The member may join FXCH as either a General member (‘GCM’),General Clearing Member 2 'GCM 2', an Individual member (“ICM”) or an Individual Clearing Member Lite 'ICM Lite' 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) Default Fund Contribution Requirements: A Default Fund is maintained by FXCH which consists of contributions from GCMs and ICMs and a certain specified portion of the Clearing Fees charged to all members 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 post five (5) million USD to the FXCH Default Fund.The member represents that it has sufficient financial resources to make the required Default 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 of 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.
(iii) GCM Sub-Accounts & Client Anonymity:
(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 the GCM2s clients, implicitly or otherwise.
(b) Any breach of the rules herein and/or any other applicable rules and regulations by the GCM2s Clients 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’) & Individual Clearing Member Lite ('ICM Lite')
(i)ICMs an ICM Lites are legal entities that clear trades, exclusively for their own account via FXCH and fulfill the criteria stipulated herein and in Rule 5.3 below.
(ii) ICM & Default Fund Contribution Requirements: An ICM must post one (1) million USD to the FXCH Default Fund.The member represents that it has sufficient financial resources to make the required Default Fund contributions and to sustain any losses that may arise during the course of it’s business relationship with FXCH.
(iii) ICM Lite & Direct Default Fund Contribution Requirements: An ICM Lite is not required to contribute directly to the Default Fund.
5.3 General Requirements (applicable to all members)
Only entities that meet the following criteria are granted FXCH Clearing Member Status, whether as a GCM, GCM2, ICM or ICM Lite;
(i) Regulatory Requirements:
(a) Professional Client/ Eligible Counterparty Criteria: 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 (where applicable):
(i) US Clients: FXCH is not registered with the U.S.Commodities Futures Trading Commission (‘CFTC’) and as a result, the FXCH service is limited to US Clients who qualify as 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 representations in accordance with § 23.402(b)of the aforementioned Act.
(ii) Non-US Clients: The Member, although not a US Client may be required to meet and maintain the qualification of an ‘Eligible Contract Participant’ by reason of but not limited to the following;
(a) the Member trades on an Electronic Foreign Exchange Platform that is governed by the Laws of the United States;
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.