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ETFS Commodity Sec - U.S. Stay Resolution Provisions

RNS Number : 8406B
ETFS Commodity Secs Ltd
11 June 2019
 

ETFS Commodity Securities Limited

LEI: 21380068Q1JSIAN4FO63

11 June 2019

 

ETFS Commodity Securities Limited

Classic and Longer Dated Commodity Securities and
Short and Leveraged Commodity Securities

ETFS Commodity Securities Limited (the "Issuer") gives notice of the following:

U.S. Stay Resolution Provisions

Regulations ("U.S. SRR Provisions") have been adopted by U.S. prudential regulators in respect of certain entities that are part of a banking organisation designated as a global-systemically important banking organisation. The U.S. SRR Provisions apply directly to banking entities (collectively "Covered Entities") that are (1) deemed to be global systemically important U.S. banking organisations ("U.S. GSIBs") or that meet an asset size threshold, (2) certain subsidiaries of a U.S. GSIB and (3) certain U.S. operations of systemically important non-U.S. banking organisations. The U.S. SRR Provisions seek to reduce the potential that the resolution of a Covered Entity will be disorderly and lead to disruptive asset sales and liquidations which prudential regulators are concerned could spark a broad financial crisis. 

The effect of the U.S. SRR Provisions is to eliminate certain contractual rights in certain financial contracts, such as agreements relating to swaps, currency forwards and other derivatives as well as repurchase agreements and securities lending agreements, such that the counterparties to these contracts (a) are subject to a stay for a specified time period during which they will be prevented from closing out a qualified financial contract if the Covered Entity is subject to resolution proceedings and (b) are prohibited from exercising default rights due to a receivership or similar proceeding of an affiliate of the Covered Entity. In some instances the U.S. prudential regulator administering the resolution could transfer the qualified financial contracts to another financial institution that is not in an insolvency proceeding.

Each of the Counterparties has advised the Issuer that it, and its Guarantor, is a Covered Entity and that the Commodity Contracts and Guarantees to which it is a party are qualified financial contracts to which the U.S. SRR Provisions apply.

The U.S. SRR Provisions apply directly to qualified financial contracts that are governed by U.S. law and to U.S. person, but they also require Covered Entities to include in all qualified financial contracts that are not governed by U.S. law (or the law of a State of the U.S.A.) contractual provisions reflecting the requirements of the U.S. SRR Provisions that delay or restrict the rights of counterparties, such as the Issuer, to exercise certain close-out, cross-default and similar rights under certain conditions.

The U.S. SRR Provisions come into force on various dates that commenced in January 2019.

The Facility Agreements are governed by English law and accordingly each of the Counterparties is required to amend its Facility Agreements with the Issuer to include such provisions.  The U.S. SRR Provisions enable compliance either by bilateral agreement or by adherence to a standard ISDA protocol.  The Issuer, with the consent of the Trustee (the Issuer having provided to the Trustee a certificate that in its opinion to do so is necessary or desirable to comply with a statutory or other requirement of law and not materially prejudicial to the rights of Security Holders), intends to adhere to the ISDA® 2018 US Resolution Stay Protocol with effect from 28 June 2019.

Implementation of these requirements may increase credit, close-out and other risks in respect of the Classic and Forward Commodity Securities and the Short and Leveraged Commodity Securities. As no resolution of a Covered Entity has taken place with the U.S. SRR Provisions in effect, it is unclear how they will operate and whether counterparties such as the Issuer will be worse off than they would have been if they had been able to exercise their contractual rights.

Terms used in this announcement and not otherwise defined bear the same meanings as where used in the prospectuses of the Issuer dated 29 May 2019 and 24 May 2019.

For further information, please contact:

Ciaran Hocking

R&H Fund Services (Jersey) Limited

Tel: +44 (0) 1534 825200

Fax: +44 (0) 1534 825335

E-mail address: etfsjersey@rhfsl.com

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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