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Settlement Rules

1. Principle of settlement by electronic transaction number
Justice and transparency are the basic principles that transaction on exchange and over-the-counter transaction must execute. The settlement of transaction on exchange includes the products member, exchange, cross-system trusteeship of transaction member, and cross-system settlement, and the settlement is supervised by the local financial supervision institution and the settlement institution specified by Pacific International Unit Exchange Limited. The risks in settlement of over-the-counter transaction are the common problem that exists in the whole world. Pacific International Unit Exchange Limited requires that every transaction of the members shall be provided with a number which shall be matched with a settlement, and that every transaction must be settled. The settlement is supervised by the settlement institution appointed by Pacific International Unit Exchange Limited.

2. Principle of netting settlement
In general, the netting settlement needs to be adopted by the transaction reached by dealing. Netting settlement, also known as balance settlement, means that, during a settlement period, only the net amount which is the result of the balance between all the receivables and payables is contained in the settlement of membership cost. The settlement among members of Pacific International Unit Exchange Limited implements the principle of netting.

3. System of Central Counter Party (CCP)
In order to ensure the legal effect of multi-lateral netting settlement, the system of Central Counter Party (CCP) needs to be introduced. Central Counter Party (CCP) indicates the subject that acts as the settlement counterparty of both the sellers and buyers and ensures the successful completion of the settlement, and it’s often undertaken by an appointed settlement institution. If either party fails to carry out the settlement in line with the agreement, the settlement institution shall pay the relevant asset or fund to the non-breaching party according to the settlement rules.
The introduction of CCP ensures that both parties don’t need to worry about the credit risks of the counterparty and is conducive to enhancing the investors’ confidence and activating the market transaction. In fact, as the settlement institution acts as the CCP, the selling means that investors sell the securities to the settlement institution, and the purchase means that investors buy the securities from the settlement institution, so that the securities or funds that both parties may obtain are guaranteed. The Pacific Asset Management Center, specified by Pacific International Unit Exchange Limited, is the CCP that undertakes the relevant settlement obligations for all members.

4. Principle of Delivery versus Payment (DVP)
Delivery versus Payment (DVP) means that, during the delivery between the settlement institution and the members, assets are paid when and only when funds are delivered, and funds are paid when and only when assets are delivered. Generally speaking, the principle of DVP means that once a member fails to perform the funds delivery obligation to the settlement institution, the settlement institution may not pay the assets to it, and vice versa. As the simultaneous transfer of assets and funds is realized, DVP can effectively avoid the risks brought by the default in delivery and greatly improve the safety in transactions.

5. Principle of graded settlement
The principle of graded settlement is implemented. The settlement institution is responsible for settling the delivery among members, and the members are responsible for handling the settlement with customers.
Some settlement of transaction on exchange can be done by investors via cross-platform on the basis of their own funds. Bidding transactions are done via the transaction channel of products members. Settlement can be done with products members, the exchange and transaction members. Moreover, the settlement account needs to be opened, and the authorization limit must be reserved. The transaction members sign the agreement of custody of securities with customers, and members sign the agreement of cross-system custody of securities with the settlement institution of the exchange and the products members to entrust the products member to manage the securities on their behalf. When the investor holds the securities, the ownership and usufruct of the securities belong to the investor, until the position is closed, after which the fund settlement will be done. When an institution takes care of the global stocks, the voting right is implemented by the entrusted institution during the period. The members of over-the-counter transaction shall complete the fund settlement with the investors on their own. Only the fund settlement is done for the global derivatives, and they cannot be delivered in other places.

6. Principle of following the transaction system and trading hours of the product exchange
Different trading markets in the world have different settlement systems and different settlement intervals. The settlement system of Pacific International Unit Exchange Limited follows that of the product exchange. The settlement may be 1-2 trading day(s) later than the product exchange.