Document ID: chunk:federal_register_of_legislation:F2022L01578:front:0:p10
Version: federal_register_of_legislation:F2022L01578
Segment Type: other
Provision Reference: 
Character Range: 25783–28816

the posting and collection of initial margin must provide for initial margin to be held in a manner that satisfies this requirement.
29.         Initial margin collected must be segregated from the collector's proprietary assets. The initial margin collector must also segregate initial margin provided in respect of one or more counterparties from the assets of other parties if requested by the relevant counterparty or counterparties.

Minimum transfer amount
30.         The combined variation margin and initial margin amount required to be posted or collected under this Prudential Standard must be subject to a de minimis minimum transfer amount that must not exceed AUD 750,000.

Due diligence
31.         An APRA covered entity must undertake a reasonable level of due diligence to assess:
(a)          whether a counterparty is a covered counterparty; and if so
(b)          whether, for variation margin requirements, the covered counterparty belongs to a margining group whose aggregate month-end average notional amount of non-centrally cleared derivatives for the relevant reference period in the first column of Table 1 exceeded the corresponding qualifying level in the second column of Table 1; and
(c)          whether, for initial margin requirements, the covered counterparty belongs to a margining group whose aggregate month-end average notional amount of non-centrally cleared derivatives for the relevant reference period in the first column of Table 2 exceeded the corresponding qualifying level in the second column of Table 2.
A self-declaration or public disclosure from a counterparty is an acceptable way to verify that the counterparty is a covered counterparty whose non-centrally cleared derivatives activity exceeded the applicable variation margin and initial margin qualifying levels. Where an APRA covered entity is of the preliminary view that a counterparty is not a covered counterparty or did not exceed the applicable qualifying levels, the APRA covered entity is required to undertake a reasonable level of due diligence to ensure that there is no reason to believe otherwise.

Calculation of initial margin for non-centrally cleared derivatives
32.         The required amount of initial margin posted and collected must be calculated by either a model approach approved by APRA or the standardised schedule set out in Attachment A to this Prudential Standard.
33.         Derivative transactions for which an APRA covered entity faces no counterparty risk require no initial margin to be collected and may be excluded from the initial margin calculation under both a model approach and the standardised schedule.
34.         The calculation of initial margin for cross-currency swaps differs depending on whether a model approach or the standardised schedule is adopted:
(a)          If a model approach is adopted, then the model does not need to incorporate the risk associated with the fixed physically settled FX transactions associated with the exchange of principal. All other risks