Regulation No. 24 for Clearing and Settlement (T+2) for the Year 2024

Regulation No. 24 for Clearing and Settlement (T+2) for the Year 2024

Article (1) Definitions: The words and expressions appearing in these Instructions shall have the meanings assigned to them in the Law: Law: The Securities Law. Commission: The Securities and Exchange Commission. Council: The Council of the Securities and Exchange Commission. Center: The Securities Depository Center. Board of Directors: The Board of Directors of the Commission. CEO: The Chief Executive Officer of the Exchange. Exchange: The Iraq Stock Exchange. Trading: Buying and selling securities according to the trading system in force in the Exchange. Trading Contract: The contract by which the buying or selling of securities in the Exchange is concluded. Settlement Contract: The contract by which the broker settles the trading contract executed by the broker for the accounts of the custodian in accordance with the provisions of these Regulations. Broker: The person who buys and sells securities on behalf of others through the Exchange or for his own account. Custodian: The legal entity that performs custodial activities for securities. Issuer: The legal entity that issues securities or declares its intention to issue them. Account Number: The investor's account number, fixed and approved by the broker with the Exchange, used for the broker's trading of securities on behalf of the investor. Ownership Restrictions: Any restriction or notation that prevents or hinders the absolute transfer of the security.

Depository of Securities: The documentation of ownership of registered securities and their owners' data, and the fixation of any ownership restrictions on them at the Center in accordance with the provisions of these Regulations. Clearing: The process by which the net rights and obligations arising from any trading contract are calculated to deliver or receive securities and settle their prices on the specified settlement date. Settlement: The process by which the trading contract is completed to transfer ownership of securities from the seller to the buyer and receive or settle their prices in final form. Settlement Guarantee Account: The account opened by the Exchange, in which each broker contributes a percentage of the value of each contract executed in the Exchange, to ensure financial settlement in case of payment failure. Delivery versus Payment (DVP): A method of settlement by which securities are delivered against the settlement of their prices. Settlement Agent: The agent approved by the Center for the purpose of receiving and paying the prices of traded securities. Settlement Account: The account opened by the Exchange in the name of the Settlement Agent, through which the prices of traded securities are received and paid. Liquidity Reserve Account: The account opened by the Exchange in the name of the Settlement Agent, in which cash funds are deposited from market members (brokers) for the purpose of settling traded securities. Settlement Day: The day specified in accordance with the provisions of these Regulations to complete the settlement process. Center Database: Includes the necessary information about issuers of registered and deposited securities at the Center, as well as information related to Center members, their securities, and any ownership restrictions on them.

Investor Account: The securities account of the investor issued by the Center. Free Balance: The investor's ownership of securities not encumbered by any ownership restrictions that prevent absolute transfer. Official Working Day: The working day for the Exchange.

Article (2) The rights and obligations arising between the seller and buyer of the security are established upon the conclusion of the trading contract in the Exchange.

Article (3) The Exchange shall carry out clearing and settlement operations for trading contracts to determine the net rights and obligations of brokers and custodians, and to implement the procedures for settling the resulting financial positions and transferring ownership in accordance with the provisions of these Regulations.

Article (4) The Exchange shall settle trading contracts for securities deposited with it on a Delivery versus Payment (DVP) basis.

Article (5)

1. The settlement day for the Exchange shall be the second day following the trading day (T+2). The Council of the Commission may, with the approval of the Commission, change the settlement day to another day it deems appropriate.
2. Notwithstanding the provisions of paragraph (1) of this Article, the Council of the Commission may, with the approval of the Commission, approve the settlement of any type of securities differently.

Article (6) Brokers and custodians must have sufficient and necessary funds to meet their obligations related to settlement in accordance with the provisions of these Regulations and the decisions of the Council of the Commission, and to take all necessary measures to implement them.

Article (7) The Council of the Commission, with the approval of the Commission, shall determine the mechanism for settling the financial obligations of brokers subject to clearing and settlement procedures arising from their trading of securities through the Exchange.

Article (8) The owner of deposited securities wishing to sell them or part of them must verify their existence in their account with the broker or custodian in accordance with the provisions of these Regulations.

Article (9)

1. The Exchange shall provide the Center with the electronic trading file containing all information and data for each executed trading contract at the end of the trading session. This file must include the following information and data for each trading contract:
   1. Trading date.
   2. Issuer code.
   3. Security code.
   4. Selling client account number.
   5. Selling broker code.
   6. Buying client account number.
   7. Buying broker code.
   8. Number of securities.
   9. Security price.
   10. Total value.
   11. Operation number.
   12. Execution time.
2. The Center shall return any trading contracts submitted to it to the Exchange, and notify the Commission and the concerned brokers thereof, in the cases specified by law, regulations, or issued decisions.
3. The trading file mentioned in paragraph (a) of this Article shall be considered final and binding, including all information and data, after the return of non-compliant trading contracts in accordance with the provisions of paragraph (b) of this Article.

Article (10)

1. Trading contracts are divided for settlement purposes into: a. Accepted trading contracts. b. Suspended trading contracts.
2. A trading contract shall be considered suspended with the broker and in the custody account in case the custodian rejects it due to a shortage in the free balance of securities.

Article (11) Subject to the provisions of Article 10 of these Regulations, and after receiving the trading file from the Exchange at the end of the session, the Center shall electronically notify the broker of the data of the trading contracts executed by him.

Article (12) The broker is obliged to keep all original documents, records, and data supporting the trading contracts for a period of ten (10) years, subject to the supervision of the Exchange and the Commission.

Article (13)

1. Subject to the provisions of paragraph (c) of Article 9 and Article 10 of these Regulations, ownership of deposited securities shall be transferred electronically via the daily trading file received by the Center from the Exchange, through restrictions recorded in the Center's system, from the accounts of the seller members to the account of the buyer.
2. The receipt of any trading contract in the file mentioned in paragraph (1) of this Article shall be considered as confirmation by the selling broker that the selling owner of the securities has issued an order to transfer ownership of the relevant securities from his account to the buyer's account.
3. The selling broker bears full responsibility for any rights or liabilities arising from the sale of any securities to his clients without receiving an order from him, and the Exchange bears no responsibility for any liabilities arising therefrom.

Article (14)

1. The sold securities shall be suspended from the seller's account and added to the buyer's account on the trading day according to the trading file received by the Center from the Exchange, and the Center bears no responsibility for this.
2. The suspended securities in the buyer's account shall remain in the accounts of the concerned broker until settlement procedures are completed, and they shall not be transferred to the Center or pledged before that date.
3. Notwithstanding the provisions of paragraphs (1) and (2) of this Article, the transfer of ownership of deposited securities shall be fixed on the trading day, subject to the completion of settlement procedures at the end of the trading session.
4. The selling broker is obliged to pay the purchase price of those securities to the buyer within the specified deadlines.
5. All procedures related to the distribution of profits, free shares, interest, returns, or other rights of the buyer shall be considered effective from the trading day (T+0).

Article (15) The Exchange shall electronically notify the selling broker of his suspended trading contracts.

Article (16)

1. The broker is obliged to enhance his account on the settlement day (T+1) in case of shortage, for the Exchange to take the necessary measures to recover the amount.
2. The period mentioned in paragraph (a) of this Article extends to a deadline of 9:00 AM on the second day following the trading day (T+2) if the shortage is in the free balance of securities sold by the broker linked to a trading contract on a custody account.
3. The broker is obliged to process trading contracts on the settlement day and before the start of the session, otherwise the Exchange shall take the following measures:
   1. Suspend the broker from trading, withhold services provided to him, and notify the Commission.
   2. Recover the guarantee letter amount and demand the broker to pay any remaining outstanding amounts.
   3. The broker concerned shall bear the penalties, fees, and service charges imposed by the Exchange for each suspended trading contract.
   4. If the coverage value is higher than the sale value for the number of securities (shortage), the broker shall bear the difference between the values.
   5. If the coverage value is less than the sale value for the number of securities (shortage), the difference between the values and the number of securities (shortage) shall be transferred to the Exchange.

Article (17) The Exchange shall complete the settlement of prices for securities of contracts previously suspended after removing the causes of suspension and after deducting any expenses, fees, penalties, or charges incurred from those suspended contracts.

Article (18)

1. Financial settlements for all trades shall be carried out through the clearing agent, unless the Exchange decides otherwise and notifies the Commission.
2. Notwithstanding the provisions of paragraph (1) of this Article, trading contracts for bond purchases shall be settled through brokers, unless the Exchange decides otherwise.

Article (19)

1. The prices of securities shall be received and paid from and to brokers and custodians through the settlement account at the settlement agent in accordance with the provisions of these Regulations.
2. The Exchange shall open a liquidity reserve account at the settlement agent or any other authorized agent, in which cash funds received from brokers are deposited as a reserve in accordance with the provisions of these Regulations.

Article (20)

1. Each broker and custodian must open a settlement account for financial settlement purposes and notify the Exchange of this account and any changes thereto.
2. The Exchange has the right to access the settlement account mentioned in paragraph (1) of this Article and obtain a statement of transactions recorded on this account, and the broker and custodian have the right to access it.

Article (21)

1. Based on the trading file received from the Exchange electronically by the Center system on the trading day, the Center shall issue a settlement contract for each executed trading contract of sale or purchase by the broker for the accounts of customers with that broker or custodian.
2. The settlement date for the settlement contract mentioned in paragraph (1) of this Article shall be the same as the settlement date of the trading contract it relates to.

Article (22) The Center shall electronically notify the broker and custodian concerned of the settlement contracts related to the trading contracts executed on the custody accounts.

Article (23) The custodian shall accept or reject the settlement contract electronically by the Center system by 2:00 PM on the day following the trading day (T+1), otherwise the settlement contract shall be considered rejected by the custodian.

Article (24)

1. In case the custodian rejects a settlement contract in accordance with the provisions of Article 23 of these Regulations, the broker concerned is obliged to settle the contract with the Exchange in accordance with the procedures and deadlines prescribed by these Regulations.
2. In case the custodian accepts the settlement contract within the period specified in Article 23 of these Regulations, this contract shall be settled with the related trading contract in accordance with the provisions of these Regulations.

Article (25)

1. The Exchange shall calculate the net amount due to or from each broker on the settlement day for each trading day and for all brokers.
2. The amount mentioned in paragraph (1) of this Article shall be calculated by subtracting the total value of the broker's purchases of securities for the trading day from his net sales of securities for the same day.
3. The net amount mentioned in these Regulations represents the broker's net sales of securities by subtracting the value of suspended trading contracts from the total value of the broker's sales of securities.

Article (26)

1. The Exchange shall calculate the net amount due to or from each custodian on the settlement day for each trading day and for all custodians.
2. The amount mentioned in paragraph (1) of this Article shall be calculated by subtracting the total value of accepted purchase settlement contracts from the custodian from the total value of accepted sale settlement contracts from the custodian for the same trading day.

Article (27) The Exchange shall recalculate the net amounts due to or from brokers and custodians on the settlement day based on accepted settlement contracts.

Article (28)

1. The broker is obliged to enhance the amount due from him in the settlement account at the specified time.
2. For each trading day, the Exchange shall calculate daily after the trading session ends the amount the broker is obliged to pay as a liquidity reserve.
3. The amount to be paid as a liquidity reserve shall be deducted from the net amount the broker is obliged to pay on the settlement day, as mentioned in paragraph (1) of this Article.
4. On the settlement day, the Exchange shall transfer the total amounts accumulated as a liquidity reserve to the settlement account in accordance with the provisions of paragraph (1) of this Article.
5. The liquidity reserve amount, in addition to any other amounts due to the Exchange, shall be used by the Exchange to clear between the amount due from the broker and between other amounts due to the broker from settlement.

Article (29) The Exchange shall send an electronic notification to the broker and custodian on each trading day containing the data and information regarding:

1. The net amount due to or from the broker or custodian for settlement purposes.
2. The amount the broker is obliged to pay as a liquidity reserve for settlement.
3. The amount the broker or custodian is obliged to pay in the settlement account on the settlement day.

Article (30)

1. Each broker and custodian is obliged to settle the net amount due from him in the settlement account on the settlement day by depositing that amount in the settlement account at the specified time for this purpose.
2. The Exchange shall transfer the amount calculated by it and due to the broker or custodian on the settlement day from the settlement account to the account of the broker or custodian, after completing the settlement of amounts due from all brokers and other custodians.

Article (31)

1. The notification sent to the broker regarding the liquidity reserve mentioned in paragraph (2) of Article 29 of these Regulations shall be considered final at 2:00 PM on the trading day concerned, unless the broker receives another notification modifying this notification after that time.
2. The notification sent to the broker and custodian in accordance with the provisions of paragraph (3) of Article 29 of these Regulations shall be considered final at 2:00 PM on the first day following the trading day (T+1), unless the broker or custodian receives another notification modifying this notification after that time.

Article (32)

1. The broker is obliged to pay the amount due from him as a liquidity reserve in the settlement account by 9:00 AM on the first day following the trading day, by transferring the required amount from his account to the Exchange's liquidity reserve account.
2. The broker and custodian are obliged to pay the amount due from them to the settlement account by 9:00 AM on the first day following the trading day, by transferring the required amount from their account to the Exchange's settlement account.

Article (33)

1. If the broker fails to pay the liquidity reserve amount mentioned in paragraph (1) of Article 32 of these Regulations by the specified time, the Exchange shall take any of the following measures: a. Notify the Commission of the necessity to suspend the broker from trading. b. Withhold all services provided to that broker.
2. If the broker fails to pay the liquidity reserve amount by 2:00 PM on the first day following the trading day, the Exchange shall add that amount to the net amount due from the broker on the settlement day, where the broker is obliged to pay them together on the settlement day.

Article (34) If the broker or custodian fails to pay the amounts due from him in the settlement account by 9:00 AM on the settlement day, he shall be considered in default, and the Exchange shall request guarantees/guarantees to fulfill those obligations and shall take the following measures:

1. Transfer the amount not settled from the settlement guarantee account to the Exchange's settlement account.
2. Notify the Commission of that default and the necessity to suspend the broker from trading.
3. Withhold the services provided by the Exchange to the broker or custodian.
4. Seize the securities owned by the broker or custodian in favor of the Exchange.
5. Demand the broker or custodian to pay all obligations due to the Exchange, including delays and any expenses or costs incurred by the Exchange in this regard.

Article (35) The Exchange shall, by 1:30 PM on the settlement day, issue payment orders to the settlement agent to pay the amounts due to the concerned brokers and custodians, after sufficient funds are gathered in the settlement account equal to the amounts due to brokers and custodians on the settlement day.

Article (36) If the broker or custodian fails to fulfill his financial obligations on the settlement day, he must fulfill those obligations within one day from the date of default, in addition to the penalty amounts due for non-payment.

Article (37) If the broker fails to pay any amounts due from him as a liquidity reserve or for settlement purposes, the Exchange has the right to deduct these amounts from the amounts due to the broker in the settlement account, if any.

Article (38)

1. The broker shall not resume work and trade securities until he settles all obligations due from him and provides a new guarantee letter to the Exchange.
2. After the broker and custodian settle all obligations due from them, the Exchange shall decide to reinstate services for that broker and custodian and notify the Commission thereof immediately.

Article (39) Settlement contracts accepted by the custodian shall be recorded electronically via restrictions, and shall be recorded on the statements of the relevant securities accounts held by him and by the brokers.

Article (40)

1. In case of force majeure, the Exchange shall postpone settlement as it deems appropriate, and shall notify the Commission, the settlement agent, and the concerned brokers and custodians thereof.
2. If the Exchange decides to postpone settlement in accordance with the provisions of paragraph (1) of this Article, it shall calculate the amounts due to or from brokers and custodians accordingly, and notify the concerned brokers and custodians thereof.

Article (41) The Exchange shall carry out financial settlements for all securities transactions executed in the trading session, except for cases approved by the Commission. In case financial institutions or clearing houses request to carry out financial settlement for transactions between them without the intervention of the Exchange and without bearing any responsibility, starting from the date specified by the Exchange for this purpose, the Exchange shall not interfere in such settlements.