Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

Article 17 (Article 11(14)(b) of Regulation (EU) No 648/2012)Criteria for using marking-to-model

For using marking-to-model, financial and non-financial counterparties shall have a model that:

  1. (a)

    incorporates all factors that counterparties would consider in setting a price, including using as much as possible marking-to-market information;

  2. (b)

    is consistent with accepted economic methodologies for pricing financial instruments;

  3. (c)

    is calibrated and tested for validity using prices from any observable current market transactions in the same financial instrument or based on any available observable market data;

  4. (d)

    is validated and monitored independently, by another division than the division taking the risk;

  5. (e)

    is duly documented and approved by the board of directors as frequently as necessary, following any material change and at least annually. This approval may be delegated to a committee.