Financial Services (Investment and Fiduciary Services)
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT
FIRMS) REGULATIONS 2007 the market value of other (i.e. non-foreign-currency and non- gold) options.
Any positions which an investment firm has deliberately taken in order to hedge against the adverse effect of the exchange rate on its capital ratio may be excluded from the calculation of net open currency positions. Such positions shall be of a non-trading or structural nature and their exclusion, and any variation of the terms of their exclusion, shall require the consent of the competent authorities. The same treatment subject to the same conditions as above may be applied to positions which an investment firm has which relate to items that are already deducted in the calculation of own funds.
For the purposes of the calculation referred to in the first paragraph, in respect of CIUs the actual foreign exchange positions of the CIU shall be taken into account. Investment firms may rely on third party reporting of the foreign exchange positions in the CIU, where the correctness of this report is adequately ensured. If an investment firm is not aware of the foreign exchange positions in a CIU, it shall be assumed that the CIU is invested up to the maximum extent allowed under the CIU’s mandate in foreign
exchange and account of the
investment firms maximum indirect
shall, for trading book positions, take exposure that they could achieve by taking
leveraged positions through the CIU when requirement for foreign exchange risk. This shall
be done by
the position in the CIU up to the maximum exposure to investment items resulting from the investment mandate.
of the CIU
foreign exchange shall be treatment of investments in
treated as a gold, subject
to the modification that, if the the total long position may be
direction added to
of the CIU’s investment is the total long open foreign
position and the foreign exchange positions prior to
total short position may be added to the total short open position. There would be no netting allowed between such the calculation.
The Authority may allow investment firm to use the net present value when calculating the net open position in each currency and in gold.
2.2. Secondly, net short and long positions in each currency other than the reporting currency and the net long or short position in gold shall be converted at spot rates into the reporting currency. They shall then be summed separately to form the total of the net short positions and the total of the net long positions respectively. The higher of these two totals shall be the investment firm’s overall net foreign exchange position.
3. Notwithstanding paragraphs 1 and 2 and pending further coordination, the Authority may prescribe or allow investment firms to use the following procedures for the purposes of this Schedule.
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Repealed Subsidiary 2007/002