CHAPTER III

SECURITIES EXCHANGES,
CLEARING GUARANTEE INSTITUTIONS
AND CENTRAL SECURITIES DEPOSITORY

Section One
Securities Exchanges

Paragraph 1
Licensing

Article 6

(1)Only a Company that has been granted a business license by BAPEPAM may carry on business as a Securities Exchange.

(2)Requirements and procedures for the licensing referred to in item (1) with respect to Securities Exchanges shall be determined in Government Regulations.

Paragraph 2
Purpose and Ownership

Article 7

(1)Securities Exchanges shall be founded for the purpose of organizing an orderly, fair and efficient trading market for Securities.

(2)To achieve the purposes mentioned in item (1), a Securities Exchange must supervise Members’ activities and provide them with facilities.

(3)A Securities Exchange must submit an annual budget and profit-utilization plan to BAPEPAM according to BAPEPAM rules

Article 8

Only Securities Companies that are licensed as Broker-Dealers may be shareholders of a Securities Exchange.

Paragraph 3
Securities Exchange Rules and Inspection Units

Article 9

(1)A Securities Exchange must make rules on Membership, listing, fungibility of Securities, clearing and settlement of Exchange Transactions, and related Exchange matters.

(2)Securities Exchanges shall determine the procedures for transferring Securities in connection with Exchange Transactions.

(3)Securities Exchanges may set listing fees, Membership dues, Transaction fees, and service charges.

(4)Fees and dues referred to in item (3) shall be in accordance with functional needs of the Securities Exchange.

Article 10

A Securities Exchange may not restrain beneficial competition nor restrict its Members from joining other Securities Exchanges.

Article 11

Securities Exchange rules and rule changes become effective when approved by BAPEPAM.

Article 12

(1)A Securities Exchange must have an inspection unit that is responsible for periodic and surprise inspections of the Exchange and its Members.

(2)The supervisor of the inspection unit shall report directly to the boards of directors and commissioners of the Securities Exchange, and to BAPEPAM, whenever matters are discovered that could materially affect a Member or the Exchange.

(3)Securities Exchanges must make inspection reports available to BAPEPAM on request.

Section Two
Clearing Guarantee Institutions, and The Central Securities Depository

Paragraph 1
Licensing

Article 13

(1)Only a Company that is licensed by BAPEPAM may act as a Clearing Guarantee Institution or a Central Securities Depository.

(2)Procedures and requirements for the licensing referred to in item (1) with respect to a Clearing Guarantee Institution and a Central Securities Depository shall be stipulated in Government Regulations.

Paragraph 2
Purpose and Ownership

Article 14

(1)A Clearing Guarantee Institution is established for the purpose of providing clearing services that are orderly, fair and efficient and of guaranteeing settlement of Exchange Transactions.

(2)A Central Securities Depository is established for the purpose of providing central Custodian services and orderly, fair and efficient services relating to the settlement of Transactions.

(3)Clearing Guarantee Institutions and Central Securities Depository may provide other services in accordance with BAPEPAM rules.

(4)A Clearing Guarantee Institution as well as a Central Securities Depository must submit an annual budget and profit-utilization plan to BAPEPAM in accordance with BAPEPAM regulations.

Article 15

(1)Securities Exchanges, Securities Companies, Securities Administration Agencies, Custodian banks or others approved by BAPEPAM, may be shareholders of a Clearing Guarantee Institution and a Central Securities Depository.

(2)The majority of the shares of a Clearing Guarantee Institution must be owned by a Securities Exchange.

Paragraph 3
Rules of Clearing Guarantee Institutions and The Central Securities Depository

Article 16

(1)A Clearing Guarantee Institution must make rules on clearing and on the guaranteed settlement of Exchange Transactions, and its service charges.

(2)A Central Securities Depository must make rules on central Custodian services and Securities Transaction settlement services, and its service charges.

(3)The charges mentioned in items (1) and (2) shall be compatible with the functional requirements of the Clearing Guarantee Institution and the Central Securities Depository.

Article 17

Rules of a Clearing Guarantee Institution or a Central Securities Depository, and amendments thereof, become effective when approved by BAPEPAM.

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