DECISION OF THE BOARD OF DIRECTORS PT KLIRING PENJAMINAN EFEK INDONESIA. : Rule of KPEI Number III-2 on Clearing and Guarantee of

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1 DECISION OF THE BOARD OF DIRECTORS PT KLIRING PENJAMINAN EFEK INDONESIA Number On : Kep-001/DIR/KPEI/0116 : Rule of KPEI Number III-2 on Clearing and Guarantee of Issue Date : 6 January 2016 Effective Date : 1 February 2016 Settlement of Securities Index Futures Contract Transactions Reference : Financial Services Authority Letter Number: S-99/PM.2/2015 dated 13 November 2015 on Approval for Draft Rule of KPEI Number III-1 and III-2. Considering : 1. that to support revitalization of Securities Index Futures Contract trade, it is necessary to improve regulation on clearing and guarantee of settlement of Securities Index Futures Contract transactions. 2. that based on the foregoing consideration, it is deemed necessary to issue Rule Number III-2 on Clearing and Guarantee of Settlement of Securities Index Futures Contract Transactions. Observing : 1. Law Number 8 of 1995 on Capital Markets (State Gazette of the Republic of Indonesia Number 64 of 1995, Supplement to State Gazette of the Republic of Indonesia Number 3608 of 1995).

2 2. Government Regulation Number 45 of 1995 on Implementation of Activities on Capital Markets (State Gazette of the Republic of Indonesia Number 86 of 1995, Supplement to State Gazette of the Republic of Indonesia Number 3617 of 1995). 3. Decision of Chairperson of Bapepam Number Kep- 26/PM/1998 dated 1 June 1998 on the Grant of Business Licenses as Clearing and Guarantee Institutions to PT Kliring Penjaminan Efek Indonesia. 4. Decision of the Board of Directors of PT Kliring Penjaminan Efek Indonesia Number Kep-005/DIR/KPEI/0505 dated 5 May 2005 on Rule of KPEI Number III on Clearing and Guarantee of Settlement of Futures Contract Transactions. HAS DECIDED To establish : 1. Rule of KPEI Number III-2 on Clearing and Guarantee of Settlement of Securities Index Futures Contract Transactions as specified in the appendix to this Decision. 2. Upon the entry into effect of this Decision, Rule of KPEI Number III on Clearing and Guarantee of Settlement of Futures Contract Transactions, Appendix to Decision of Board of Directors of PT Kliring Penjaminan Efek Indonesia Number Kep-005/DIR/KPEI/0505 dated 5 May 2005 is declared null and void.

3 3. The provisions concerning Service Fees as specified in clause XIII of the Appendix to this Decision shall take effect as of 1 August This decision shall take effect as of its effective date, and the provisions will be amended and revised as appropriate if any improvement is required or any errors are found herein. Issued in : Jakarta On : 6 January 2016 (signed) Hasan Fawzi President Director (signed) Indriani Darmawati Director

4 Appendix to the Decision of Board of Directors PT Kliring Penjaminan Efek Indonesia Number : Kep-001/DIR/KPEI/0116 On : RULE OF KPEI NUMBER III-2 CLEARING AND GUARANTEE OF SETTLEMENT OF SECURITIES INDEX FUTURES CONTRACT TRANSACTIONS I. DEFINITION In this Rule: 1. Clearing Member means a Stock Exchange Member, which meets KPEI terms and conditions to obtain services for Clearing and Guarantee of Trading Transaction Settlement. 2. SIFC Transaction means the meeting of sales quotation and purchase demand for certain SIFC. 3. Trading Limit means the maximum Trading Transaction value for each Clearing Member as specified by KPEI. 4. Collateral means any fund, Securities, and/or other financial instruments of a Clearing Member as a guarantee, which may be used by a Clearing and Guarantee Institution to settle Trading Transactions and/or perform its obligations as a Clearing Member of a Clearing and Guarantee Institution as specified in Article 1 point 7 of Financial Services Authority Regulation Number 26/POJK.04/2014 on Trading Transaction Settlement Guarantee.

5 5. Unblocked Collateral means any collateral that is not blocked by KPEI. 6. Margin means a Clearing Member s Collateral blocked by KPEI to settle Futures Contract and Option Transactions. 7. LQ-45 SIFC Multiplier means a value in Rupiah representing one LQ-45 SIFC Price. 8. Clearing means a process of determining the rights and obligations arising from Trading Transactions as specified in Article 1 point 4 of Financial Services Authority Regulation Number 26/POJK.04/2014 on Trading Transaction Settlement Guarantee. 9. SIFC Netting means a Clearing activity conducted by KPEI, which gives rise to rights or obligations against the fund of each Clearing Member to receive or pay certain funds relating to SIFC Transactions. 10. Clearing Result List of Futures Contracts and Option (CRL of Futures Contracts and Option) means an electronic document containing details of the rights and obligations of each Clearing Member arising from Futures Contract and/or Option Trading Transactions. 11. Clearing Member s Customer means any individual or institution using the services of a Clearing Member. 12. Open Position means unsettled selling or buying SIFC position as specified in point 1 letter f of Bapepam Regulation Number III.E.I on Futures Contracts and Option on Securities or Security Indexes, Appendix to Decision of Chairperson of Bapepam-LK Number KEP-39/PM/2003 dated 31 October Final Settlement Price (FSP) means a price used to determine the rights and obligations of a Clearing Member on the due date.

6 14. Daily Settlement Price (DSP) means a price used to determine the daily rights and obligations of a Clearing Member. 15. SIFC Transaction Settlement means fulfilment of a Clearing Member s obligations to KPEI and fulfilment of a Clearing Member s rights by KPEI under CRL of Futures Contracts and Option. 16. Trading Limit means any actions by KPEI restricting a Clearing Member from adding any new contract positions. 17. Position Limit means maximum contract position permitted for each Clearing Member in making orders due to Transaction Restriction. 18. Sett-Off means a transaction made by a Clearing Member to settle a contract in an opposite position, either selling or buying of the same SIFC as specified in point 1 letter g of Bapepam Regulation Number III.E.I on Futures Contracts and Option on Securities or Security Indexes, Appendix to Decision of Chairperson of Bapepam-LK Number KEP-39/PM/2003 dated 31 October Futures Contract and Option Settlement Account means a Clearing Member Account with a Payment Bank used to settle the rights and obligations under Futures Contract and Option Transactions. 20. Futures Contract and Option Guarantee Account means a Clearing Member Account with a Payment Bank used to place Collateral, deliver its payment obligations to KPEI, and receive its rights from KPEI under Futures Contract and Option Transactions. 21. Futures Contract and Option Operational Account means a Clearing Member Account with a Payment Bank used to place fund related to

7 withdrawal of Collateral by a Clearing Member and/or Customer and withdrawal of Security Fund. 22. Sub-Futures Contract and Option Settlement Account means an Account in the name of a Clearing Member Customer with a Payment Bank used to settle Futures Contract and Option Transactions of the relevant Clearing Member s Customer. 23. Payment Bank means a commercial bank under an Agreement with KPEI, appointed to settle Futures Contract and Option Transactions. 24. Obligation Settlement Report of Futures Contracts and Option (OSR of Futures Contracts and Option) means an electronic document containing the fulfilment status of fund rights or obligations of each Clearing Member in relation to Futures Contract and/or Option Security Trading Transactions. 25. Stock Exchange means PT Bursa Efek Indonesia. 26. Trading Transaction Settlement Guarantee means an obligation of a Clearing and Guarantee Institution to immediately and directly take over the responsibilities of a Clearing Member failing to meet its obligations related to settlement of Security Trading Transactions at the time and in the manner as obligated to the relevant Clearing Member as specified in Article 1 point 1 of Financial Services Authority Regulation Number 26/POJK.04/2014 on Trading Transaction Settlement Guarantee. 27. Guarantee Fund means funds and/or Securities administered and managed by a Clearing and Guarantee Institution, the funds and/or Securities of which are used to finance the Trading Transaction Settlement Guarantee by a Clearing and Guarantee Institution as

8 specified in Article 1 point 2 of Financial Services Authority Regulation Number 26/POJK.04/2014 on Trading Transaction Settlement Guarantee. 28. Security Fund means certain funds that must be paid by a Clearing Member to KPEI to settle obligations in Futures Contract and Option Transactions. 29. Security Fund Account means a Clearing Member s Account with a Payment Bank used to pay the Security Fund. 30. Payment Default means non-fulfilment of obligations, whether in part or in whole, of a Clearing Member to pay certain funds to KPEI to meet the obligation in respect of the settlement of the Trading Transactions. 31. Force Majeure means an event and/or condition beyond the control and ability of the Stock Exchange and/or KPEI and/or Payment Bank causing the failure of the main system of the Stock Exchange, KPEI, and/or Payment Bank to function properly and/or conditions including, but not limited to, war, either officially or unofficially declared, rebellion, fire, flood, earthquake, riot, sabotage, strike, and any other similar events or conditions. 32. Trading Day means a day on which Securities are traded on the Stock Exchange from Monday to Friday, except a national holiday or any day stipulated as a Trading holiday by the Stock Exchange. 33. LQ-45 Securities Index Futures Contract means a covenant to sell or buy LQ-45 Securities Index contract with settlement in the future, requiring all Parties to comply with the agreement as and when due. 34. Contract Liquidation means a Clearing Member s Open Position by the Clearing and Guarantee Institution as specified in point 1 letter d of

9 Bapepam Regulation Number III.E.1 on Futures Contracts and Option on Securities or Securities Indexes, Appendix to Decision of Chairperson of Bapepam-LK Number KEP-39/PM/2003 dated 31 October Underlying means Securities, Securities index, a group of Securities or index of a group of Securities as the basis for contract transactions as specified in point 1 letter h of Bapepam Regulation Number III.E.1 on Futures Contracts and Option on Securities or Securities Indexes, Appendix to Decision of Chairperson of Bapepam-LK Number KEP- 39/PM/2003 dated 31 October II. TRADING LIMIT AND RISK CALCULATION 1. A Clearing Member may only make SIFC Transactions according to the Trading Limits determined by KPEI. 2. A Clearing Member may place Collateral in a Guarantee Account for Futures Contracts and Option as the basis for calculation of Trading Limits. 3. KPEI determines the Trading Limit of each Clearing Member based on such Clearing Member s Unblocked Collateral. 4. KPEI adjusts the Trading Limit of each Clearing Member based on: a. SIFC Transactions made by the Clearing Member; and/or b. Collateral deposit in a Guarantee Account for Futures Contracts and Option. 5. KPEI makes risk calculation for every selling offer and/or buying request made by a Clearing Member. 6. Based on the risk calculation set forth in point 5 above, KPEI will validate the Trading Limit of the relevant Clearing Member and is authorized to

10 approve or reject every selling offer and/or buying request made by a Clearing Member. III. COLLATERAL 1. A Clearing Member must place Collateral in the form of funds to guarantee the settlement of SIFC Transactions. 2. Collateral for SIFC Transactions may only be deposited by a Clearing Member into a Guarantee Account for Futures Contracts and Option on a Trading Day. 3. A Clearing Member may withdraw the Unblocked Collateral by making Collateral withdrawal application to KPEI. KPEI will credit the Unblocked Collateral to the Clearing Member s Operational Account for Futures Contracts and Option. IV. MARGIN 1. KPEI determines the calculation of Margin of every Open Position owned by a Clearing Member. 2. So long as a Clearing Member has an Open Position, KPEI will make a calculation of Margin requirement adjustment. 3. If any additional Collateral demand arises for Margin requirement adjustment, KPEI will adjust Margin requirement by calculating the availability of a Clearing Member s Unblocked Collateral. 4. If Unblocked Collateral is not available for Margin requirement adjustment, the relevant Clearing Member will be charged with Trading Limits.

11 5. If Unblocked Collateral is not available for Margin requirement adjustment and the additional Collateral requirement has reached a potential loss of 50% (fifty percent) of the Margin and Security Fund, KPEI will inform such condition to the relevant Clearing Member and request for additional Collateral or request the relevant Clearing Member to make a Sett-Off. 6. If Unblocked Collateral is not available for Margin requirement adjustment and the additional Collateral requirement has reached a potential loss of 75% (seventy-five percent) or more than the Margin and Security Fund on the last Trading Day, KPEI will liquidate partial Open Position of the relevant Clearing Member until the determination of Margin requirement equal to the available Collateral. 7. Against a liquidated Clearing Member, KPEI will charge a compensation fee and compensation will be given to the Clearing Member affected by the compensation. The compensation fee is 0.5% x Multiplier x Contract Price x Daily Adjustment Price. V. SIFC TRANSACTION CLEARING 1. Based on the List of Stock Exchange Transactions, KPEI will conduct Clearing by SIFC Netting against SIFC Transactions of a Clearing Member and its Customer. 2. The Clearing process and activity by SIFC Netting shall be conducted under the following conditions: a. KPEI determines an Open Position of all SIFC Transactions; b. KPEI determines fund rights or obligations of each Clearing member consisting of:

12 1. Gains or losses against SIFC position; and 2. Determination or change of Margin requirement against SIFC position. c. The calculation basis for fund rights and obligations for an Open Position uses Daily Settlement Price on each Trading Day, or Final Settlement Price if on such Trading Day, the Futures Contract falls due. 3. The document that is made as a result of the Netting activity set forth in point 2 above shall be List of Futures Contract and Option Clearing Result (CRL of Futures Contracts and Option). 4. The CRL of Futures Contracts and Option set forth in point 3 above contains the following: a. Open Position of a Clearing Member; b. Fund rights or obligations of a Clearing Member; and c. SIFC Transaction settlement date. 5. If there is a Trading ID of a Clearing Member s Customer conducting SIFC Transaction and unregistered with KPEI, any Open Position resulting from the SIFC Trading will automatically become the responsibility of a Clearing Member from which the Clearing Member s Customer come. 6. KPEI shall provide the CRL of Futures Contracts and Option no later than 19:30 West Indonesia Time on a Trading Day (T+0) where SIFC Transaction is conducted. 7. The CRL of Futures Contracts and Option constitutes a request by KPEI to a Clearing Member to fulfill the obligation to settle Futures Contract and Option Transactions.

13 8. In addition to the CRL of Futures Contracts and Option, KPEI also provides information on Open Position and the rights and obligations of each Clearing Member s Customer in relation to the SIFC Transactions. VI. DAILY SETTLEMENT PRICE AND FINAL SETTLEMENT PRICE Calculation of DSP and FSP is further determined in a joint decision of the Stock Exchange and KPEI. VII. TRADING LIMITS 1. Trading Limits may apply to a Clearing Member among others for the following reasons: a. the Clearing Member does not have any Unblocked Collateral; b. the Clearing Member s Security Fund is less than the determined minimum limit or runs out; and/or c. the Clearing Member is on Payment Default. 2. In the event of a Trading Limit against a Clearing Member, KPEI will issue a Position Limit for the relevant Clearing Member. 3. A Clearing Member imposed with Trading Limit may only make SIFC A Sett-Off against an Open Position according to the last Position Limit issued by KPEI and must use the Trading ID according to the Open Position. 4. In conducting the Trading Limit, if an SIFC Set-Off made by a Clearing Member is not in accordance with the Position Limit and/or Trading ID of an Open Position, such SIFC Sett-Off will be corrected by KPEI according to the last Position Limit issued by KPEI and the Trading ID relevant to the

14 Open Position in order to close the Open Position of the corresponding Clearing Member. 5. If KPEI makes the correction set forth in point 4, KPEI will deliver such correction information to the relevant Clearing Member no later than West Indonesia Time on the same Trading Day (T+0). VIII. SETTLEMENT OF SIFC TRANSACTIONS 1. For settlement of SIFC Transactions, a Clearing Member must open only 1 (one) Sub-Futures Contract and Option Guarantee Account for each Clearing Member s Customer. 2. Opening of 1 (one) Sub-Futures Contract and Option Guarantee Account of a Clearing Member s Customer must be made with the same Bank Payment as the one used by the relevant Clearing Member. 3. Fulfillment of a Clearing Member s obligations to KPEI is made under CRL of Futures Contracts and Option by providing fund in a Guarantee Account for Futures Contracts and Option on the following Trading Day after an SIFC Transaction (T+1) no later than West Indonesia Time. 4. Fulfillment of obligations of a Clearing Member s Customer to a Clearing Member is made by providing fund in Sub-Futures Contract and Option Guarantee Account by a Clearing Member s Customer no later than West Indonesia Time on the following Trading Day after an SIFC Transaction (T+1). 5. Fulfillment of a Clearing Member s rights by KPEI is made by crediting funds to the Clearing Member s Guarantee Account for Futures Contracts

15 and Option on the following Trading Day after an SIFC Transaction (T+1) no later than West Indonesia Time. 6. For fulfillment of the rights of a Clearing Member s Customer, KPEI will credit funds into the Sub-Futures Contract and Option Guarantee Account of such Clearing Member s Customer no later than West Indonesia Time on the following Trading Day after an SIFC Transaction (T+1). 7. Based on the Payment Bank s report on the fulfillment status of a Clearing Member s rights and obligations under CRL of Futures Contracts and Option, KPEI will provide the CRL of Futures Contracts and Option on the following Trading Day after an SIFC Transaction (T+1) no later than West Indonesia Time. 8. The CRL of Futures Contracts and Option contains the following information: a. Clearing Member s name; b. date of CRL of Futures Contracts and Option; c. amount of fund transferred by a fund transferor Clearing Member to KPEI; and d. amount of fund transferred by KPEI to a fund recipient Clearing Member. 9. On the due date, KPEI will make Contract Liquidation of Open Position owned by a Clearing Member by using the Final Settlement Price. 10. A Clearing Member is responsible for the mandatory settlement of SIFC Transactions for their own account or for the Clearing Member s Customer account according to the time and procedure determined by KPEI.

16 IX. OPEN POSITION ASSIGNMENT 1. If a Clearing Member with an Open Position is imposed with temporary suspension of Securities trading on the Stock Exchange or requests for a suspension at their own request as specified in the Stock Exchange Regulation, such Clearing Member must use efforts to assign the Open Position to 1 (one) Clearing Member under the following conditions: a. another Clearing Member agrees to receive the Open Position assignment of such suspended Clearing Member; b. if a suspended Clearing Member s Customer has an Open Position, such suspended Clearing Member must ensure that the Customer s Trading ID has been registered and the Customer has a Sub-Futures Contract and Option Guarantee Account with the assignee Clearing Member; and c. A suspended Clearing Member must assign the Customer s Collateral to an assignee Clearing Member. 2. If the requirements for Open Position assignment set forth in point 1 are fulfilled, a suspended Clearing Member will apply to KPEI to assign all Open Positions and Collateral to another Clearing Member during the trading hour on the relevant Trading Day. 3. The Open Position assignment set forth in point 2 above is made by KPEI on the Trading Day when the application is made. 4. A Clearing Member receiving an Open Position assignment must treat the assignment the same as any other Customer s orders. 5. If, until the end of a Trading Day as from a Clearing Member is suspended, such suspended Clearing Member fails to assign the Open Position to

17 another Clearing Member, KPEI will liquidate the Open Position of such Defaulting Clearing Member and charge compensation fee of 0.5% x Multiplier x Contract Price x Daily Settlement Price. Compensation fee will be given to the liquidated Clearing Member. X. SECURITY FUND 1. KPEI may apply the Clearing Member s Security Fund to discharge the Clearing Member s obligations. 2. If the application of the Clearing Member s Security Fund causes such Security Fund amount to become less than the required amount or causes such amount to run out, the following conditions will apply: a. the relevant Clearing Member must increase the Security Fund to a determined limit; b. the relevant Clearing Member shall be subjected to the Trading Limit; and c. If the Clearing Member has Unblocked Collateral, KPEI may transfer such Unblocked Collateral for the Security Fund. 3. If, until the end of a Clearing Member s Contract Position, such Clearing Member has not fulfilled the Security Fund according to the determined limit, KPEI may request the Stock Exchange to impose an SIFC trading suspension on such Clearing Member. XI. NON-PERFORMANCE BY A CLEARING MEMBER AND GUARANTEE FOR TRADING SETTLEMENT ON THE STOCK EXCHANGE 1. If a Clearing Member fails to meet its obligations under the CRL of Futures Contracts and Option until West Indonesia Time on the

18 following Trading Day after an SIFC Transaction (T+1), KPEI may apply the Clearing Member s Security Fund for obligation fulfillment according to the CRL under the following conditions: a. if the existing Security Fund is sufficient to fulfil the obligation under the CRL, KPEI will issue Security Fund invoice to such Clearing Member; b. if the existing Security Fund is sufficient only to fulfil the obligation for loss of SIFC position, KPEI will issue Security Fund invoice to such Clearing Member and Margin requirement invoice (if any); or c. if the existing Security Fund is insufficient to fulfil the obligation for loss of SIFC position, the Clearing Member will be declared in Payment Default. 2. For a Clearing Member in Payment Default, the following conditions apply: a. KPEI will report such Payment Default to the Stock Exchange; b. KPEI will carry on Securities Trading Settlement Guarantee function only limited to meet any loss of SIFC position of such Clearing Member in Payment Default; c. if a Clearing Member has an Open Position, the Clearing Member must make a Sett-Off for the Open Position and or assign such Open Position set forth in point IX no later than West Indonesia Time on the Trading Day when such Clearing Member is declared in Payment Default; and d. If, until the time limit determined in letter (c), a Clearing Member has an Open Position:

19 1) KPEI will liquidate the Open Position of such Clearing Member in Payment Default and impose compensation fee of 0.5% x Multiplier x Contract Price x Daily Settlement Price; 2) Compensation fee will be given to the liquidated Clearing Member; and 3) KPEI will report the fulfillment status of such Clearing Member in Payment Default to the Stock Exchange. 3. To recover the used financial sources in relation to the Securities Trading Settlement Guarantee function, KPEI will take the actions specified in Financial Services Authority Regulation Number 26/POJK.04/2014 on Securities Trading Settlement Guarantee. 4. All costs incurred from handling failure will be fully borne and paid by the Clearing Member in Payment Default. XII. GUARANTEE FUND 1. KPEI determines Guarantee Fund contribution to a Clearing Member for each SIFC Transaction. 2. The amount of Guarantee Fund contribution levied from each SIFC Transaction is % (zero point zero zero zero six percent) of the SIFC Transaction value. 3. The Guarantee Fund set forth in points 1 and 2 above must be paid by the Clearing Member to KPEI no later than the Securities Trading settlement day.

20 4. A Clearing Member failing to pay the Security Fund will be sanctioned under Rule of KPEI No. II-8 on the Sanctions and Violations of Clearing Members. XIII. SERVICE FEE 1. A Clearing Member must pay a fee for clearing and guarantee of the SIFC Transaction settlement to KPEI of Rp. 2,000 (two thousand rupiah) calculated based on the frequency of such Clearing Member. 2. A Clearing Member must pay the fee for the clearing and guarantee of the SIFC Transaction settlement for their own account and for the account of the Clearing Member s Customer to KPEI. 3. The obligation set forth in point 1 above excludes Value Added Tax (VAT) and Income Tax as well as other taxes, if applicable, and will be paid through KPEI as the Withholding Agent. 4. The service fee and taxes set forth in point 1 and 3 above must be fully paid and received by KPEI in freely transferable funds in KPEI account on a monthly basis no later than the 12th (twelfth) calendar day of the following month. 5. If the 12th (twelfth) calendar day set forth in point 4 above falls on Saturday or Sunday or holiday, such obligation will be effective on the following calendar day. 6. Any late payment of the service fee for Clearing and Guarantee of SIFC Transaction Settlement to KPEI will be subject to a penalty of 1% (one percent) of the total amount payable for each calendar day of delay.

21 7. Any late payment of the VAT and other tax obligations will be subject to a reimbursement fee in the same amount as incurred by KPEI plus 1% (one percent) of the amount of taxes payable for each calendar day of delay within 30 business day at the maximum. 8. If a Clearing Member fails to pay the service fee for Clearing and Guarantee of SIFC Transaction Settlement to KPEI at least 5 (five) Trading Days after the lapse of the period set forth in point 4 above, KPEI may enforce the Clearing Member s Collateral with KPEI to discharge such payment obligation, including the penalty set forth in points 6 and 7 above. XIV. FORCE MAJEURE 1. In the event of any delay in the settlement of Securities Index Futures Contract Transaction due to Force Majeure, such delay shall not be construed as default or non-performance by either the Clearing Member and/or KPEI of the rights and obligations. 2. In the event of Force Majeure, any party affected by the Force Majeure must give a notice to the other party no later than 24 hours of the Force Majeure declaration. 3. In the event of Force Majeure, KPEI and the Stock Exchange shall determine the Trading Day for settling the delayed SIFC Transaction. Issued in Jakarta, (signed) (signed)

22 Hasan Fawzi Indriani Darmawati President Director Director