TITLE IVU.K. REQUIREMENTS FOR CCPs

[F1 [X1CHAPTER 4 U.K. Calculations and reporting for the purposes of Regulation (EU) No 575/2013

Article 50a U.K. Calculation of K CCP

1 . For the purposes of [F2Article 308 of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook] [F3and Chapter 10 of the Prudential Sourcebook for MiFID Investment Firms (MIFIDPRU) in the FCA Handbook], a CCP shall calculate K CCP as specified in paragraph 2 of this Article for all contracts and transactions it clears for all its clearing members falling within the coverage of the given default fund.

[F4 2 .A CCP shall calculate the hypothetical capital as follows:

where:

3 . A CCP shall undertake the calculation required by paragraph 2 at least quarterly or more frequently where required by the competent authorities of those of its clearing members which are institutions [F5or FCA investment firms].

4 . For the purpose of paragraph 3, [F6the Bank of England, having consulted the PRA and the FCA, may make technical standards specifying] the following:

( a ) the frequency and dates of the calculation laid down in paragraph 2;

( b ) the situations in which the competent authority of an institution [F7or FCA investment firm] acting as a clearing member may require higher frequencies of calculation and reporting than those referred to in point (a).

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Textual Amendments

[F9 Article 50b U.K. General rules for the calculation of K CCP

For the purpose of calculating KCCP referred to in Article 50a(2), the following provisions shall apply:

(a)CCPs shall calculate the value of the exposures they have to their clearing members as follows:

(i)for exposures arising from contracts and transactions listed in points (a) or (c) of Article 301(1) of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook, CCPs shall calculate the value in accordance with the method set out in Section 3 of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook by using a margin period of risk of 10 business days;

(ii)for exposures arising from contracts and transactions listed in point (b) of Article 301(1) of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook, CCPs shall calculate the value (EADi) in accordance with the following formula:

EADi = max {EBRMi – IMi – DFi; 0}

where:

All values in this formula shall relate to the valuation at the end of the day before the margin called on the final margin call of that day is exchanged;

(iii)for situations referred to in the third sentence of the second subparagraph of Article 301(1) of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook, CCPs shall calculate the value of the transactions referred to in the first sentence of that subparagraph in accordance with the formula set out in point (a)(ii) of this Article, and shall determine EBRMi in accordance with Title V of Part Three of the Capital Requirements Regulation;

(b)for institutions that fall under the scope of the Capital Requirements Regulation the netting sets are the same as those defined in point (4) of Article 272 of that Regulation;

[F10(ba)for FCA investment firms that fall under the scope of Part 9C rules, the netting sets are the same as those set out in the definition of “netting set (in MIFIDPRU)” in the Glossary of the FCA Handbook;]

(c)a CCP that has exposures to one or more CCPs shall treat those exposures as if they were exposures to clearing members and include any margin or pre-funded contributions received from those CCPs in the calculation of KCCP ;

(d)a CCP that has in place a binding contractual arrangement with its clearing members that allows that CCP to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions shall consider that initial margin as pre-funded contributions for the purposes of the calculation in paragraph 1 and not as initial margin;

(e)where collateral is held against an account containing more than one of the types of contracts and transactions referred to in Article 301(1) of Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook, CCPs shall allocate the initial margin provided by their clearing members or clients, as applicable, in proportion to the EADs of the respective types of contracts and transactions calculated in accordance with point (a) of this paragraph, without taking into account initial margin in the calculation;

(f)CCPs that have more than one default fund shall carry out the calculation for each default fund separately;

(g)where a clearing member provides client clearing services, and the transactions and collateral of the clearing member’s clients are held in sub-accounts which are separate from those of the clearing member’s proprietary business, CCPs shall carry out the calculation of EADi for each sub-account separately and shall calculate the clearing member’s total EADi as the sum of the EADs of the clients’ sub-accounts and the EAD of the clearing member’s proprietary business sub-account;

(h)for the purposes of point (f), where DFi is not split between the clients’ sub-accounts and the clearing member’s proprietary business sub-accounts, CCPs shall allocate DFi per sub-account according to the respective fraction the initial margin of that sub-account has in relation to the total initial margin posted by the clearing member or for the account of the clearing member;

(i)CCPs shall not carry out the calculation in accordance with Article 50a(2) where the default fund covers cash transactions only.

For the purposes of point (a)(ii) of this Article, the CCP shall use the method specified in Article 223 of the Capital Requirements Regulation with supervisory volatility adjustments set out in Article 224 of that Regulation to calculate the exposure value.]

Textual Amendments

Article 50c U.K. Reporting of information

1 . For the purposes of Article 308 of [F11Chapter 3 of the Counterparty Credit Risk (CRR) Part of the PRA Rulebook] [F12and Chapter 10 of the Prudential Sourcebook for MiFID Investment Firms (MIFIDPRU) in the FCA Handbook], a CCP shall report the following information to those of its clearing members which are institutions [F13or FCA investment firms] and to their competent authorities:

( a ) the hypothetical capital (K CCP );

( b ) the sum of pre-funded contributions (DF CM );

( c ) the amount of its pre-funded financial resources that it is required to use — by law or due to a contractual agreement with its clearing members — to cover its losses following the default of one or more of its clearing members before using the default fund contributions of the remaining clearing members (DF CCP );

F14( d ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F15( e ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Where the CCP has more than one default fund, it shall report the information in the first subparagraph for each default fund separately.

2 . The CCP shall notify those of its clearing members which are institutions [F16or FCA investment firms] at least quarterly or more frequently where required by the competent authorities of those clearing members.

3 .[F17The Bank of England, having consulted the PRA and the FCA, may make technical standards specifying] the following:

( a ) the uniform template for the purpose of the reporting specified in paragraph 1;

( b ) the frequency and dates of the reporting specified in paragraph 2;

( c ) the situations in which the competent authority of an institution [F18or FCA investment firm] acting as a clearing member may require higher frequencies of reporting than those referred to in point (b).

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Textual Amendments

Article 50d U.K. Calculation of specific items to be reported by the CCP

For the purposes of Article 50c, the following shall apply:

(a)

where the rules of a CCP provide that it use part or all of its financial resources in parallel to the pre-funded contributions of its clearing members in a manner that makes those resources equivalent to pre-funded contributions of a clearing member in terms of how they absorb the losses incurred by the CCP in the case of the default or insolvency of one or more of its clearing members, the CCP shall add the corresponding amount of those resources to DF CM ;

(b)

where the rules of a CCP provide that it use part or all of its financial resources to cover its losses due to the default of one or more of its clearing members after it has depleted its default fund, but before it calls on the contractually committed contributions of its clearing members, the CCP shall add the corresponding amount of those additional financial resources to the total amount of pre-funded contributions (DF) as follows:

.

(c)

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Editorial Information

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