• Trade Exposure Of A Client To A Clearing Member

    • PRU A4.9.8

      For the purposes of Rule A4.9.7 above, the following conditions must be met:

      (a) the clearing member's offsetting transaction with a QCCP is identified by the QCCP as a client transaction and collateral to support it is held by the QCCP and/or the clearing member, as applicable, under arrangements that would prevent any losses to the Authorised Person due to: (i) the default or insolvency of the clearing member, (ii) the default or insolvency of the clearing member's other clients; and (iii) the joint default or insolvency of the clearing member and any of its other clients;

       

      (b) the Authorised Person has conducted sufficient legal review (and undertaken such further review as necessary to ensure continuing enforceability) that concludes that, in the event of legal challenge, the relevant courts and administrative authorities would find that the Authorised Person would bear no losses on account of the insolvency of its clearing member or of any of its clearing member's clients under the relevant laws of the relevant jurisdiction(s); and

       

      (c) laws, regulations, rules, contractual or administrative arrangements applicable to or binding the Authorised Person or the QCCP facilitate the transfer of the Authorised Person's position relating to that contract and transaction and of the corresponding collateral to another clearing member within the applicable margin period of risk in the event of default or insolvency of the original clearing member. In such a circumstance, the Authorised Person's position and the collateral must be transferred at market value unless the client requests to close out the position at market value.

       

    • PRU A4.9.7 PRU A4.9.7

      Where an Authorised Person is a client of a clearing member, and enters into a transaction with the clearing member acting as an intermediary between the Authorised Person and a CCP, it must calculate Credit RWA in respect of its Trade Exposure to the clearing member as if it were a Trade Exposure to a QCCP provided all the conditions in Rule A4.9.8 are satisfied.

      • PRU A4.9.9

        Where an Authorised Person is a client of the clearing member and the conditions set out in Rule A4.9.8 are not satisfied, the Authorised Person must capitalise its exposure to the clearing member as a bilateral OTC transaction in accordance with A4.6.14.

      • PRU A4.9.10

        Without prejudice to Rule A4.9.9, where an Authorised Person that is a client is not protected from losses where the clearing member and another client of the clearing member jointly default, but all the other conditions set out in Rule A4.9.8 are met, it must calculate Credit RWA in respect of its exposure to the clearing member in accordance with Rule A4.6.14, except that it must apply a CRW of 4%.