Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p38
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 100968–103946

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 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 an Other Managed Fund.

Part A1.2 Methods

A1.2.1 Overview
There are separate methods for measuring counterparty risk amounts for each of the following transaction types:
Table A1.1: Method for measuring counterparty risk: Transaction type
Transaction Type
Non-margined Financial Instrument – Rule A1.2.2  Free Delivery – Rule A1.2.3                                  Securities Lending and Borrowing – Rule A1.2.4
Margined Financial Instrument – Rule A1.2.5      OTC Derivative or a Warrant held as principal – Rule A1.2.6  Sub Underwritten Position – Rule A1.2.7

A1.2.2 Non-margined Financial Instruments method
(1) 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 is 3% of the Client Balance, where this balance does not include trades which remain unsettled with the Counterparty for greater than 10 Business Days following the transaction date and regardless of whether the Counterparty is issuer or participant sponsored.
(2) A Market Participant may reduce the Client Balance by the amount of Financial Instruments held by the Market Participant on behalf of the Counterparty if they specifically relate to the sale trades pending settlement with the market or by the amount of collateral held by the Market Participant on behalf of the specific 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 Counterparty's 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