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Repealed by LN. 2013/198 as from 1.1.2014 - page 36 / 94

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1989-47

Financial Services (Investment and Fiduciary Services)

Repealed Subsidiary 2007/002

FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT FIRMS) REGULATIONS 2007 SCHEDULE 1

Regulations 9, 10, 14, 15, 22, 24 and 25

Calculating Capital Requirements for Position Risk

GENERAL PROVISIONS

Netting.

1. The excess of an investment firm’s long (short) positions over its short (long) positions in the same equity, debt and convertible issues and identical financial futures, options, warrants and covered warrants shall be its net position in each of those different instruments. In calculating the net position the Authority shall allow positions in derivative instruments to be treated, as laid down in paragraphs 4 to 7, as positions in the underlying (or notional) security or securities. Investment firms’ holdings of their own debt instruments shall be disregarded in calculating specific risk under paragraph 14.

2.

No netting shall be allowed between a convertible and an offsetting

position in the instrument underlying it, approach under which the likelihood of converted is taken into account or have a loss which conversion might entail.

unless the Authority adopts an a particular convertible’s being capital requirement to cover any

3. All net positions, irrespective of their signs, shall be converted on a daily basis into sterling at the prevailing spot exchange rate before their aggregation.

Particular instruments.

4.

Interest rate futures, forward rate agreements (“FRA”)

commitments

to

buy

or

sell

debt

instruments

shall

be

treated

as

and forward combinations

of long treated futures

and short positions. Thus a long interest rate futures position shall be as a combination of a borrowing maturing on the delivery date of the contract and a holding of an asset with maturity date equal to that of

the instrument or question. Similarly

notional position a sold FRA shall

underlying the be treated as a

futures contract in long position with a

maturity date equal to the settlement date plus the contract short position with maturity equal to the settlement date. Both and the asset holding shall be included in the first category set

period, and a the borrowing out in Table 1

the capital

required against

A forward

commitment to

specific risk buy a debt

to calculate and FRAs.

in paragraph 14 for interest rate

in order futures

instrument shall be treated as a combination delivery date and a long (spot) position in

of a the

borrowing maturing on the debt instrument itself. The

© Government of Gibraltar (www.gibraltarlaws.gov.gi)

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