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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.

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Article 17 Diversification, hedging and risk offsets across underlying classes

  1. (1)

    Initial margin models shall only include non-centrally cleared OTC derivative contracts within the same netting set. Initial margin models may provide for diversification, hedging and risk offsets arising from the risks of the contracts within the same netting set, provided that the diversification, hedging or risk offset is only carried out within the same underlying asset class as referred to in paragraph 2.

  2. (2)

    For the purposes of paragraph 1, diversification, hedging and risk offsets may only be carried out within the following underlying asset classes:

    1. (a)

      interest rates, currency and inflation;

    2. (b)

      equity;

    3. (c)

      credit;

    4. (d)

      commodities and gold;

    5. (e)

      other.