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Repealed by LN. 2013/198 as from 1.1.2014 - page 37 / 94

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Financial Services (Investment and Fiduciary Services)

FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT

FIRMS) REGULATIONS 2007 borrowing shall be included in the first category set out in Table 1 in paragraph 14 for purposes of specific risk, and the debt instrument under whichever column is appropriate for it in the same table.

The Authority may allow the capital requirement for an exchange-traded future to be equal to the margin required by the exchange if it is fully satisfied that it provides an accurate measure of the risk associated with the future and that it is at least equal to the capital requirement for a future that would result from a calculation made using the method set out in this Schedule or applying the internal models method described in Schedule 5. The Authority may also allow the capital requirement for an OTC derivatives contract of the type referred to in this paragraph cleared by a clearing house recognised by it to be equal to the margin required by the clearing house if it is fully satisfied that it provides an accurate measure of the risk associated with the derivatives contract and that it is at least equal to the capital requirement for the contract in question that would result from a calculation made using the method set out in the this Schedule or applying the internal models method described in Schedule 5.

For the purposes of this paragraph, “long position” means a position in which an investment firm has fixed the interest rate it will receive at some time in the future, and “short position” means a position in which it has fixed the interest rate it will pay at some time in the future.

5.

Options

on

financial futures,

interest rates, debt instruments, swaps and foreign currencies shall

equities, equity indices, be treated as if they were

positions equal in the option refers,

value to the amount of multiplied by its delta

the for

underlying instrument to which the purposes of this Schedule.

The

latter

positions

may

be

netted

off

against

any

offsetting

positions

in

the

identical underlying securities the exchange concerned, that

or derivatives. The delta used shall be calculated by the Authority or, where

that

of

that

is

not available or for OTC-options, that calculated itself, subject to the Authority being satisfied that investment firm is reasonable.

by the

the investment firm model used by the

The Authority may also prescribe that investment firms calculate their deltas using a methodology specified by it.

Other risks, apart from the delta risk, associated with options shall be safeguarded against. The Authority may allow the requirement against a written exchange traded option to be equal to the margin required by the exchange if it is fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement against an option that would result from a calculation made using the method set out in the remainder of this Schedule or applying the internal models method described in Schedule 5. The Authority may also

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

1989-47

Repealed Subsidiary 2007/002

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