Financial Services (Investment and Fiduciary Services)
FINANCIAL SERVICES (CAPITAL ADEQUACY OF INVESTMENT
FIRMS) REGULATIONS 2007 calculated by the investment firm itself, subject to the Authority being satisfied that the model used by the investment firm is reasonable.
However, 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 commodity options shall be safeguarded against.
The Authority may allow the requirement for a written exchange-traded commodity 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 allow the capital requirement for an OTC commodity option 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 option and that it is at least equal to the capital requirement for an OTC 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.
In addition it may allow the requirement on a bought exchange-traded or OTC commodity option to be the same as that for the commodity underlying it, subject to the constraint that the resulting requirement does not exceed the market value of the option. The requirement for a written OTC option shall be set in relation to the commodity underlying it.
11. Warrants relating to commodities shall be treated in the same way as commodity options referred to in paragraph 10.
12. The transferor of commodities or guaranteed rights relating to title to commodities in a repurchase agreement and the lender of commodities in a commodities lending agreement shall include such commodities in the calculation of its capital requirement under this Schedule.
Maturity ladder approach
An investment firm shall use a separate maturity ladder in line with Table
1 for each commodity. All positions in that commodity and all positions which are regarded as positions in the same commodity pursuant to
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Repealed Subsidiary 2007/002