Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p37
Version: federal_register_of_legislation:F2024C01107
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Character Range: 98362–101215

that an updated projection would differ materially from the current projection; and
(g)       document a contingency funding plan, procedures for managing liquidity risks, and procedures for the escalation of liquidity issues.

Annexure 1 to Schedule 1A: Counterparty Risk Requirement

Part A1.1 Counterparty Risk Requirement

A1.1.1 Nature of counterparty risk amount

(1) For each type of counterparty risk that gives rise to a Positive Credit Exposure, a counterparty risk amount:
(a)        must be calculated in accordance with the methods set out in this Annexure 1; and
(b)       may be reduced by a counterparty risk weighting in accordance with Rule A1.2.8.

(2) For the purposes of subrule A1.2.2(1), a Positive Credit Exposure exists on a Client Balance regardless of whether the Client Balance is positive or negative.

A1.1.1A Treatment: Classical ETFs

(1) Subject to subrule (2), a Market Participant is not required to calculate a counterparty risk amount under this Annexure in relation to a subscription for or redemption of a unit in a Classical ETF.

(2) In the event of default in the settlement of a primary market transaction in Classical ETFs:
(a)        in the case of a subscription for Classical ETF units, where the Market Participant transfers underlying securities and does not receive the corresponding Classical ETF units or some other cash consideration; or
(b)       in the case of a redemption, where the Market Participant transfers Classical ETF units and does not receive the corresponding underlying securities, or some other cash consideration,

a counterparty risk amount must be calculated under the Free Delivery method from the time those assets or cash were due to be settled.

(3) A Market Participant is required to calculate a counterparty risk amount under this Annexure for all secondary market transactions in Classical ETF units.

A1.1.1B Treatment: Hybrid ETFs

(1) Subject to subrule (2), a Market Participant is not required to calculate a counterparty risk amount under this Annexure in relation to a subscription for or redemption of a unit in a Hybrid ETF.

(2) In the event of a default in the settlement of a primary market transaction in Hybrid ETFs:
(a)        in the case of a subscription for Hybrid ETF units, where the Market Participant transfers cash and does not receive the corresponding Hybrid ETF units; or
(b)       in the case of a redemption, where the Market Participant transfers Hybrid ETF units and does not receive the corresponding cash,
a counterparty risk amount must be calculated under the Free Delivery method from the time those assets or cash were due to be settled.
(3) A Market Participant is required to calculate a counterparty risk amount under this Annexure for all secondary market transactions in Hybrid ETF units.

A1.1.1C Treatment: Other Managed Funds
A