CHAPTER 46:06
NATIONAL CLEARANCE AND SETTLEMENT SYSTEMS

ARRANGEMENT OF SECTIONS

    SECTION

PART I
Preliminary

    1.    Short title

    2.    Interpretation

PART II
Clearance and Settlement Systems

    3.    Recognition of clearance and settlement systems

    4.    Approval of amendments to constitution and rules of recognised systems

    5.    Constitution and rules of recognised system to be open for inspection

    6.    Withdrawal of recognition from clearance and settlement system

    7.    Establishment and operation of a clearance and settlement system by the Central Bank

    8.    Provision of information to Central Bank

    9.    Control of undesirable conduct in regard to recognised system

PART III
Finality of Settlements Within Recognised System in the Central Bank System

    10.    Finality of payments and transfers made within settlement systems

    11.    Payments and transfers within settlement systems not subject to interdict or stay

PART IV
Winding-Up, Judicial Management or Curatorship of Participants in Recognised System

    12.    Central Bank to be notified of winding-up, judicial management or curatorship

    13.    Winding-up or judicial management not to affect finality of prior settlements

    14.    Rules, etc., of recognised systems binding on liquidator, judicial manager or curator

    15.    Priority of certain instruments on winding-up of participant in recognised systems

PART V
General

    16.    Prohibition against unrecognised systems

    17.    Prohibition against settlement intermediation

    18.    Settlement of disputes arising out of recognised systems or settlement systems

    19.    Exercise of functions by Central Bank

    20.    Preservation of secrecy

    21.    Use of confidential information for personal gain

    22.    Evidence

    23.    Unpaid items due to insufficient funds

    24.    Computer entries

    25.    Imaging

    26.    Review of Act

    27.    Regulations

Act 5, 2003,
S.I. 11, 2005.

An Act to provide for the recognition, operation, regulation and supervision of systems for the clearing of transfer instructions between financial institutions, for the settlement of obligations arising from such clearing, for the discharging of indebtedness arising from such settlements made in such clearing systems and to provide for matters connected with and incidental thereto.

[Date of Commencement: 1st March, 2005]

PART I
Preliminary (ss 1-2)

1.    Short title

    This Act may be cited as the National Clearance and Settlement Systems Act.

2.    Interpretation

    In this Act, unless the context otherwise requires—

    "bilateral netting" means an arrangement to net obligations between two parties, where the obligations covered by the arrangement may arise from financial contracts, transfer instructions or both;

    "Central Bank" means the Bank of Botswana as defined in the Bank of Botswana Act (Cap. 55:01);

    "Central Bank system" means a system established and operated by the Central Bank in terms of section 7 for the discharge of settlement obligations between participants in the system;

    "clearing" means the process of transmitting, reconciling and, in some cases, confirming transfer instructions regarding funds, securities or other financial instruments prior to settlement, including the netting of instructions and the establishment of final positions for settlement, and "clearance" shall be construed accordingly;

    "clearance and settlement system" means a system that facilitates the presenting and exchanging of transfer instructions regarding funds, securities or other financial instruments and the settlement of those transfer instructions between participants in the system;

    "clearing system" means a set of procedures—

    (a)    used by financial institutions to present and exchange information relating to the transfer of funds, securities or other financial instruments to other financial institutions through a centralised system or at a single location; and

    (b)    that include a mechanism for the calculation of participant's positions on a bilateral or multilateral basis with a view to facilitate the settlement of their obligations on net basis;

    "financial institution" means—

    (a)    a person licenced under section 3 of the Banking Act (Cap. 46:04) to transact banking business in Botswana; or

    (b)    a broker-dealer, insurance company, investment scheme, central securities depository or pension fund;

    "funds" means legal tender in terms of sections 23 of the Bank of Botswana Act (Cap. 55:01), cheque, bank draft, banker's acceptance, or an instruction for the electronic movement of funds through a financial intermediary, a recognised system or the Central Bank system;

    "gross settlement" means the settlement of transfer instructions on an instruction-by-instruction basis;

    "management body" in relation to a recognised payment system, means a body which represents participants in the system and organises, and manages their participation in the system;

    "multilateral netting" means an arrangement among three or more parties to net their obligations, where—

    (a)    obligations covered by the arrangement may arise from financial contracts, transfer instructions or both; and

    (b)    the multilateral netting of obligations normally takes place in the context of a multilateral net settlement system;

    "netting" means an agreed off setting of positions or obligations by participants in a clearance and settlement system, which has the effect of reducing a large number of individual positions or obligations to a smaller number of positions and may be conducted on a bilateral or a multilateral basis;

    "obligation" means a duty imposed by contract or law that may arise from the clearing of transfer instructions through a clearing system or the submission of a transfer instruction to a settlement system;

    "recognised system" means a system recognised by the Central Bank that facilitates the clearance or settlement of transfer instructions regarding funds, securities or other financial instruments;

    "settlement" means an act of discharging obligations by transferring funds, securities or financial instruments between two or more parties;

    "settlement system" means a system used to facilitate the settlement of transfer instructions regarding payments, securities or other financial instruments;

    "systemic risk" means the risk of failure by one participant in a clearance and settlement system, or in financial markets generally, to meet its required obligation resulting in other participants or financial institutions being unable to meet their obligations (including settlement obligations in a clearance and settlement system) when due;

    "transfer" means the sending of funds, securities or other financial instruments or a right relating to those funds, securities or other financial instruments from one party to another party by—

    (a)    conveyance of funds or physical instruments;

    (b)    accounting entries on the books of a financial intermediary; or

    (c)    book-entry movement of funds or physical instruments through a recognised system or the Central Bank system; and

    "transfer instruction" means an order or electronic message requesting the movement of funds, securities or other financial instruments or a right relating to those funds, securities or other financial instruments from one party to another party.

PART II
Clearance and Settlement Systems (ss 3-9)

3.    Recognition of clearance and settlement systems