Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p49
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 129754–132810

(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 value for OTC Derivatives such as Options and Warrants and the mark-to-market gain/loss for OTC Derivatives where payments to/from the parties are based on changes in the price of the underlying product (for example, Swaps, forward foreign exchange); and
(e)        in the case of a Warrant transaction:
(i)         if the Warrant is subject to a trading halt (due to the underlying security being subject to a trading halt), the last market value may be used;
(ii)       if the Warrant is subject to suspension, the Warrant should be treated as an Excluded Asset on the basis that it is not Liquid.
(5) For the purposes of calculating a potential credit exposure under subparagraph (1)(c)(ii):
(a)        a potential credit exposure must be calculated on every transaction, including those transactions with a negative or zero current credit exposure;
(b)       the potential credit exposures must not be netted; and
(c)        in the case of an equity Option or Warrant, the notional face value is the underlying number of shares multiplied by the strike price.
(6) For the purposes of subrule (1), as principal includes where the Market Participant enters into an off-market facilitation role whereby the Market Participant "purchases" the Derivatives contract from client A and "sells" it to client B and neither client A nor B are aware of the identity of the other.
(7) A Market Participant must calculate a counterparty risk amount under this method for transactions in OTC Derivatives and Warrants including, but not limited to, transactions in:
(a)        interest rate Options;
(b)       foreign currency Options;
(c)        single-currency interest rate Swaps;
(d)       cross-currency interest rate Swaps;
(e)        basis Swaps;
(f)        Forward Rate Agreements; and
(g)       forward foreign exchange contracts,
but is not required to calculate a counterparty risk amount under this method for transactions in foreign exchange contracts with an original maturity of 14 calendar days or less.

A1.2.7 Sub Underwritten Positions method
     For a Market Participant that has received a Sub Underwriting Commitment, the counterparty risk amount in respect of the Sub Underwriter:
 1.         from the time the Sub Underwriting Commitment is entered into until the time the Sub Underwriting Commitment becomes unconditional, is the product of:
        1.          the amount sub underwritten by the Sub Underwriter under the Sub Underwriting Commitment, less any part of that amount that has been:
               1.        secured by collateral which is Liquid, evidenced in writing and valued at the mark-to-market value; or
               2.        received from the Sub Underwriter; and
        2.        the sub underwriting risk