HL Deb 13 November 1989 vol 512 cc1116-8

307 Clause 160, page 153, line 39, leave out from 'paragraph' to 'insert' in line 40 and insert '5'.

308 Page 153, leave out lines 41 to 43 and insert —

'Supplementary

6. —(1) The provisions of this Schedule relate to an exchange only so far as it provides facilities for the carrying on of investment business; and nothing in this Schedule shall be construed as requiring an exchange to limit dealings on the exchange to dealings in investments.'.

309 Page 153, line 44, leave out 'paragraph 2(4) above' and insert 'this Schedule'.

310 Page 153, line 47, after 'procedures', insert '(including default procedures)'.

311 Page 153, line 48, leave out from 'exchange' to end of line 2 on page 154.

312 Page 154, line 3, at end insert— '(3) In section 207(1) of the Financial Services Act 1986 (interpretation), at the appropriate place insert — 'ensure' and 'ensuring', in relation to the performance of transactions on an investment exchange, have the meaning given in paragraph 6 of Schedule 4 to this Act;".

Lord Strathclyde

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 307. In moving this Motion I shall also move, with permission, agreement to Amendments Nos. 308 to 312 inclusive.

These various amendments to Clause 160 clarify two points of uncertainty which have been identified in this provision. The first occurs in what had previously been intended to be sub-paragraph 2A(1) of Schedule 4 to the Financial Services Act. That provision had been introduced to make it clear that the requirement in the Schedule 4 recognition criteria that an exchange should restrict dealing to investments in which there was a proper market should not mean that the exchange could not permit dealings in things other than investments (for instance physical commodities as opposed to futures, since only the latter are investments within the meaning of the Act). However, that in turn begs the question of whether the requirements of Schedule 4 should apply to these non-investments. Our view is that they should not —the Financial Services Act is only concerned with investments.

Amendment No. 308 puts that point beyond doubt while at the same time tidying up the position of this provision in Schedule 4. Amendments Nos. 307 and 309 are consequential on that tidying up.

The second point of uncertainty was highlighted in Committee by the noble Lord, Lord Lloyd of Kilgerran. I am sorry that he is not in the Chamber to hear my words. He suggested that, as it stands, new paragraph 2A(2)(b) can be read as requiring a recognised exchange to have procedures to deal with all the possible consequences of a default and that this was an impossible requirement. As it was pointed out in offering to consider this point, there may be circumstances where we would want an exchange to concern itself with the consequences of so-called back-to-back transactions whereby the deal between the exchange member and the ordinary investor is not strictly speaking "on exchange". However, having considered the matter further we concluded that the wording of paragraph 2A(2)(b) was not ideal and that the question of back-to-back contracts was more appropriately dealt with in the context of Part VII itself. Amendment No. 311 therefore removes this sub-paragraph.

Amendment No. 310 is consequential to ensure that an exchange's procedures for settlement of on-exchange transactions include default procedures. Amendment No. 312 introduces a cross-reference to the new definitions inserted by this clause into the relevant definitions section in the Financial Services Act. I beg to move.

Moved, That the House do agree with the Commons in the said amendments. —(Lord Strathclyde.)

On Question, Motion agreed to.