21 juni 2024

Linklaters Zhao Sheng issued legal opinion on the central clearing agreement and rules of the Shanghai Clearing House

With the Futures and Derivatives Law coming into effect in 2022 and following the revision and publication of its new Clearing Guidelines, the Shanghai Clearing House (SHCH) commissioned Linklaters Zhao Sheng for legal opinions on material legal aspects of the clearing agreement and rules for compliance with the Principles for Financial Market Infrastructures (PFMIs).

 

This legal opinion for the SHCH, a Qualifying Central Counterparty (QCCP) supervised by the People’s Bank of China (PBOC), was issued in May 2024 and considered a number of key legal issues including:

 

  • Novation of clearing contracts and settlement finality;
  • Enforceability of close-out netting;
  • Enforceability of margin arrangements; and
  • Enforceability of default management provisions and application of risk management resources.

With the PBOC’s approval, the SHCH recently notified its clearing members of the issuance of this legal opinion.

 

The Linklaters team was led by Asia Head of Structured Finance and Derivatives Chin-Chong Liew, with support from counsel Simon Zhang.

Zhao Sheng Law Firm provided PRC law support on this project – consolidating Linklaters’ long-standing reputation for providing seamlessly integrated Chinese and international legal advice to clients through its joint operationin China. The Zhao Sheng team was led by Capital Markets partner Ying Zhou.

 

Linklaters’ Asia Head of Structured Finance and Derivatives Chin-Chong Liew commented:

 

“We would like to thank the Shanghai Clearing House for entrusting Linklaters Zhao Sheng with this significant legal opinion which is important not just for the Shanghai Clearing House but also for their clearing members and the market at large. We have already started receiving enquiries from clearing members of Shanghai Clearing House and their clients, who are looking to rely on the opinion to satisfy the capital requirements under the capital rules recently issued in mainland China and of their home jurisdictions. We are delighted to have the opportunity to assist the market with this significant development.”