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{{crrsnap|306(1)}} | {{crrsnap|306(1)}} | ||
===Discussion=== | |||
So a clearing member must be able to pass losses occasioned by the default of a CCP on to its client. But it will be a generous client indeed who does not insist on a carve-out from that right for defaults caused by the clearning member's own negligence, wilful default or fraud. Would such a carve-out invalidate an application of {{crrprov|306(1)(c)}}? | |||
Respectfully, it is submitted, it would not: | |||
It is clear in {{crrprov|306(1)(c)}} that it must be that the {{crrprov|CCP}} has defaulted under the transaction (i.e., more than the {{crrprov|CCP}} just generally be “in default” in the abstract in the sense of being “insolvent”. (Of course, a CCP’s Insolvency would come into play if it led to a default (which ordinarily it would, unless the contract had already been breached by the clearing member, and particularly where that clearing member’s default had, of itself, brought about the insolvency!) | |||
It ought to be safe to say any negligence (whether or not gross), wilful default or fraud on behalf of the {{crrprov|clearing member}} in carrying out its obligations under the transaction with the CCP would, QED, be a default under that transaction by the clearing member: (any action it was ''entitled'' to take under the trasnaction, could hardly be 'negligent' as far as the CCP was concerned). | |||
So a loss to the {{crrprov|clearing member}} which arose out of the inability of the {{crrprov|CCP}} to perform under a transaction which in turn came about as a result of the clearing member defaulting in its obligations to that {{crrprov|CCP}} would not be “loss suffered in the event that CCP defaults”: if the clearing member sued the CCP for that loss, it would fail. | |||
Looking at it another way, if such a carve out did invalidate {{crrprov|306(1)(c)}} then the provision would have no application at all, because it would be commercially impossible to remove it. | |||
{{crranatomy}} | {{crranatomy}} |