Document ID: chunk:federal_register_of_legislation:F2022C00868:reg:3:p1
Version: federal_register_of_legislation:F2022C00868
Segment Type: reg
Provision Reference: reg 3 (pt 1/3)
Character Range: 128417–131737

3     > 5 years               1.5%                     7.5%                              10%                          10%                                          15%

 (3) In the case of credit default swaps where the passport fund is entitled to payments unaffected by a credit event of the person liable under the underlying, the relevant percentage is 0% unless the credit default swap contract incorporates a provision on closeout upon insolvency of the counterparty in which case the amount to be added for the purposes of paragraph (1)(b) is 10% of any unpaid amount that may become payable to the passport fund at the time of the calculation that is not covered by collateral at fair value.

Appendix B

 (1) The value of a derivative is:
 (a) if the derivative is listed in the table below—as specified in the table; and
 (b) if the derivative is not listed in the table below or if a value specified in the table does not give a reasonable relative estimation of the market risk—the value which in the reasonable opinion of the operator has appropriate relativity to the values of other derivatives calculated in accordance with paragraph (a) above, taking into account the market value of the equivalent position in the underlying asset.
Example: A value calculated in accordance with the table may not give a reasonable relative estimation of the risks for certain binary options or whether the notional contract value is determined in an un‑assumed manner.
 (2) The operator may demonstrate compliance with a requirement of the Passport Rules, for the home economy or any host economy for the passport fund, affected by a value of a derivative by using instead of the value under subsection (1) above, a value for a derivative calculated by reference to the notional value of the derivative where the amount is higher.
 (3) If the value of a derivative is calculated in accordance with paragraph (1)(b), the operator must:
 (a) document why the value is appropriate; and
 (b) keep a copy of that documentation for 5 years after the derivative has been terminated.

Types of derivatives                                          Commitment value
Plain vanilla options (including bought/sold puts and calls)
Bond option                                                   Notional contract value x market value of underlying reference bond x delta
Currency option                                               Notional contract value of foreign currency leg(s) x delta
Equity option                                                 Notional contract size x market value of underlying equity share if the contract size is determined by the number of underlying shares x delta
                                                              Notional contract value x index level x delta
Index option                                                  or
                                                              Point value x index level x delta, if appropriate
Interest rate option                                          Notional contract value x delta
Warrant and Rights                                            Number of shares/bonds x market value of underlying referenced instrument x delta
Futures
Bond future                                                   Notional contract size x market price of the