Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p39
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 103681–106558

agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions specified in the collateral agreement.
(3) For unsettled trades in Financial Instruments which are not margined and not covered by one of the other methods in this Annexure, and for unsettled trades in margined Equities, Debt Instruments and Warrants, the counterparty risk amount for trades remaining unsettled for greater than 10 Business Days following the transaction date is at the choice of the Market Participant:
(a)        either:
(i)         3% of the contract value; or
(ii)       the excess of:
(A)       the contract value over the market value of each Financial Instrument in the case of a client purchase; and
(B)       the market value of each Financial Instrument over the contract value in the case of a client sale,
whichever is the greater; or
(b)       100% of the contract value for a client purchase or 100% of the market value for a client sale.
(4) A Market Participant may reduce the contract values and the excesses by the amount of collateral held by the Market Participant on behalf of the Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction and is not the securities underlying the client purchase;
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark-to-market value and offset on a transaction by transaction basis; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the Counterparty in circumstances where:
(i)         the Market Participant has established that the Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions specified in the collateral agreement.
(5) For the purposes of subrule (2), the Market Participant may:
(a)        adjust the Client Balance with respect to a specific buy transaction, by removing from the Client Balance