(This note is not part of the Regulations)

These Regulations change the insolvency regime that applies to any exchange which is a "recognised investment exchange" ("RIE") and any central counterparty clearing house which is a "recognised clearing house" ("RCH") within the meaning of the Financial Services and Markets Act 2000 (c. 8) (see Part 18 of that Act). They do so by amending Part 7 of the Companies Act 1989 (c. 40) ("Part 7"); the Financial Markets and Insolvency Regulations 1991 (S.I. 1991/880) (the "1991 Regulations") and the Financial Services and Markets Act 2000 (Recognition Requirements for Investment Exchanges and Clearing Houses) Regulations 2001 (S.I. 2001/995) (the "2001 Regulations").

These Regulations amend Part 7, the 1991 Regulations and the 2001 Regulations so that they provide further protection for the actions of RIEs and RCHs in the event of default by any of their members on the obligations they have entered into in the course of buying or selling financial instruments. The amendments comprise:

(a) a broadening of the definition of "market contracts" to which Part 7 applies;

(b) inclusion of default fund contributions within the protections of Part 7;

(c) provisions amending Part 7 so that it takes account of administration on a basis equivalent to bankruptcy and winding up;

(d) provision to ensure default rules refer to and take into account cross margining agreements; and