Document ID: chunk:federal_register_of_legislation:F2023L01599:front:0:p3
Version: federal_register_of_legislation:F2023L01599
Segment Type: other
Provision Reference: 
Character Range: 5776–8724

the CCP;
(e)          close-out netting — is the process of combining all outstanding transactions and reducing them to a single net payment in the event of default by a counterparty to a netting agreement;
(f)           counterparty credit risk — is the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default;
(g)          default funds — are clearing members' funded or unfunded contributions towards, or underwriting of, a CCP's mutualised loss-sharing arrangements;
(h)          eligible bilateral netting agreement — has the meaning given in Prudential Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk (APS 112);
(i)            exchange-traded derivative — is a derivative that is transacted directly through an organised, licensed and regulated exchange;
(j)            hedging set — under the SA-CCR, a set of transactions under a single netting set within which partial or full offsetting may be recognised for the purposes of calculating the potential future exposure add-on;
(k)          independent collateral amount (ICA) — represents:
(i)            collateral (other than variation margin) posted by a counterparty that an ADI may seize upon default of the counterparty, the amount of which does not change in response to the value of the transactions it secures; and/or
(ii)         the Independent Amount parameter as defined in standard industry documentation.
       While ICA does not change in response to the value of the transactions it secures, it may change in response to factors such as the value of the collateral or a change in the number of transactions in the netting set. For clarity, initial margin for both centrally cleared and non-centrally cleared derivative transactions is included as ICA within the SA-CCR methodology outlined in Attachment D of this Prudential Standard;
(l)            initial margin — is collateral that is collected to cover the potential future exposure that could arise from future changes in the market value of a derivative transaction over the close-out period in the event of a counterparty default;
(m)        IRB ADI — is an ADI with approval from APRA to use an internal ratings-based (IRB) approach to credit risk;
(n)          long settlement transaction — is a transaction where a counterparty undertakes to receive or deliver a security, a commodity or a foreign exchange amount against cash, other financial instruments or commodities at a contractually specified settlement or delivery date that is more than the lesser of (i) the market standard for the particular instrument, and (ii) five business days after the date on which the parties enter into the transaction;
(o)          margin period of risk (MPOR) — is an estimated time