Iraq Securities Commission Board Regulations on Clearing and Settlement No. 24 of 2024

1 Regulations on Clearing and Settlement No. (24) for the year 2024

Article (1) Definitions: The words and phrases appearing below shall have the meanings indicated alongside them: Law: The Securities Law. Authority: The Securities Commission. Board: The Board of the Securities Commission. Center: The Securities Depository Center. Board of Governors: The Board of Directors. CEO: The CEO of the Market. Market: The Iraq Stock Exchange. Trading: Buying and selling securities according to the trading system in force in the Market. Trading Contract: The contract by which the buying or selling of securities in the Market is concluded. Settlement Contract: The contract by which the settlement of the transactions related to the trading contract executed by the broker on behalf of the custodians is concluded, in accordance with the provisions of these Regulations. Broker: The person who buys and sells securities on behalf of others or for his own account through the Market. 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 registered and approved by the broker with the Market, 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 data regarding their owners, and the fixation of any ownership restrictions on them at the Center in accordance with the provisions of these Regulations. Clearing Rights and Obligations: The calculation of the net rights and obligations of the parties resulting from any trading contract, in order to deliver or receive the securities and pay or settle their prices on the specified settlement date. Settlement: The completion of the trading contract by transferring ownership of the securities from the seller to the buyer, and receiving or settling their prices definitively.

2 Settlement Guarantee Account: The account registered with the Market, in which each Market participant contributes a percentage of the value of each contract executed, for the purpose of ensuring financial settlement in case of payment default. Delivery versus Payment (DVP): A method of settlement whereby securities are delivered against the payment of their prices. Settlement Bank: The bank approved by the Center for the purpose of receiving and paying the prices of traded securities. Settlement Account: The account registered with the Settlement Bank, opened by the Market in its name, through which the prices of traded securities are received and paid. Liquidity Reserve Account: The account registered with the Settlement Bank or any authorized settlement bank, opened by the Market in its name, in which cash funds required by Market participant brokers are deposited 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 securities deposited with the Center, as well as information regarding Center members, securities, and any ownership restrictions on them. Investor Account: The securities account specific to the investor, issued by the Center. Free Balance: The investor's ownership balance of securities not subject to any ownership restrictions that prevent absolute transfer. Official Working Day: The Market's official working day.

Article (2) The rights and obligations arising between the seller and buyer of the security, which are not subject to a suspension date, are established upon the conclusion of the trading contract in the Market.

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

Article (4) The Market shall settle trading contracts for securities deposited with it on the basis of delivery of the security against payment of its price.

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Article (5)

1. The settlement day for trading contracts executed in the Market shall be T+2 (the second day after the trading day). The Board of Governors may, with the approval of the Authority, change the settlement day from time to time as it deems appropriate.
2. Notwithstanding the provisions of paragraph (1) of this Article, the Board of Governors may, with the approval of the Authority, adopt regulations for the settlement of any type of securities contrary to the provisions herein.

Article (6) The broker and custodian must have sufficient and necessary funds to face and meet their obligations related to settlement in accordance with the provisions of these Regulations and the Board of Governors' decisions, and must take all necessary procedures to implement them.

Article (7) The Board of Governors shall, with the approval of the Authority, determine the mechanism for settling the financial obligations of brokers arising from their trading of securities through the Market, to be settled through the Center.

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

Article (9)

1. The Market shall provide the Center with the electronic trading file containing all executed daily trading operations and information by the end of the trading session. This file must include, at a minimum, 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.

4 2. The Center may return any trading contracts submitted to it to the Market, and must notify the Authority and brokers of the cases specified by law, regulations, or decisions issued by the competent authority. 3. The trading file mentioned in paragraph (a) of this Article shall be considered final and include all information and data, except for trading contracts returned 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 is considered suspended with the broker and in the custodial account due to a shortage in the trading contract. In the case where the custodian refuses to accept the securities balance, the contract is considered suspended.

Article (11) Following the receipt of the daily trading file from the Market at the end of the session, and after the broker electronically enhances the data of the trading contracts executed by him, the Center shall clear the contracts executed by him.

Article (12) The broker is required to retain all original documents, data, and records supporting the executed trading contracts for a period of ten (10) years, subject to the supervision of the Market and the Authority.

Article (13)

1. Notwithstanding the provisions of paragraph (c) of Article (9) and Article (10) of these Regulations, ownership of deposited securities shall be transferred from the Center to the Market based on the daily trading file received from the Market, according to electronic entries recorded in the special accounts of the members of the Center, from the seller's account to the buyer's account.
2. The receipt of any trading contract in the file mentioned in paragraph (1) of this Article shall be considered as the seller broker having issued an order to the seller owner to transfer ownership of the securities from their account to the buyer's account.
3. The selling broker bears full responsibility for any rights or obligations that may arise from the sale of any securities by his client, and the Market bears no responsibility for any such rights or obligations without receiving an order from the client.

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Article (14)

1. The sold securities shall be suspended from the seller's account and added to a suspended account for the buyer on the trading day, according to the trading file received by the Center from the Market, and the Center bears no responsibility for this.
2. The suspended securities in the buyer's account shall not be transferred or pledged before completing the settlement procedures, and they shall not be transferred to the Center or between accounts with the broker 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, conditional upon completing settlement procedures at the end of the trading session.
4. The buying broker must pay the prices of the deposited securities to the buyer within the specified deadlines.
5. All procedures related to ownership rights and entitlements, such as distribution of dividends, free shares, interest, or returns, shall be considered from the trading day (T+0) in favor of the buyer.

Article (15) The Market shall electronically notify the selling broker of the suspended trading contracts related to him.

Article (16)

1. The broker is required to enhance his account during the settlement day (T+1), or if unable to do so, the Market shall take the necessary procedures to obtain the amount.
2. The period mentioned in paragraph (a) of this Article extends to a deadline of 9:00 AM on the second day after the trading day (T+2), if the shortage is related to a trading contract on a custodial account.
3. The broker must resolve trading contracts on the settlement day and before the start of the session; otherwise, the Market shall take the following procedures: -1 Suspend the broker from trading, withhold services provided to him, and notify the Authority. -2 Collect the guarantee letter amount and demand the broker to pay any remaining outstanding amounts. -3 Impose fines, fees, and service charges approved by the Market for each suspended trading contract borne by the broker. -4 If the coverage value is higher than the sale value for the number of securities (shortage), the broker bears the difference between the values. -5 If the coverage value is less than the sale value, the difference between the values and the number of shortage securities shall be transferred to the Market.

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Article (17) The Market shall complete the settlement of prices for securities whose contracts were previously suspended, after removing the causes of suspension and after deducting any expenses, fees, fines, or charges incurred due to those suspended contracts.

Article (18)

1. Financial settlements for all trades shall be conducted through the clearing bank, unless the Market decides otherwise and notifies the Authority.
2. Notwithstanding the provisions of paragraph (1) of this Article, trading contracts for bonds shall be settled through brokers inter-dealer, unless the Market decides otherwise.

Article (19)

1. The prices of securities shall be received and paid from and to brokers and the custodian through the Settlement Account at the Settlement Bank in accordance with the provisions of these Regulations.
2. The Market shall open a Liquidity Reserve Account at the Settlement Bank or any authorized settlement bank, 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 one Settlement Bank account for settlement purposes and notify the Market of this account and any changes to it.
2. Notwithstanding the provisions of paragraph (1) of this Article, the Market has the right to inspect the Settlement Bank account mentioned and obtain a statement of transactions recorded on this account, and the broker and custodian must enable the Market to do so.

Article (21)

1. Based on the daily trading file received by the Center from the Market through the Center's electronic system, the Center shall issue a settlement contract for each trading contract for the sale or purchase executed by the broker on behalf of his clients with the 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 in question.

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

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Article (23) The custodian shall accept or reject the settlement contract through the Center's electronic system by a deadline of 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 any settlement contract in accordance with the provisions of Article (23) of these Regulations, the broker concerned shall remain obligated to face the Market with the settlement of the trading contract executed by him according to the procedures and deadlines stipulated in these Regulations.
2. In case the custodian accepts the settlement contract within the period stipulated 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 Market shall calculate the net amount due to or from each broker for each trading day and all brokers on the settlement day.
2. Notwithstanding the provisions of paragraph (1) of this Article, the amount mentioned shall be calculated by subtracting the total value of the broker's purchases of securities for the trading day from the net value of the broker's sales of securities for the same day.
3. The net amount represents the total value of the broker's sales of securities for the trading day minus the value of the broker's purchases of securities for the trading day in accordance with the provisions of these Regulations.

Article (26)

1. The Market shall calculate the net amount due to or from each custodian for each trading day and all custodians on the settlement day.
2. Notwithstanding the provisions of paragraph (1) of this Article, the amount mentioned shall be calculated by subtracting the total value of the settlement contracts for sales accepted by the custodian from the total value of the settlement contracts for purchases accepted by him for the same trading day.

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

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Article (28)

1. The broker must enhance the net amount due from him in the Settlement Account by the specified deadline.
2. For each trading day, the Market shall calculate the amount that the broker must pay as a liquidity reserve.
3. The amount that must be paid as a liquidity reserve mentioned in paragraph (1) of this Article shall be deducted from the net amount that the broker must pay on the settlement day.
4. On the settlement day, the Market shall transfer the total accumulated amounts 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 required by the Market to conduct clearing between the amount due from the broker and the amount due to the broker from settlement.

Article (29) The Market shall send an electronic notification to each 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 that the broker must pay as a liquidity reserve in the Settlement Account. -3 The amount that the broker or custodian must pay in the Settlement Account on the settlement day.

Article (30)

1. Each broker and custodian must settle the net amount due from him in the Settlement Account on the settlement day by depositing that amount in the Settlement Account by the specified deadline for this purpose.
2. The Market shall transfer the amount calculated by it and due to the broker or custodian from the Settlement Account to the account of the broker or custodian on the settlement day, after completing the settlement of amounts due from all other brokers and 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 in question, unless the broker receives another notification modifying this notification after that time.
2. The notification sent to the broker and custodian mentioned in paragraph (3) of Article (29) of these Regulations shall be considered final at 2:00 PM on the first day after the trading day (T+1), unless the broker or custodian receives another notification modifying this notification after that time.

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Article (32)

1. The broker must pay the amount due from him as a liquidity reserve in the Settlement Account by a deadline of 9:00 AM on the first day after the trading day, by transferring the amount required from his special account to the Market's liquidity reserve account.
2. The broker and custodian must pay the amount due from them to the Settlement Account by a deadline of 9:00 AM on the second day after the trading day, by transferring the amount required from their special account to the Market'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 deadline, the Market shall take any of the following procedures: a. Notify the Authority 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 after the trading day, the Market shall add that amount to the net amount due from the broker on the settlement day, where the broker must pay them together on the settlement day.

Article (34) If the broker or custodian defaults on paying the amounts due from him in the Settlement Account on the settlement day by 9:00 AM, he is considered in default, and the Market shall request a guarantee/bond to fulfill those obligations and shall take the following procedures: -1 Transfer the amount not settled from the Settlement Guarantee Account to the Market's Settlement Account. -2 Notify the Authority of that default and the necessity to suspend the broker from trading. -3 Withhold the services provided by the Market to the broker or custodian. -4 Seize the securities owned by the broker or custodian in favor of the Market. -5 Demand the broker or custodian to pay all obligations due to the Market, including late payment fees and any expenses or costs incurred by the Market in this regard.

Article (35) The Market shall, by 1:30 PM on the settlement day, issue payment orders to the Settlement Bank to pay the amounts due to brokers and custodians, after sufficient funds are accumulated in the Settlement Account equivalent to the amounts due to brokers and custodians on the settlement day.

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Article (36) If the broker or custodian fails to meet his financial obligations on the settlement day, he must fulfill those obligations within one day from the date of default, in addition to the amount of fines due.

Article (37) If the broker defaults on paying any of the amounts due from him as a liquidity reserve or for settlement, the Market has the right to deduct these amounts from the amounts due to the broker in the Settlement Account, if available.

Article (38)

1. The broker shall not resume work and trade securities except after settling all obligations due from him and providing a new guarantee letter to the Market.
2. After the broker and custodian settle all obligations due from them, the Market shall decide to resume providing services to that broker and custodian and notify the Authority thereof immediately.

Article (39) Settlement contracts accepted by the custodian shall be recorded in the securities account statements held by them and by brokers.

Article (40)

1. In the event of force majeure, the Market's CEO shall have the authority to postpone settlement, and the Authority, Settlement Bank, brokers, and custodians shall be notified thereof as deemed appropriate.
2. If the Market decides to postpone settlement in accordance with the provisions of paragraph (1) of this Article, it shall recalculate the amounts due to or from brokers and custodians and notify the concerned brokers and custodians thereof.

Article (41) The Market shall conduct financial settlements for all securities trades executed on the trading session, except for cases exempted by the Authority for non-interbank transactions. In the event of financial affiliation between financial institutions or banks upon their request, the Market shall not intervene in conducting financial settlement for the transaction, bearing no responsibility, from the date specified by the Market for this purpose.