(1) If:

(a) the SEGC allows a claim by a person (the ** claimant **) in respect of a
liability of another person (the

(b) the liability of the defaulter to the claimant has been reduced, by
an amount of money or a number of securities (the ** set-off reduction **), because
of:

(i) the exercise by the claimant or the defaulter of a right of set-off, whether under an agreement or otherwise; or

(ii) the operation of an agreement so far as it provides for the automatic set-off of liabilities; and

(c) but for this regulation, the reduction of the defaulter's liability would not be taken into account when working out the obligations of the SEGC in respect of the claim;

this regulation applies for the purposes of working out those obligations.

(2) If:

(a) the SEGC is required to satisfy the claim by paying an amount; and

(b) the set-off reduction consists of an amount;

the amount the SEGC must pay in respect of the claim is reduced by the amount of the set-off reduction.

(3) If:

(a) the SEGC is required to satisfy the claim by paying an amount; and

(b) the set-off reduction consists of a number of securities;

then:

(c) the SEGC must work out the value of the securities; and

(d) the amount the SEGC must pay in respect of the claim is reduced by the value worked out under paragraph (c).

(4) If:

(a) the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

(b) the set-off reduction consists of a number of securities of that kind;

the number of securities that the SEGC must transfer in respect of the claim is reduced by the number mentioned in paragraph (b).

(5) If:

(a) the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

(b) the set-off reduction consists of a number of securities that are not of that kind;

then:

(c) the SEGC must work out:

(i) the value of the securities that constitute the set-off reduction; and

(ii) the number of securities of the kind mentioned in paragraph (a) that are equal in value to the value worked out under subparagraph (i); and

(d) the number of securities that the SEGC is required to transfer in respect of the claim is reduced by the number worked out under subparagraph (c)(ii).

(6) If:

(a) the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

(b) the set-off reduction consists of an amount of money;

then:

(c) the SEGC must work out the number of securities of that kind that are equal in value to that amount; and

(d) the number of securities that the SEGC must transfer in respect of the claim is reduced by the number worked out under paragraph (c).