PAYMENT CLEARING AND SETTLEMENT 1

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THE PAYMENT CLEARING AND SETTLEMENT ACT

ARRANGEMENT OF SECTIONS I

PART 1. Preliminaty

1. Short title.

2. Interpretation. I

PART 11. Clearing and Settlement System Regulation ;
3. Bank to exercise oversight functions.

4. Determination as to existence of clearing and settlement system!

5. Designation of system.

6. Settlement rules to be approved by Bank.

7. Bank to have regard to public interest.

8. Agreements.

9. Bank's directions to clearing house.

10. Bank's directions to participants.

1 1. Directions to facilitate system stability.

12. Standards.

13. Bank powers.

14. Preservation of settlement rules, rights and remedies for collateral
granted.

15. Clearing house to notify of changes and other information.

16. Audits and inspections.

17. Cost of regulation.

PART 111. Miscellaneous

18. Other Bank powers.

19. Netting agreements.

20. Judicial review application not to stay directions, etc.

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PAYMENT CLEARING AND SETTLEMENT

21. Clearing house not in Jamaica.

22. Restriction on disclosure where information not generally available.

23 . Establishment of National Payments System Council.

. , 24. Confidentiality.

25. Protection from liability.

26. Enforcement.

27. Offences and penalties.

28. Guidelines.

29. Regulations.

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PAYMENT CLEARlNG AND SETTLEMENT . 3

THE PAYMENT CLEARING AND SETTLEMENT ACT ; Act
32 of 2010.

[31" December, 201 0.1

PART I. Preliminary

1. This Act may be cited as thepayment Clearing and Settle- short title.
ment Act.

: Interpreta- 2. In this Act unless the context otherwise requires- ; tion.
"the Bank" means the Bank of Jamaica;

I

"central counter-party" means a partnership, agency, asso-
ciation, body corporate or other entity in a payment or
securities clearing and settlement system which is inter-
posed between the participants, and which acts as the
exclusive counter-party of these entities with regard to
their transfer orders;

"clearing and settlement system" or "system" means!a sys-
tem or arrangement for the cleaiing or settlement Of-

(a) payment obligations or payment messages in
which-

(i) there are at least three participants, at
least one of which is the Bank or a
bank;

(ii) clearing or settlement is in Jamaican
currency or other currencies as deter-
mined by the Bank; and

(iii) the payment obligations j that arise
from clearing within the 'system or
arrangement are ultimately settled
through adjustments to the account or
accounts of one or .more of the part-
icipants at the Bank;

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PAYMENT CLEARING AND SETTLEMENT

(b) securities and derivatives transactions, foreign
exchange transactions or other transactions,
where the system or arrangement also clears or
settles payment obligations arising from those
transactions;

"clearing house" means the entity (whether incorporated or
not) that provides clearing or settlement services for a
clearing and settlement system, and in relation to any
particular system means the body that so services that
system;

"Court" means the Supreme Court;

"designated system" means a clearing and settlement sys-
tem designated under section 5(1);

"functions" includes powers and ,duties;

"Governor" means the Governor of the Bank;

"Minister" means the Minister responsible for finance;

"National Payments System Council" or "Council" means
the body established in accordance with section 23;

"netting" means the conversion into one net claim or one
net obligation of claims and obligations resulting from
transfer orders which a participant either issues to or
receives from, one or more participants, with the result
that only a net claim can be demanded or a net obliga-
tion can be settled;

: "participant" nieans a member of a system or a party to an
arrangement that establishes a system, including its
administrator;

"systemic risk" means the risk that the inability of a partici-
pant to meet its obligations in a clearing and settlement
system as they become due, will-

(a) cause other participants in the clearing and settle-
i

ment system to be unable to meet their obligations
as they become due; or

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(b) cause significant liquidity or credit problems that
might threaten stability and confidence in tHe
financial system;

"transfer order" means any instruction by a participant to
place at the disposal of a recipient an amount of money
by means of a book entry on the accounts of a credit
institution, settlement agent or the Bank, or any
instruction which results in the assumption or discharge
of a payment obligation, or any instruction by a parti-
cipant to transfer the title to, or interest in, a security or
securities by means of a book entry on register, or
otherwise.

PART 11. Clearing and Settlement System Regulation

3.-(1) The Bank is charged with responsibility fof the ~ a n k t o
regulation, supervision and monitoring of clearing and settle-
ment systems. functions.

(2) For the purposes of this section, the Bank shall
perform such functions, implement such rules and procedures,
and in general, take such steps as it deems necessary.

(3) Subject to subsection (4), the functions confefred on
the Bank by this Act shall be exercised by the ~overno,r on its
behalf.

(4) The Governor may in writing authorize any of the
officers of the Bank to perform any of its functions under this
Act.

4.-(1) Where the Bank has reasonable grounds to believe Determ~na-
tlon as to that a clearing and settlement system exists, but the Bank existenceof

requires further information in order to determine its nature or clearingand
settlement its systemic importance or any other aspect of its operation, system

the Bank may request a person who is a party to the* system
to provide the Bank with such information and documents
regarding the system as the Bank may require to make the
deterhination.

(2) Every person to whom a request is directed under
subsection (1) shall comply with the request.

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PAYMENT CLEARING AND SETTLEMENT

(3) Every clearing house shall, in respect, of its clearing
and settlement system, provide the Bank with such information
and documents as the Bank may from time to time require to
enable the Bank to determine whether the clearing and settle-
ment system poses a systemic risk and, without limiting the
generality of the foregoing, the clearing house shall, in respect
of the clearing and settlement system, provide the Bank upon
request in writing, with-

(a) the names of its participants;

(b) copies of its constituting documents, by-laws, resolu-
tions, agreements, rules, procedures and other docu-
ments governing its establishment and operation;

(c) the names of its directors, committee members and
auditors;

(d) copies of its reports, statements or other documents that
are required to be filed with any government agency or
regulatory body; and

(e) copies of its' financial statements.

Designation
of system.

. .
Settlement
rules to be
approved by
Bank.

5 . 4 1 ) The Bank may designate a clearing settlement system
as a.designated system if the Bank is of the opinion that-

(a) the clearing and settlement system may be operated in
such a manner as to pose systemic risk; or

1
(b) the designation is necessary to protect the public

interest.

(2) The Bank shall, in writing, notify the fact of the
designation of a system to the clearing house of the designated
system, and shall cause a copy of the instrument of designation
to be published in the Gazette.

6. A clearing house shall not commence or, as the case may
be,'continue its operations until it has submitted to the Bank and
received its prior written approval of- the by-laws, agreements,
rules, procedures and guidelines governing the operations of the
cle@ng house.

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PAYMENT CLEARING AND SETTLEMENT 7

7. In exercising its powers in relation to clearing and settle- Bank to have
regard to ' ment systems under this Act, the Bank shall have regard to the pub,ic

public interest; and in this respect, the Bank may take into con- 'interest.
sideration any or all of the following mattkrs, namely- + . *

(a) whether any system is, in the opinion of the Bank-

(i) financially safe for use by participants;

(ii) efficient;

(iii) not causing or contributing to systemic risk;'
and

(b) such other matters as the Bank may consider to be
relevant. . -1 I

8. The Bank may enter into an agreement'with a clearing Agreements
house or a participant, or both, as the case may require, in
respect of-

(a) netting arrangements;'

(b) risk-sharing and risk-control mechanisms;

(c) certainty of settlement and finality of payment;

(4 the nature of financial arrangements among .partici-
I;ants;

(e) the operational systems and financial soundness of the
clearing house; and '

u> such other matters pertaining to systemic risk as may be
agreed on by the parties to the agreement. ,

. 9.--(I) The Bank may act under subsection (2) where it is of Bank's
d~rections to the opinion that systemic risk is or is likely to be inadequately clearing

controlled, as a result of the operations or likely operations of- house.

(a) a clearing house for a designated system;

(b) a participant in a designated system; or

(c) a designated system.

(2) Subject to section 1 1, in the circumstances specified
in subsection (I), the Bank inay issue directions in writing to the

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8 PAYMENT CLEARING AND SETTLEMENT

clearing house for the designated system requiring it, within
such time as the Bank considers necessary, to-

(a) perform such acts or have the participants perform
such acts as in the opinion of the Governor are neces-
sary to remedy the situation; and

(b) cease and desist from engaging in the causative act,
omission or course of conduct, or have the participants
cease and desist from engaging in such act, omission or
course of conduct.

(3) Without affecting the generality of subsection (2),
directions issued to a clearing house under that subsection may
not be in respect of any matter that is not directly related to its
participation in the designated system.

~ a n k ' s direc- 10.-31) Where the Bank has fohned an opinion under section
tions to parti-
cipants. 9 that systemic risk is being inadequately controlled, it may

exercise the powers conferred upon it by subsection (2), in any
case where-

(a) the clearing.house fails to comply with any directions
that have been issued to it under section 9(2);

'

! (b) the designated system does not have a clearing house
I located in Jamaica; or

(c) in the opinion of the Bank-

(i) the systemic risk is being inadequately con-
trolled due to an act, omission or course of con-
duct by a participant with respect to its partici-
pation in the designated system; and

(ii) the act, omission or course of conduct is
not subject to the by-laws, agreements, rules,
procedures, guidelines or other documenta-
tion governing the designated system.

(2) Subject to section 1 1, the Bank may, in the circum-
stances specified in subsection (I), issue directions in writing to
the participants requiring them, within such time as it considers
necessary, to-

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PA Y-VENT CLEARING AND SETTLEMENT 9

(a) perform such acts with respect to their participation, as
the Bank considers necessary to remedy the situation;
and

(b) cease and desist from engaging in certain acts, omis-
sions or courses of conduct with respect to their partici-

- pation in the designated system.

0 '
11. Directions under sections 9 and 10 shall be such as appear Directions to

to the Bank to be desirable for the purpose of ensuring the EIEtiif;;
stability of the clearing and settlement system in Jamaica.

12. The Bank may, in writing, determine standards to be Standards.
complied with by clearing houses for designated systems or par-
ticipants. .

13. The Bank may do all or any of the following things in ~ankpowers.
relation to a designated system and its clearing house-

(a) provide a secured or unsecured guarantee of settlement
by participants;

(b) make liquidity loans to the clearing house and the cen-
tral counter-party;

(c) act as the central counter-party to the participants.

14.-41) Notwithstanding any other provision of law- Preservation
of settlement

(a) the settlement rules of a designated system are to be rules,rights
and remed~es regarded as valid and binding on the clearing house, its for collateral

participants, ' a central counter-party (including the granted.
Bank, where applicable), and any action may be taken
or payment made in accordance with the settlement
rules;

(b) where the settlement rules of a designated system pro-
vide for netting, the obligation of a clearing house,
a participant or a central counter-party (including the
Bank, where applicable) to make any payment or trans-
fer any securities to a participant and the right of a
clearing house, a participant or a central counter-party
to receive payment or securities from a clearing house,
a participant or a central counter-party shall be

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1 10 PAYMENT CLEARING AND SETTLEMENT

determined in' accordance with the provisions of the
settlement rules, in that regard;

(c) where the settlement rules of a designated system
provide that the settlement of a payment obligation
through an entry to or a payment out of an account of a
clearing house, a participant or a central counter-party
at a bank or the Bank, is final and irrevocable, the entry
or payment shall not be required to be r&ersed, repaid
'or set aside.

(2) An entry to or a payment out of the account of a
clearing house, a participant or a central counter-party at a bank
or the Bank, to settle a payment obligation in a designated sys- .
tem, shall not be the subject of any provision or order that
operates as a stay of that activity.

(3) The rights and remedies of a clearing house, a parti-
cipant, a system, a central counter-party or the Bank, in respect
of collateral granted to it as security for a payment or the per-
formance of an obligation incurred in a designated system, may
not be the subject of any provision or order that operates as a
stay that affects the ability of creditors to exercise rights and
remedies with respect to the collateral.

(4) In this section, "settlement rules" means the rules,
, however established, that provide the basis on which payment

obligations are calculated, netted or settled, and includes rules
for the taking of action in the event that a participant is unable
or likely to become unable to meet its obligations to the clearing
house, a central counter-party or the other participants.

Clearing 15.-(1) A clearing house for a designated system shall
house to
notify of provide the Bank with reasonable prior notice of any significant
changes and change to be made by the clearing house in relation to its desig-
other inform-
ation. nated system, and without limiting the generality of the fore-

going, such notice shall be provided in respect of any change
affecting-

(a) the constituting documents and by-laws of the clearing
house;

(b) the operation of the designatid system; or-

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PAYMENT CLEARING AND SETTLEMENT 1 1

(c) the by-laws, agreements, rules, procedures, guidelines
or other documentation governing the designated sys-
tem.

(2) Every such clearing house shall, forthwith after it
makes any other change in relation to the designated system,
provide the Bank with written notice of the change and, without
limiting the generality of the foregoing, 'the notice shall be
provided in respect of any change affecting-

I I

. (a) the composition of a board of directors of the clearing
house, due to resignation or otherwise; or

' (b ) the appointed auditor of the clearing house.

(3) Where it appears to the Bank that any change made
or proposed to be made by a clearing house to its by-laws,
agreements, rules, procedures or guidelines is inappropriate; the
Bank may-

(a) direct the clearing house to refrain from making the
change; or

(b) require the clearing house to make any other changes as
the Bank may specify.

(4) Every such clearing house shall, in respect of its
designated system, provide the Bank with such information, at
such times and in such form as the Bank may in writing require.

(5) The directors or other persons (however designated)
responsible for the- direction and management of a clearing
house shall' be responsible for providing the information re-
quired under this section.

16.-31) The Bank may, for the purposes of carrying out its Audits and
functions under this Act, conduct audits and inspections of a inspeC"Ons~
clearing house for a designated system, and every such clearing
house shall, as required, assist the Bank to the extent necessary
to enable the Bank to carry out an audit or inspection.

(2) For the purpose of obtaining evidence under oath in
relation to an audit or inspection under subsection (I), the Bank
has all the powers of a person appointed as a Commissioner

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12 PAYMENT CLEARING AND SETTLEMENT

under the Commissions ofEnquiry Act.

(3) Where in any case the Bank considers it expedient or
necessary to do so, it may appoint an auditor or a firm of
auditors for the purpose of carrying out an audit or inspection
under subsection ( 1 ) .

(4) The expenses, as approved by the Bank, of any audit
or inspection carried out by an auditor or firm of auditors
appointed under subsection (3) shall be paid by the Bank, and
the amount so paid shall be repaid to the Bank by the clearing

a
house concerned; and may be recovered by or on behalf of the
Bank summarily in a Resident Magistrate's Court, without limit
of amount, as a civil debt.

,
cost of 1 7 . 4 1 ) The Bank may annually impose a fee on a clearing
regulat~on. .house in respect of the cost to the Bank for the administration of

this Act.

(2) A fee imposed under subsection ( 1 ) constitutes a
debt due to the Bank and may be recovered by or 'on behalf of
the Bank summarily in a Resident Magistrate's Court, without
limit of amount, as a civil debt.

PART 111. Miscellaneous

Other Bank 18. The Bank may do all or any of the following things in
powers. relation to a clearing and settlement system' and its clearing

I house-

(a) be a participant and participate in the loss-sharing
mechanism;

(b) act as a custodian of financial assets or act as a settle-
ment agent, or both; and

(c) accept and pay interest on deposits from the clearing
house, a participant or the central counter-party. a

Netting 1 9 . 4 1 ) Notwithstanding anything in any law relating to
agreements. bankruptcy or insolvency, or, any order of a court made in res-

pect of the administration of a reorganization, arrangement,
liquidation or receivership involving insolvency, including any

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PAYMENT CLEARING AND SETTLEMENT 13

law or an order of a court of a foreign jurisdiction, where in
accordance with the settlement rules of a clearing and settlement
system a participant is party to a netting agreement-

(a) the participant may terminate .the agreement and
determine a net termination value or net settlement
amount in accordance with the provisions of the agree-
ment, and thereupon the party entitled to the net term-
ination value or. net settlement amount becomes
a creditor of the party owing the net termination
value or net settlement amount, for that value or
amount;

(b) the basis on which payment and delivery obligations
are calculated, netted and settled shall be determined in
accordance with the settlement rules and the netting
agreement; and

(c) a participant's rights or remedies in respect of any
collateral that has been granted to it to secure the per-
formance of any obligation of any other participant
shall not be interfered with.

(2) In subsection (1)-

(a) "net termination value" means the net amount obtained
after setting off or otherwise netting the obligations
between the parties to a netting agreement in accor-
dance with its provisions; and

(b) "netting agreement" means an agreement between two
or more participants which provides for the netting or
setting off of present or future obligations to make pay-
ments or deliveries against present or future rights to
receive payments or take deliveries. .

20. Notwithstanding the'making of an application for judicial Judicial re-
review of,any designation under section 5 or of any direction ~ ~ ~ ~ ~ $ ~ o
issued under this Act, a stay of the designation or direction staydirec-
shall not be granted pending the final disposition of the t'ons7 etc
application.

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14 PAYMENT CLEARING AND SETTLEMENT

Clear~ng 2 1 . - ( 1 ) where a clearing and settlement system does not
'

house not
in Jamaica. have a clearing house located in Jamaica, the Jamaican partici-

pants shall-

(a) comply with the obligations imposed under this Act on
a clearing house in respect of a clearing and settlement
system; and

(b) have all the rights conferred by this Act on a clearing
house in respect of a clearing and settlement system, in
the same manner and to the same extent as if the
Jamaican participants were the clearing house on which
those obligations and rights are imposed or conferred
and, for that purpose, any action that the Bank may take
in respect of a clearing house may only be taken in
respect of the Jamaican participants.

(2) Where a clearing house fails to comply with the
obligations imposed on it under this Act in respect of its clearing
and settlement system or otherwise contravenes this Act, the
participants jointly and severally are, as the case may be-

(a) required to comply with those obligations; or

(b) liable for .otherwise contravening this Act, -
in the same manner and to the same extent as if the participants
were the clearing house on which the obligations are imposed or

' that committed the contravention.

(3) In subsection (I), a participant is regarded as Jamai-
can if the participant is incorporated or formed under the laws of

: Jamaica. ,
Restriction 22. A participant of a clearingaand settlement system is not
on disclosure
where4 infor- required to provide information to the' Bank under this Act
mation not concerning another participant of that system if the information
generally
available. . is not available to all the participants.

23.-(1) There is established, for the purposes of this Act, a
of National National Payments System Council, which shall be an advisory
Payments
System body to the Bank in the exercise of its oversight functions.
Council.

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PAYMENT CLEARING AND SETTLEMENT 15

(2) The members of the National . Payments System
Council shall be representatives of-

(a) the Bank, whose representative shall also be the chair-
man of the Council;

(b) other governmental bodies regulating or in any other
way involved in the payments and financial markets;

(c) national associations of financial institutions operating
in Jamaica which are involved in payment activities or
)clearing and settlement of securities; and

(6) any other entity, involved in payments activities or in
the clearing and settlement of securities, as may be
determined by the Bank..

(3) The Bank may issue guidelines and directions to the
Council, from time to time, as it considers expedient and the
Council shall comply with all such guidelines and directions.

24.-41) Subject to subsection (2), information and docu- Confiden-
ments obtained under this Act are confidential, and shall be
treated accordingly.

(2) Nothing in subsection (1) prevents the Bank from
disclosing any information or documents-

(a) if the Bank is satisfied that the information or docu-
ments will be treated as confidential by the agency,
body or individual to whom they are disclosed, to-. . .

(i) any public body charged with the regulation
of financial institutions, for purposes related
to such regulation; or

(ii) the chief executive officer of the Jamaica
Deposit Insurance Corporation or any officer
of that Corporation authorized in writing by
the chief executive officer;

(b) pursuant to an order of the Court.

(3) In this section "public body" means-

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PAYMENT CLEARING AND SETTLEMENT

Protection
from liability.

Enforce-
ment.

Offences and
penalties.

(a) a Ministry, department, Executive Agency or other
agency of Government;

(b) a statutory body or authority or any Government com-
pany, that is to say, a company registered under the
Companies Act, being a company in which the Govern-
ment or an agency of the Government, by the holding
of shares, is in a position to direct the policy of that
company.

25. No action lies against the Governor, the Bank, any
officer, employee or director of the Bank or any person acting
under the direction of the Governor. for anything done or omit-
ted to be done in good faith in the administration or discharge of
any function that is intended or authorized to be executed or
performed under this Act.

26. If a clearing house or a participant fails to comply with a
provision of this Act or a direction issued to it by the Bank in
connection with any matter under this Act, or a person on whom
a requirement referred to in section 16(1) is imposed fails to
comply with the request, the Bank may apply to the Court for an
order directing the clearing house, participant or person, as the
case may be, to comply with the provision, direction or request
and, on the application, the Court may so order and make any
further order'it thinks fit.

2 7 . - ( 1 ) Every person who, without reasonable cause, con-
travenes any provision .of this Act commits an offence and-

(a) in the case of an individual, is liable on summary con-
viction in a Resident Magistrate's Court to a fine not
exceeding one million dollars or to imprisonment for a
term not exceeding twelve months, or to both; or

(b) in the case of a body. corporate, is liable on summary
conviction in aResident Magistrate's Court to a fine
not exceeding two million dollars.. . ,

(2) Where offence under this Act, committed by a
body corporate, is proved to 'have been' committed with the

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PAYMENT CLEARING AND SETTLEMENT 17

consent or connivance of, or to be attributable to any neglect on
the part of, any director, manager, secretary or other similar
officer of the body corporate or any person who was purporting
to act in any such capacity, he, as well as the body corporate,
commits that offence and is liable to be proceeded against and
punished accordingly.

28. The Bank may issue guidelines in respect of any matter Guidelines.
relating to the administration or enforcement of this Act.

29. The Minister may, after consultation with the Bank, make Regulations.
regulations, subject to affirmative resolution, for giving effect to
the provisions of this Act.

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