate of the base currency in question in USD, according to prevailing market rates at the time that the trade is posted to FXCH for clearing.
16. RISK MANAGEMENT
Mapping risk (Financial & Operational)
- third party services
Risk Mitigation & contingency
- Diversification of custodians
- Redundancy/backup systems
- Emergency work places & procedures
- members commingled with their clients' funds
Fully Segregated accounts
Each Client of a member may deposit his funds directly with the Clearing House
-legally separated but operationally commingled
17. TERMINATION FOR REASONS OTHER THAN A MEMBER’S DEFAULT
(i) Withdrawal by a Member: The member may terminate its Clearing Member status upon the expiration of not less than …………….days/months in writing to FXCH. The member is responsible for ensuring that as of close of business on the date of termination, all open positions, in respect of the it’s accounts and/or all of its clients accounts (where applicable) have been terminated or closed out and any and all of its obligations in respect thereof have been fully satisfied.
(ii) Termination by FXCH:
(a) Inactive Membership: where a member’s account has been continuously inactive for a period of three months or more, FXCH may request an explanation in writing from the member for it’s inactive status. In the event that the member does not provide a reasonable explanation or refuses to co-operate with FXCH, the member may be requested to resign its Clearing Member status.