Related provisions for BIPRU 7.2.6

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BIPRU 7.2.1RRP
(1) A firm must calculate its interest rate PRR under BIPRU 7.2 by:(a) identifying which positions must be included within the interest rate PRR calculation;(b) deriving the net position in each debt security in accordance with BIPRU 7.2.36R-BIPRU 7.2.41R;(c) including these net positions in the interest rate PRR calculation for general market risk and the interest rate PRR calculation for specific risk; and(d) summing all PRRs calculated for general market risk and specific risk.(2)
BIPRU 7.2.3RRP
A firm's interest rate PRR calculation must:(1) include all trading bookpositions in debt securities, preference shares and convertibles, except:(a) positions in convertibles which have been included in the firm'sequity PRR calculation;(b) positions fully deducted as a material holding under the calculations under the capital resources table, in which case the firm may exclude them; or(c) positions hedging an option which is being treated under BIPRU 7.6.26R (Table: Appropriate
BIPRU 7.2.5GRP
BIPRU 7.2.3R(1) includes a trading bookposition in debt security, preference share or convertible that is subsequently repo'd under a repurchase agreement or lent under a stock lending agreement. Clearly, if the security had initially been obtained via a reverse repurchase agreement or stock borrowing agreement, the security would not have been included in the PRR calculation in the first place.
BIPRU 7.2.10GRP
BIPRU 7.2.11 R - BIPRU 7.2.35R convert the instruments listed in the table in BIPRU 7.2.4R into notional positions in:(1) the underlying debt security, where the instrument depends on the price (or yield) of a specific debt security; or(2) notional debt securities to capture the pure interest rate risk arising from future payments and receipts of cash (including notional payments and receipts) which, because they are designed to represent pure general market risk (and not specific
BIPRU 7.2.11RRP
(1) For the purposes of calculating interest rate PRR, unless specified otherwise, a firm must derive the value of notional positions as follows:(a) notional positions in actual debt securities must be valued as the nominal amount underlying the contract at the current market price of the debt security; and(b) positions in zero-specific-risk securities must be valued using one of the two methods in (2).(2) A firm must use one of the following two methods for all positions arising
BIPRU 7.2.13RRP
Futures, forwards or synthetic futures on a single debt security must be treated as follows:(1) a purchased future, synthetic future or forward is treated as:(a) a notional long position in the underlying debt security (or the cheapest to deliver (taking into account the conversion factor) where the contract can be satisfied by delivery of one from a range of securities); and(b) a notional short position in a zero coupon zero-specific-risk security with a maturity equal to the
BIPRU 7.2.16RRP
The notional debt securities in BIPRU 7.2.14R are assigned a specific risk position risk adjustment and a general market risk position risk adjustment equal to the highest that would apply to the debt securities in the basket or index.
BIPRU 7.2.17GRP
The debt security with the highest specific risk position risk adjustment within the basket might not be the same as the one with the highest general market risk position risk adjustment. BIPRU 7.2.16R requires a firm to select the highest percentages even where they relate to different debt securities in the basket or index, and regardless of the proportion of those debt securities in the basket or index.
BIPRU 7.2.20GRP
(1) The following example illustrates BIPRU 7.2.18R and BIPRU 7.2.19R in conjunction with BIPRU 7.2.11R (the last rule determines the value of notional positions). A firm sells £1mn notional of a 3v6 FRA at 6%. This results in:(a) a short position in a zero-specific-risk security with a zero coupon, three month maturity, and a nominal amount of £1million; and(b) a long position in a zero-specific-risk security with a zero coupon, six month maturity, and nominal amount of £1,015,000
BIPRU 7.2.22RRP
Table: Interest rate and foreign currency swapsThis table belongs to BIPRU 7.2.21RPaying leg (which must be treated as a short position in a zero-specific-risk security)Receiving leg (which must be treated as a long position in a zero-specific-risk security)Receiving fixed and paying floatingCoupon equals the floating rate and maturity equals the reset dateCoupon equals the fixed rate of the swap and maturity equals the maturity of the swapPaying fixed and receiving floatingCoupon
BIPRU 7.2.25RRP
Table: Deferred start interest rate and foreign currency swapsThis table belongs to BIPRU 7.2.24RPaying leg (which must be treated as a short position in a zero-specific-risk security with a coupon equal to the fixed rate of the swap)Receiving leg (which must be treated as a long position in a zero-specific-risk security with a coupon equal to the fixed rate of the swap)Receiving fixed and paying floatingmaturity equals the start date of the swapmaturity equals the maturity of
BIPRU 7.2.27RRP
A firm must treat a swap with only one interest rate leg as a notional position in a zero-specific-risk security:(1) with a coupon equal to that on the interest rate leg;(2) with a maturity equal to the date that the interest rate will be reset; and(3) which is a long position if the firm is receiving interest payments and short if making interest payments.
BIPRU 7.2.30RRP
The forward cash leg of a repurchase agreement or reverse repurchase agreement must be treated as a notional position in a zero-specific-risk security which:(1) is a short notional position in the case of a repurchase agreement; and a long notional position in the case of a reverse repurchase agreement;(2) has a value equal to the market value of the cash leg;(3) has a maturity equal to that of the repurchase agreement or reverse repurchase agreement; and(4) has a coupon equal
BIPRU 7.2.31RRP
A cash borrowing or deposit must be treated as a notional position in a zero coupon zero-specific-risk security which:(1) is a short position in the case of a borrowing and a long position in the case of a deposit;(2) has a value equal to the market value of the borrowing or deposit;(3) has a maturity equal to that of the borrowing or deposit, or the next date the interest rate is reset (if earlier); and(4) has a coupon equal to:(a) zero, if the next interest payment date coincides
BIPRU 7.2.32RRP
(1) Where included in the PRR calculation in BIPRU 7.2 (see the table in BIPRU 7.2.4R), options and warrants must be treated in accordance with this rule.(2) An option or warrant on a debt security, a basket of debt securities or a debt security index must be treated as a position in that debt security, basket or index.(3) An option on an interest rate must be treated as a position in a zero coupon zero-specific-risk security with a maturity equal to the sum of the time to expiry
BIPRU 7.2.33RRP
Where a debt security pays coupons in one currency, but will be redeemed in a different currency, it must be treated as:(1) a debt security denominated in the coupon's currency; and(2) a foreign currencyforward to capture the fact that the debt security's principal will be repaid in a different currency from that in which it pays coupons, specifically:(a) a notional forward sale of the coupon currency and purchase of the redemption currency, in the case of a long position in the
BIPRU 7.2.34RRP
Other futures, forwards, options and swaps treated under BIPRU 7.2 must be treated as positions in zero-specific-risk securities, each of which:(1) has a zero coupon;(2) has a maturity equal to that of the relevant contract; and(3) is long or short according to the table in BIPRU 7.2.35R.
BIPRU 7.2.36RRP
The net position in a debt security is the difference between the value of the firm's long positions (including notional positions) and the value of its short positions (including notional positions) in the same debt security.
BIPRU 7.2.37RRP
(1) A firm must not net positions (including notional positions) unless those positions are in the same debt security. This rule sets out the circumstances in which debt securities may be treated as the same for these purposes.(2) Subject to (3) long and short positions are in the same debt security, and a debt security is the same as another if and only if:(a) they enjoy the same rights in all respects; and(b) are fungible with each other.(3) Long and short positions in different
BIPRU 7.2.38RRP
A firm may net a short notional position in the cheapest to deliver security arising from a short future or forward (see BIPRU 7.2.13R(2)(a)) under which the seller has a choice of which debt security it may use to settle its obligations against a long position in any deliverable security up to a maximum of 90% of the common nominal amounts. The residual long and short nominal amounts must be treated as separate long and short positions.
BIPRU 7.2.40RRP
A firm may net a notional long position in a zero-specific-risk security against a notional short position in a zero-specific-risk security if:(1) they are denominated in the same currency;(2) their coupons do not differ by more than 15 basis points; and(3) they mature:(a) on the same day, if they have residual maturities of less than one month;(b) within 7 days of each other, if they have residual maturities of between one month and one year; and(c) within 30 days of each other,
BIPRU 7.2.41RRP
A firm must not net a reduced net underwriting position in a debt security with any other debt securityposition.
BIPRU 7.2.43RRP
(1) A firm must calculate the specific risk portion of the interest rate PRR for each debt security by multiplying the market value of the individual net position (ignoring the sign) by the appropriate position risk adjustment from the table in BIPRU 7.2.44R or as specified by BIPRU 7.2.45R - BIPRU 7.2.48L R or by BIPRU 7.11.13 R - BIPRU 7.11.17 R.33(2) Notional positions in zero-specific-risk securities do not attract specific risk.(3) For the purpose of (1), a firm may cap the
BIPRU 7.2.44RRP
Table: specific risk position risk adjustmentsThis table belongs to BIPRU 7.2.43R.IssuerResidual maturityPosition risk adjustmentDebt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or EEA States' regional governments or local authorities which would qualify for credit quality step 1 or which would receive a 0% risk weight under the standardised approach to credit risk.Any0%(A) Debt securities
BIPRU 7.2.46RRP
A debt security issued by a non-qualifying issuer must receive a specific risk position risk adjustment of 8% or 12% according to the table in BIPRU 7.2.44R. However a firm must apply a higher specific risk position risk adjustment to such a debt security and/or not recognise offsetting for the purposes of defining the extent of general market risk between such a security and any other debt securities to the extent that doing otherwise would not be a prudent treatment of specific
BIPRU 7.2.46AGRP
3BIPRU 7.2.43 R includes both actual and notional positions. However, notional positions in a zero-specific-risk security do not attract specific risk. For example:(1) interest-rate swaps, foreign-currency swaps, FRAs, interest-rate futures, foreign-currencyforwards, foreign-currencyfutures, and the cash leg of repurchase agreements and reverse repurchase agreements create notional positions which will not attract specific risk; while(2) futures, forwards and swaps which are based
BIPRU 7.6.8RRP
Table: Appropriate position risk adjustmentThis table belongs to BIPRU 7.6.7RUnderlying positionAppropriate position risk adjustmentEquityThe position risk adjustment applicable to the underlying equity or equity index in the table in BIPRU 7.3.30R (Simplified equity method)Interest rateThe sum of the specific risk position risk adjustment (see BIPRU 7.2.43R to BIPRU 7.2.51G (Specific risk calculation)) and the general market risk position risk adjustment (as set out in BIPRU
BIPRU 7.6.13RRP
Table: Derived positionsThis table belongs to BIPRU 7.6.9RUnderlyingOption (or warrant)Derived positionEquityOption (warrant) on a single equity or option on a future/forward on a single equityA notional position in the actual equity underlying the contract valued at the current market price of the equity.Option (warrant) on a basket of equities or option on a future/forward on a basket of equitiesA notional position in the actual equities underlying the contract valued at the
BIPRU 7.6.24RRP
Under the option hedging method a firm must calculate the option PRR for individual positions as follows:(1) for an option or warrant on an equity, basket of equities or equity index and its equity hedge(s), the firm must, to the extent specified or permitted in the table in BIPRU 7.6.26R, use the calculation in the table in BIPRU 7.6.27R;(2) for an option or warrant on a debt security, basket of debt securities or debt security index and its debt security hedge(s), the firm must,
BIPRU 7.6.26RRP
Table: Appropriate treatment for equities, debt securities or currencies hedging optionsThis table belongs to BIPRU 7.6.24RHedgePRR calculation for the hedgeLimits (if hedging method is used)Naked positionAn equity (hedging an option or warrant)The equity must be treated in either BIPRU 7.3 (equity PRR) or the option hedging method (see the table in BIPRU 7.6.27R)The option hedging method must only be used up to the amount of the hedge that matches the notional amount underlying
BIPRU 7.6.27RRP
Table: The hedging method of calculating the PRR (equities, debt securities and gold)This table belongs to BIPRU 7.6.24R(1) - (3)PRROption or warrantpositionIn the money by more than the position risk adjustmentIn the money by less than the position risk adjustmentOut of the money or at the moneyLong in security or goldLong putZeroWpXShort callYYZShort in security or goldLong callZeroWcXShort putYYZWhere:Wp means{(position risk adjustment-100%) x The underlying position valued
BIPRU 7.3.14RRP
A future (including a synthetic future), forward or CFD on a single equity must be treated as a notional position in that equity.
BIPRU 7.3.17GRP
An example of BIPRU 7.3.16R is as follows. A firm decides to treat a FTSE Eurotop 300 future under the standard equity method, and furthermore, chooses to treat it as one notional position. The table in BIPRU 7.3.16R requires that this notional position be treated as if it were from a separate notional country rather than any of the countries to which the underlying equities are from.
BIPRU 7.11.5RRP
A credit default swap does not create a position for general market risk. For the purposes of specific risk, a firm must record a synthetic long position in an obligation of the reference entity, unless the derivative is rated externally and meets the conditions for a qualifying debt security, in which case a long position in the derivative is recorded. If premium or interest payments are due under the product, these cash flows must be represented as notional positions in zero-specific-risk
BIPRU 7.11.6RRP
A single name credit linked note creates a long position in the general market risk of the note itself, as an interest rate product. For the purpose of specific risk, a synthetic long position is created in an obligation of the reference entity. An additional long position is created in the issuer of the note. Where the credit linked note has an external rating and meets the conditions for a qualifying debt security, a single long position with the specific risk of the note need
BIPRU 7.11.8RRP
Where a multiple name credit linked note has an external rating and meets the conditions for a qualifying debt security, a single long position with the specific risk of the note need only be recorded.
BIPRU 7.11.62GRP
BIPRU 7.11.5 R requires a firm to recognise any premiums payable or receivable under the contract as notional zero-specific-risk securities. These positions are then entered into the general market risk framework. As premium payments paid under such contracts are contingent on no credit event occurring, a credit event could significantly change the general market risk capital requirement. A firm should consider, under the overall Pillar 2 rule, whether this risk means that the
BIPRU 7.8.27RRP
To calculate the reduced net underwriting position a firm must apply the reduction factors in the table in BIPRU 7.8.28R to the net underwriting position (calculated under BIPRU 7.8.17R) as follows:(1) in respect of debt securities, a firm must calculate two reduced net underwriting positions; one for inclusion in the firm'sinterest rate PRRspecific risk calculation (BIPRU 7.2.43R), the other for inclusion in its interest rate PRRgeneral market risk calculation (BIPRU 7.2.52R);
BIPRU 7.8.28RRP
Table: Net underwriting position reduction factorsThis table belongs to BIPRU 7.8.27RUnderwriting timelineDebtEquityGeneral market riskSpecific riskTime of initial commitment until working day 00%100%90%Working day 10%90%90%Working day 20%75%75%Working day 30%75%75%Working day 40%50%50%Working day 50%25%25%Working day 6 and onwards0%0%0%
BIPRU 1.2.18RRP
In order to calculate the proportion that trading book business bears to total business for the purpose of BIPRU 1.2.17 R (1)(a) to BIPRU 1.2.17R (1)(c) the firm must refer to the size of the combined on- and off-balance-sheet business. For this purpose, debt instruments must be valued at their market prices or their principal values, equities at their market prices and derivatives according to the nominal or market values of the instruments underlying them. Long positions and
PR App 3.1.1EURP
1The following schedules and building blocks and tables of combinations are copied from the PD Regulation:6[Note: See transitional provisions in Regulation (EU) No 862/2012 and Regulation (EU) No 759/20137]ANNEX IMinimum Disclosure Requirements for the Share Registration Document (schedule)71.PERSONS RESPONSIBLE1.1.All persons responsible for the information given in the Registration Document and, as the case may be, for certain parts of it, with, in the latter case, an indication