In markets where settlement occurs some time after the contract of sale is executed, there is a risk that one of the parties will default in its settlement obligations. For example, a seller of shares may be unable to deliver the proper documentation transferring title to the shares, or a buyer may be unable to deliver the cash to purchase the shares. This is known as settlement risk.
The Rules provide that settlement must occur on the fifth business day after a transaction is executed. The Rules provide (in effect) that the ACX broker guarantees to a seller the performance of the payment obligations of the buyer and the ACX broker guarantees to a buyer the delivery of the quantity of Emissions commodities purchased. Each ACX broker must have appropriate financial resources and insurance in place to cover its liabilities in this regard