Document ID: chunk:federal_register_of_legislation:F2024L01519:body:0:p55
Version: federal_register_of_legislation:F2024L01519
Segment Type: other
Provision Reference: 
Character Range: 151257–153931

slippage from the index weights. Stocks that comprise the index but are not held in the physical basket have a slippage equal to their percentage weight in the index. The sum of these slippages across each stock in the index represents the total level of slippage from the index. In summing the percentage differences, no netting is applied between under market-weight and over market-weight holdings (i.e. the absolute values of the percentage slippages should be summed). Deducting the total slippage from 100 gives the percentage coverage of the index to be compared to the required minimum of 90 per cent.
    [25] Gold must be dealt with as a foreign exchange position rather than as a commodity position because its volatility is more in line with foreign currencies and it is typically managed in a similar manner to foreign currencies.
    [26] Where gold is part of a forward contract (the quantity of gold to be received or to be delivered), the interest rate and foreign exchange exposure from the other leg of the contract should be reported as set out in paragraphs 3 to 41 of this Attachment and paragraph 14 of Attachment A.
    [27] Where the ADI is assessing its foreign exchange risk on a consolidated basis, it may be technically impractical in the case of some marginal operations to include the currency positions of a foreign branch or subsidiary of the ADI. In such cases the internal limit in each currency applied to such entities may be used as a proxy for the positions. Provided there is adequate ex post monitoring of actual positions against such limits, the limits are to be added, without regard to sign, to the net open position in each currency.
    [28] Where a commodity is part of a forward contract (a quantity of commodities is to be received or to be delivered), any interest rate, equity or foreign currency exposure from the other leg of the contract should be reported as set out in paragraphs 3 to 41, 42 to 55 and 56 to 64 of this Attachment.
    [29] For an ADI using other approaches to measure option price risk, all options and the associated underlying assets are to be excluded from both the maturity ladder approach and the simplified approach.
    [30] If one of the legs involves receiving/paying a fixed or floating interest rate, that exposure is to be slotted into the appropriate repricing maturity band in the maturity ladder covering interest rate-related instruments.
    [31] For markets that have daily delivery dates, any contracts maturing within ten days of one another may be offset.
    [32] Where all the written option positions are hedged by perfectly matched long positions in exactly the same options,