Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p48
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 127073–130064

the applicable potential credit exposure factor specified in Table A5.2.2 in Annexure 5 to Schedule 1A.
(2) A Market Participant may reduce the premium or credit equivalent amount 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;
(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 where paragraph (1)(c) applies is deducted from the credit equivalent amount before multiplying the amount by 8%; 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 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 the purposes of subrule (2), if the security lodged as collateral is subject to:
(a)        a trading halt, the last market value may be used; or
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
(4) For the purposes of calculating a current credit exposure under subparagraph (1)(c)(i):
(a)        subject to paragraph (b), a calculation of a current credit exposure must be done on a transaction by transaction and Counterparty by Counterparty basis;
(b)       where the Market Participant has more than one transaction of the same type with the same Counterparty, the Market Participant may net the positive and negative current credit exposures on those transactions, provided that:
(i)         the Market Participant has a legally binding and enforceable netting agreement with the Counterparty that covers the relevant transactions; and
(ii)       if, after netting, the current credit exposure to the Counterparty is negative, the Market Participant must calculate the current credit exposure as zero for the purpose of calculating the counterparty risk amount;
(c)        the Market Participant may only net the positive and negative current credit exposures arising from transactions denominated in different currencies, where the netting agreement referred to in subparagraph (b)(i) allows for multi-currency netting;
(d)       mark-to-market valuation means the market