Document ID: chunk:federal_register_of_legislation:F2024C00507:body:0:p26
Version: federal_register_of_legislation:F2024C00507
Segment Type: other
Provision Reference: 
Character Range: 71274–74538

Any potential credit exposure that a central counterparty could face at a future point in time. Potential future exposure is technically defined as the maximum exposure estimated to occur at a future point in time at a high level of statistical confidence. Potential future exposure arises from potential fluctuations in the market value of a participant's open positions between the time they are incurred or reset to the current market price, and the time they are liquidated or effectively hedged.
principal risk                         The risk that a counterparty will lose the full value involved in a transaction, for example, the risk that a seller of a financial asset will irrevocably deliver the asset but not receive payment.
procyclicality                         Changes in risk management requirements or practices that are positively correlated with business or credit cycle fluctuations and that may cause or exacerbate financial instability.
real-time gross settlement (RTGS)      The real-time settlement of payments, transfer instructions or other obligations individually on a transaction-by-transaction basis.
related body                           A 'related body corporate' as defined in section 9 of the Corporations Act.
replacement cost                       The unrealised gain on the unsettled contract or the cost of replacing the original contract at market prices that may be changing rapidly during periods of stress.
repurchase agreement (repo)            A contract to sell and subsequently repurchase securities at a specified date and price.
securities                             Any financial product (within the meaning given in the Corporations Act) of a kind in relation to which obligations are prescribed under the Corporations Regulations 2001 for the purposes of section 768A(1)(b) of the Corporations Act.
securities settlement facility         A clearing and settlement facility that enables its participants to transfer title to or other interests in securities, typically in return for payment. A securities settlement facility may also operate a central securities depository.
segregation                            A method of protecting customer collateral and contractual positions by holding or accounting for them separately from those of the direct participant (such as a carrying firm or broker).
settlement bank                        The entity that maintains accounts with the money settlement agent in order to settle payment obligations arising from securities transfers, or other clearing and settlement activities, both on its own behalf and for other market participants.
settlement risk                        The general term used to designate the risk that settlement in a funds or securities transfer system will not take place as expected. This risk may comprise both credit and liquidity risk.
stress testing                         The estimation of credit and liquidity exposures that would result from the realisation of extreme price changes.
systemic risk                          The risk that the inability of one or more participants to perform as expected will cause other participants to be unable to meet their obligations when due.
systemically important                 A central