Document ID: chunk:federal_register_of_legislation:F2023L01599:reg:6:p2
Version: federal_register_of_legislation:F2023L01599
Segment Type: reg
Provision Reference: reg 6 (pt 2/35)
Character Range: 30622–33423

Attachment.
3.             Where a CCP does not meet the definition of a QCCP in paragraph 8(w) of this Prudential Standard, or where a CCP does not meet all of the requirements in paragraph 6 of Attachment C, the CCP is considered to be a non-qualifying CCP. An ADI must apply the counterparty credit risk requirements for exposures to a non-qualifying CCP in accordance with paragraph 29 of this Attachment and the risk management requirements in accordance with paragraphs 30 to 34 of this Attachment.
4.             Within three months of a CCP ceasing to qualify as a QCCP, unless required otherwise by APRA, the transactions with a former QCCP may, for the purposes of this Attachment, continue to be treated as though they are with a QCCP. After that time, the ADI's exposures with such a CCP must be treated according to paragraph 29 of this Attachment.
5.             For the purposes of calculating an ADI's exposure to a CCP:
(a)          initial margin is the funded collateral posted to a CCP to mitigate the potential future exposure of the CCP to the clearing member, including collateral deposited by a clearing member or a client that may be in excess of the minimum required amount provided there are appropriate arrangements in place to prevent the withdrawal of such excess collateral by the clearing member of the client. Initial margin does not include an ADI's contribution to a CCP for a mutualised loss-sharing arrangement (i.e. a default fund contribution); and
(b)          variation margin is the funded collateral posted on a daily or intraday basis to a CCP to mitigate movements in ongoing mark-to-market exposure.
6.             An ADI may treat a transaction as settled-to-market and an unmargined transaction with the remaining maturity (Mi) equal to the time until the next exchange of variation margin if:
(a)          the outstanding exposure is settled by variation margin and the terms are reset so that the fair value of the contract is zero; and
(b)          the ADI has legal opinion to support such treatment of variation margin.[12]
7.             For an exchange-traded derivative where the transaction between the clearing member and client is conducted under a bilateral agreement, an ADI that is either a clearing member (clearing member ADI) or a client (client ADI) must treat the transaction as an OTC derivative transaction for the purposes of this Attachment.
8.             Where the amount of capital required for an ADI's exposure to a QCCP due to its trade exposure and default fund contribution is higher than would be applied if the CCP were a non-qualifying CCP, the required capital is capped at the amount for a non-qualifying CCP.

Exposures arising from transactions cleared through a QCCP
9.             For transactions cleared through