Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p40
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 106293–109097

collateral in accordance with the conditions specified in the collateral agreement.
(5) For the purposes of subrule (2), the Market Participant may:
(a)        adjust the Client Balance with respect to a specific buy transaction, by removing from the Client Balance that portion of the contract value that is covered by client funds held in a cash management account, where the Market Participant has sole and unconditional control over those funds, where a Market Participant that has the ability to sweep a client's account to pay for purchases may only reduce the counterparty risk amount prior to the settlement date if:
(i)         the ability to sweep the client's account means that the funds are "locked" in favour of the Market Participant; or
(ii)       the funds are actually removed from the cash management account;
(b)       reduce the Client Balance by an amount held in the Market Participant's trust account if that trust money is held in relation to the unsettled transaction or as otherwise agreed by the client; and
(c)        remove the value of scrip which is the subject of a sale transaction from the Client Balance where the selling client has the scrip in a participant sponsored account and the Market Participant has either "locked" that scrip from the client or has strong internal controls to prevent that client recalling the scrip prior to settlement.
(6) For the purposes of subrule (3), where the security underlying the trade becomes subject to:
(a)        a trading halt, the last market value is acceptable in calculating the counterparty risk amount; or
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
(7) A Market Participant need not include credit amounts included in a Client Balance where such amounts represent an amount of cash held in the Market Participant's trust and/or segregated account.
(8) A Market Participant that has calculated a counterparty risk amount for an unsettled trade under this method is not required to treat or disclose any amounts calculated as Excluded Assets.
(9) This method does not apply to OTC Derivatives but does apply to Warrants which also may be covered by the method in Rule A1.2.6.
(10) Without limitation, a Market Participant must calculate a counterparty risk amount under this method in relation to a non-margined Financial Instrument in the following circumstances:
(a)        where the Market Participant has entered into an on-market purchase or sale transaction as agent for a client (including where the client is another Market Participant or a Clearing Participant which is trading as principal) and the Market Participant is the clearer for that transaction, the Market Participant must calculate a counterparty risk amount on its exposure to that