4.2.1. Risk management framework

(1) An Authorised Clearing House must have a comprehensive risk management framework (i.e. detailed policies, procedures and systems) capable of managing legal, credit, liquidity, operational and other risks to which it is exposed.

(2) The risk management framework in (1) must:

• (a) encompass a regular review of material risks to which the Clearing House is exposed and the risks posed to other market participants resulting from its operations; and
• (b) be subject to periodic review by its board as appropriate to ensure that it is effective and operating as intended.

4.2.2. Safeguards for investors

An Authorised Clearing House must ensure that:

• (a) access to its facilities is subject to criteria designed to protect the orderly functioning of those facilities and the interests of investors;
• (b) its clearing services involve satisfactory arrangements for securing the timely discharge (whether by performance, compromise or otherwise) of the rights and liabilities of the parties to transactions in respect of which it provides such services (being rights and liabilities in relation to those transactions);
• (c) satisfactory arrangements are made for recording transactions which are cleared or to be cleared by means of its facilities; and
• (d) appropriate measures are adopted to reduce the extent to which the clearing house's facilities can be used for a purpose connected with market abuse or Financial Crime, and to facilitate their detection and monitor their incidence.

4.2.3. Loss allocation

An Authorised Clearing House must maintain effective arrangements (which may include rules) for ensuring that losses that:

• (a) arise otherwise than as a result of a default of a Member of the Authorised Clearing House; and
• (b) threaten the Authorised Clearing House’s solvency; are allocated with a view to ensuring that the Authorised Clearing House can continue to provide its activities.