BIPRU 14.3 Unsettled transactions

Scope

BIPRU 14.3.1R

BIPRU 14.3 applies in respect of items in the trading book and the non-trading book.

BIPRU 14.3.2G

The capital requirement for unsettled transactions is an element of the counterparty risk capital component set out in BIPRU 14.2.1 R.

Calculation

BIPRU 14.3.3R

In the case of transactions in which debt instruments, equities, foreign currencies and commodities (excluding repurchase agreements and reverse repurchase agreements and securities or commodities lending and securities or commodities borrowing) are unsettled after their due delivery dates, a firm must calculate the price difference to which it is exposed, being the difference between the agreed settlement price for the debt instrument, equity, foreign currency or commodity in question and its current market value, where the difference could involve a loss for the firm.

[Note: CAD Annex II point 1 (part)]

BIPRU 14.3.4R

A firm must multiply the price difference calculated under BIPRU 14.3.3 R1 by the appropriate factor in column A of the Table in BIPRU 14.3.4 R in order to calculate its capital requirement for the purposes of BIPRU 14.3.

[Note: CAD Annex II point 1 (part)]

Table: Factors for the multiplication of price differences

BIPRU 14.3.5R

This table belongs to BIPRU 14.3.4 R

Number of working days after due settlement date

Column A (%)

5 - 15

8

16 - 30

50

31 - 45

75

46 or more

100

[Note: CAD Annex II Table 1]

BIPRU 14.3.5G

In cases of a system wide failure of a settlement or clearing system, a firm should refer to the emergency provisions in GEN 1.3. Where the requirements of GEN 1.3.2 R are met, until the situation is rectified failure of a counterparty to settle a trade will not be deemed a default for purposes of credit risk.

[Note: CAD Annex II point 4]