Each of the following is a financial derivative instrument:
an interest-rate contract, being:
a single-currency interest rate swap;
a forward rate agreement;
an interest-rate future;
a purchased interest-rate option; and
other contracts of similar nature.
a foreign currency contract or contract concerning gold, being:
a contract of a nature similar to those in 1(a) to (e) and 2(a) to (d) concerning other reference items or indices, including as a minimum all instruments specified in points 4 to 7, 9 and 10 of Section C of Annex I to the MIFID not otherwise included in (1) or (2).
[Note: BCD Annex IV]
Long settlement transaction means a transaction where a counterparty undertakes to deliver a security, a commodity, or a foreign currency amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for this particular transaction and five business days after the date on which the firm enters into the transaction.
[Note: BCD Annex III Part 1 point 3]
A firm may determine exposures arising from long settlement transactions using any of the CCR mark to market method, the CCR standardised method and the CCR internal model method, regardless of the methods chosen for treating financial derivatives instruments and repurchase transactions, securities or commodities lending or borrowing transactions, and margin lending transactions. In calculating capital requirements for long settlement transactions, a firm that uses the IRB approach may apply the risk weights under the standardised approach on a permanent basis and irrespective of the materiality of such positions.
[Note: BCD Annex III Part 2 point 7]
A firm is not required to calculate the exposure value of a transaction as a long settlement transaction for the purposes of BIPRU 13 if the transaction is a financial derivative instrument or a securities financing transaction and the firm chooses to calculate the capital requirement for the transaction according to the methods applicable to those exposures.
Under the CCR mark to market method, the CCR standardised method and the CCR internal model method, a firm must determine the exposure value for a given counterparty as equal to the sum of the exposure values calculated for each netting set with that counterparty.
[Note: BCD Annex III Part 2 point 5]
The combined use of the CCR mark to market method, the CCR standardised method and the CCR internal model method is not permitted. The combined use of the CCR mark to market method and the CCR standardised method is permitted where one of the methods is used for the cases set out in BIPRU 13.5.9 R to BIPRU 13.5.10 R.
[Note: BCD Annex III Part 2 point 1(part)]
Notwithstanding BIPRU 13.3.1 R and BIPRU 13.3.5 R, a firm may determine the exposure value of a credit risk exposure outstanding with a central counterparty in accordance with BIPRU 13.3.13 R, provided that the central counterparty's counterparty credit risk exposure with all participants in its arrangements are fully collateralised on a daily basis.
A firm may attribute an exposure value of zero for CCR to derivative contracts and long settlement transactions, or to other exposures arising in respect of those contracts or transactions (but excluding an exposure arising from collateral held to mitigate losses in the event of the default of other participants in the central counterparty's arrangements) where they are outstanding with a central counterparty and have not been rejected by the central counterparty.
[Note: BCD Annex III Part 2 point 3 (part)]1
1However, a firm may choose consistently to include for the purposes of calculating capital requirements for counterparty credit risk all credit derivatives not included in the trading book and purchased as protection against a non-trading exposure or against a CCR exposure where the credit protection is recognised under the BCD.
[Note: BCD Annex III Part 2 point 3 (part)]