ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014

Link to law: https://www.comlaw.gov.au/Details/F2014L00592

 
 
 
 
 
ASIC Market Integrity Rules
(Chi-X Australia Market-Capital) 2014
 
 
 
 
 
 
 
 
 
 
 
I, Oliver Harvey, acting with the written consent of the Minister, make the following ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014 under subsection 798G(1) of the Corporations Act 2001.
 
 
 
 
 
 
 
 
 
 
 
Dated this 20th day of May 2014
 
 
 
 
Signed by Oliver Harvey
as delegate of the Australian Securities and Investments Commission
 
 
 
ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014
 
 
Contents
Chapter 1: Introduction. 5
Part 1.1     Preliminary. 5
Part 1.2     Waiver 6
Part 1.3     Notice, notification and service of documents. 7
Part 1.4     Interpretation. 8
Part 1.5     Transitional 12
Chapter 8: Capital requirements. 13
Part 8.1 Preliminary. 13
Part 8.2 Application. 13
Chapter 9: Accounts and audit 14
Part 9.1 Application of Rules. 14
Part 9.2 Risk Based Capital Requirements—Reporting. 14
Part 9.3  17
Part 9.4 General 18
Part 9.5 Scope of audits. 18
Schedule 1A: Capital liquidity requirements. 19
Part S1A.1 Definitions and Interpretation. 19
Part S1A.2 Obligations of Market Participants. 32
Schedule 1B. 41
Annexure 1 to Schedule 1A: Counterparty Risk Requirement 42
Part A1.1 Counterparty Risk Requirement 42
Part A1.2 Methods. 43
Annexure 2 to Schedule 1A: Large exposure risk requirement 56
Part A2.1 Counterparty large exposure risk requirement 56
Part A2.2 Issuer large exposure risk requirement 57
Part A2.3 Methods. 60
Annexure 3 to Schedule 1A: Position risk requirement 64
Part A3.1 Equity position risk amount 64
Part A3.2 Standard method—Equity position risk. 67
Part A3.3 Building block method––Equity position risk. 68
Part A3.4 Contingent loss matrix method—Equity position risk. 69
Part A3.5 Margin method—Equity position risk. 70
Part A3.6 Basic method—Equity position risk. 71
Part A3.7 Arbitrage method––Equity position risk. 72
Part A3.8 Calculation of Equity Equivalent positions––Equity position risk  73
Part A3.9 Calculation of equity net positions––Equity position risk. 75
Part A3.10 Debt position risk amount 76
Part A3.11 Standard method—Debt position risk. 78
PartA3.12 Building block method—Debt position risk. 79
Part A3.13 Contingent loss matrix method—Debt position risk. 82
Part A3.14 Margin method—Debt position risk. 85
Part A3.15 Basic method—Debt position risk. 85
Part A3.16 Calculation of Debt Equivalent positions—Debt position risk. 86
Part A3.17 Calculation of debt net positions—Debt position risk. 88
A3.18 Foreign exchange position risk amount 90
Part A3.19 Standard method—Foreign exchange position risk. 90
Part A3.20 Contingent loss matrix method—Foreign exchange position risk  91
Part A3.21 Calculation of Foreign Exchange Equivalent positions— Foreign exchange position risk. 93
Part A3.22 Calculation of a converted net open position—Foreign exchange position risk  93
Annexure 4 to Schedule 1A: Underwriting Risk Requirement 95
Annexure 5 to Schedule 1A: Tables. 96
Part A5.1 Position Risk. 96
Part A5.2 Counterparty Risk. 101
Part A5.3 Other 102
Schedule 1C: Forms. 104
Sch 1C Form 1 Pt 1     Ad Hoc Risk-Based Return. 104
Schedule 1C Form 2 Part 2: Risk Based Capital Requirements – Risk-Based Return Declaration  107
Sch 1C Form 3A Pt 1     Risk-Based Return (Summary, Monthly and Annual) 109
Schedule 1C Form 5: Risk Based Capital Requirements – Auditor’s Report 183
Schedule 1C Form 6: Risk Based Capital Requirements – Key. 185
Schedule 1C Form 7: Risk Based Capital Requirements – Partnership Statutory Declaration  186
 
Chapter 1: Introduction
Part 1.1 Preliminary
1.1.1      Enabling legislation
ASIC makes this instrument under subsection 798G(1) of the Corporations Act.
1.1.2      Title
This instrument is ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014.
1.1.3      Commencement
This instrument commences on the later of:
(a)        26 May 2014; and
(b)       the day on which the instrument is registered under the Legislative Instruments Act 2003.
Note: An instrument is registered when it is recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form: see Legislative Instruments Act 2003, section 4 (definition of register). The FRLI may be accessed at http://www.frli.gov.au/.
1.1.4      Scope of these Rules
These Rules apply to:
(a)        the activities or conduct of the Chi-X Market;
(b)       the activities or conduct of persons in relation to the Chi-X Market;
(c)        the activities or conduct of persons in relation to Financial Products traded on the Chi-X Market.
Note: There is no penalty for this Rule.
1.1.5      Entities that must comply with these Rules
The following entities must comply with these Rules:
(a)        the Market Operator;
(b)       Market Participants; and
(c)        Other Regulated Entities,
as specified in each Rule.
Note: There is no penalty for this Rule.
1.1.6      Conduct by officers, Employees or agents
In these Rules, conduct engaged in on behalf of a person:
(a)        by an officer, Employee, or other agent of the person, and whether or not within the scope of the actual or apparent authority of the officer, Employee, or other agent; or
(b)       by any other person at the direction or with the consent or agreement (whether express or implied) of an officer, Employee, or other agent of the person, and whether or not the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the officer, Employee, or other agent,
is deemed to have been engaged in by the person.
Note: There is no penalty for this Rule.
1.1.7      State of mind of a person
(1) If for the purposes of these Rules in respect of conduct engaged in by a person, it is necessary to establish the state of mind of the person, it is sufficient to show that an officer, Employee, or other agent of the person, being an officer, Employee, or other agent by whom the conduct was engaged in and whether or not the conduct was within the scope of the actual or apparent authority of that officer, Employee, or other agent, had that state of mind.
(2) In subrule (1), a reference to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person’s reasons for the person’s intention, opinion, belief or purpose.
Note: There is no penalty for this Rule.
Part 1.2 Waiver
1.2.1      Waiver of Rules
(1) Subject to Rule 1.2.3, ASIC may relieve any person or class of persons from the obligation to comply with a provision of these Rules, either generally or in a particular case or category, and either unconditionally or subject to such conditions as ASIC thinks fit.
(2) If any conditions on a waiver given under subrule (1) are imposed, all of the conditions must be complied with for the waiver to be effective.
(3) ASIC may withdraw, in writing, a waiver given under subrule (1) at any time.
(4) Any request by a person for a waiver under subrule (1) must be in writing.
(5) Any waiver given under subrule (1), and any conditions imposed on that waiver, must be in writing.
(6) ASIC may publish notice of a waiver given under subrule (1).
Note: There is no penalty for this Rule.
1.2.2      Compliance with conditions
Failure to comply with a condition imposed under Rule 1.2.1 is a contravention of this Rule.
Maximum penalty: $1,000,000
1.2.3      Period during which relief applies
ASIC may specify the period or specific event during which any relief from an obligation to comply with a provision of these Rules may apply.
Note: There is no penalty for this Rule.
1.2.4      Register
(1) ASIC may establish and maintain a register for recording details of relief granted under Rule 1.2.1 and may enter the following details in the register:
(a)        the date that the relief takes effect;
(b)       the person or class of persons relieved from the obligation;
(c)        the provision to which the relief applies;
(d)       brief reasons for the relief; and
(e)        any conditions that apply to the relief.
(2) ASIC may publish the register referred to in subrule (1).
Note: There is no penalty for this Rule.
Part 1.3 Notice, notification and service of documents
1.3.1      Market Participant to have email
A Market Participant must acquire and maintain an operating email system for the purposes of receiving notices under these Rules.
Note: There is no penalty for this Rule.
1.3.2      Methods of giving notice in writing
Unless otherwise specified in a Rule, ASIC may give a notice under these Rules by any of the following methods:
(a)        delivering it to the recipient personally;
(b)       leaving it at or by sending it by courier or post to the address of the recipient last notified to ASIC;
(c)        sending it by facsimile to the recipient’s facsimile number last notified to ASIC;
(d)       a circular or bulletin addressed to a class of persons and delivered or communicated by any means permitted under this Rule;
(e)        specific email by any method which identifies a person or person’s title as addressee and no notice of non-delivery has been received;
(f)        broadcast email by any method which identifies the addressee and which, having regard to all the relevant circumstances at the time, was as reliable as appropriate for the purposes for which the information was communicated.
Note: There is no penalty for this Rule.
Part 1.4 Interpretation
1.4.1      References to time
In these Rules a reference to time is to the time in Sydney, Australia.
Note: There is no penalty for this Rule.
1.4.2      Words and expressions defined in the Corporations Act
Words and expressions defined in the Corporations Act will unless otherwise defined or specified in these Rules or the contrary intention appears, have the same meaning in these Rules.
Note: There is no penalty for this Rule.
1.4.3      Definitions
“ASIC” means the Australian Securities and Investments Commission.
“ASX” means ASX Limited (ACN 008 624 691).
“ASX Listing Rules” means the Listing Rules of ASX.
“ASX Market” means the market for Financial Products operated by ASX.
“ASX Market Integrity Rules” means the ASIC Market Integrity Rules (ASX Market) 2010, and the ASIC Market Integrity Rules (ASX Market-Capital) 2014, as amended from time to time.
“ASX Participant” means a participant in the ASX Market admitted under the Operating Rules of the ASX Market.
“Australian ADI” has the meaning given by section 9 of the Corporations Act.
“Business Day” means a day other than a Saturday, Sunday, New Year’s Day, Good Friday, Easter Monday, Christmas Day or Boxing Day.
“CHESS Depository Interest” has the meaning given to the term “CDI” by rule 2.13.1 of the operating rules of ASX Settlement Pty Limited (ACN 008 504 532).
“Chi-X Australia” means Chi-X Australia Pty Ltd (ACN 129 584 667).
“Chi-X Market” means the market operated by the Market Operator under Australian Market Licence (Chi-X Australia Pty Ltd) 2011.
“Clearing Facility” means, in relation to a Market Transaction, the clearing and settlement facility, within the meaning of section 761A of the Corporations Act, through which the Market Transaction has been or will be cleared.
“Clearing Participant” means a person admitted as a participant under the Clearing Rules.
“Clearing Rules” means:
(a)        in relation to a particular Clearing Facility, the operating rules, procedures, practices, directions, decisions and requirements of that Clearing Facility;
(b)       in relation to a particular Clearing Participant, the rules of the Clearing Facility to which that Clearing Participant is subject.
“Corporations Act” means the Corporations Act 2001 (Cth).
“Employee” in relation to a Market Participant includes a director, employee, officer, agent, representative, consultant or adviser of that Market Participant, or an independent contractor who acts for or by arrangement with a Market Participant.
“ETF” means a Managed Fund:
(a)        which is listed on the ASX Market;
(b)       with power and approval to continuously issue and have quoted on the ASX Market, Equity Securities in the Managed Fund;
(c)        which provides for the issue of new Equity Securities in return for the subscriber transferring to the Managed Fund a portfolio of Securities; and
(d)       for which the price of the Financial Product, index, foreign or Australian currency, commodity or other point of reference for determining the value of the Equity Securities is continuously disclosed or can be immediately ascertained.
“ETF Security” means a Financial Product issued by or provided pursuant to an ETF.
“Equity Market Product” means:
(a)        a share in a body;
(b)       a financial product referred to in subparagraph 764A(1)(b)(i) or subparagraph 764A(1)(ba)(i) of the Act; or
(c)        a right (whether existing or future and whether contingent or not) to acquire, by way of issue, the following under a rights issue:
(i)         a share covered by paragraph (a); or
(ii)       a financial product covered by paragraph (b); or
(d)       a CHESS Depository Interest,
admitted to quotation on ASX and able to be traded on the Chi-X Market.
“Equity Securities” means:
(a)        shares in a body corporate or an unincorporated body other than redeemable preference shares which are Loan Securities in accordance with paragraph (c) of the definition of Loan Securities; or
(b)       interests in a managed investment scheme, except those referred to in paragraph (d) of the definition of Loan Securities; or
(c)        renounceable and non-renounceable rights to subscribe for Securities other than Loan Securities; or
(d)       options over unissued Securities other than Loan Securities; or
(e)        convertible notes; or
(f)        any Securities which are determined by the operator of the Relevant Financial Market to be Equity Securities,
but does not include Options Market Contracts, or Securities determined to be Loan Securities by the operator of the Relevant Financial Market.
“Family Trust” means a trust in which:
(a)        the person or the Immediate Family of the person is the sole or majority beneficiary; or
(b)       the person has the ability to remove the trustee of the trust and replace that trustee with his or her own nominee.
“Financial Product” has the meaning given by Division 3 of Part 7.1 of the Corporations Act.
“Futures Market Contract” means a contract on the terms of a Futures Series.
“Futures Series” means a set of contractual terms on which futures contracts are authorised for trading by the operator of the Relevant Financial Market.
“Immediate Family” in relation to a person, means that person’s spouse and any non-adult children.
“Issuer” means, in relation to an Equity Market Product, the legal entity which issues the Equity Market Product.
“Listing Rules” has the meaning given by section 761A of the Corporations Act.
“Loan Securities” means:
(a)        debentures, stocks or bonds issued or proposed to be issued by a government; or
(b)       debentures of a body corporate or an unincorporated body; or
(c)        redeemable preference shares which have a fixed and certain date for redemption, other than shares having a participating entitlement to rights or options referred to in paragraphs (c) and (d) of the definition of Equity Securities; or
(d)       interests in a managed investment scheme, relating to a financial or business undertaking or scheme, common enterprise or investment contract, the trustee or representative or responsible entity of which only invests in or acquires one or more of Loan Securities, mortgages and cash; or
(e)        any Securities which are determined by the operator of the Relevant Financial Market to be Loan Securities,
but does not include Options Market Contracts, or Securities determined to be Equity Securities by the operator of the Relevant Financial Market.
“Managed Fund” means a managed investment scheme which is a registered managed investment scheme pursuant to section 601EB of the Corporations Act or a managed investment scheme which ASIC has exempted from those registration requirements.
“Market Operating Rules” means the Operating Rules of the Chi-X Market.
“Market Operator” means Chi-X Australia.
“Market Participant” means a participant in the Chi-X Market admitted under the Market Operating Rules.
“Market Transaction” means a transaction for one or more Equity Market Products, entered into on a Trading Platform or reported to the Market Operator under the Market Operating Rules.
“Official Quotation”, in relation to Financial Products, means admitted to quotation by ASX under the ASX Listing Rules.
“Operating Rules” has the meaning given by section 761A of the Corporations Act.
“Option Series” means a set of contractual terms on which options are authorised for trading by ASX on the ASX Market.
“Options Market Contract” means a contract on the terms of an Option Series.
“Order” means, in relation to Equity Market Products, an instruction to purchase or sell Equity Market Products, or an instruction to amend or cancel a prior instruction to purchase or sell Equity Market Products.
“Other Regulated Entities” means entities prescribed by regulations made for the purposes of paragraph 798H(1)(c) of the Corporations Act, that must comply with these Rules.
“Principal Trader” means a Market Participant with Trading Permission which limits it to trading on its own behalf.
“Related Body Corporate” has the meaning given by section 50 of the Corporations Act.
“Relevant Financial Market” has the meaning given by section 9 of the Corporations Act.
“Representative” has the meaning given by section 910A of the Corporations Act.
“Rules” means these market integrity rules.
“Security” or “security” means:
(a)        a “security” within the meaning of section 761A of the Corporations Act; or
(b)       a managed investment product.
“Trading Messages” means those messages submitted into a Trading Platform relating to trading functions, such as Orders, amendment or cancellation of Orders and the reporting or cancellation of Market Transactions on the Trading Platform.
“Trading Permission” means the right to submit Trading Messages in a Trading Platform.
“Trading Platform” means a facility made available by the Market Operator to Market Participants for the entry of Trading Messages, the matching of Orders and the reporting of transactions.
Note: There is no penalty for this Rule
Part 1.5 Transitional
1.5.1      Repeal
The following provisions of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 are repealed:
(a)        Chapters 8 and 9;
(b)       Schedules 1A to 1C; and
(c)        the Annexures  to Schedule 1A.
Note: There is no penalty for this Rule.
Chapter 8: Capital requirements
Part 8.1 Preliminary
8.1.1      Definitions
In this Chapter and in Chapter 9: 
“Approved Clearing Facility” means ASX Clear Pty Limited (ACN 001 314 503).
“Capital Requirements” means, in relation to a Market Participant, the Risk Based Capital Requirements. 
“Risk Based Capital Requirements” means the requirements set out in Schedule 1A. 
Note: There is no penalty for this Rule.
Part 8.2 Application
8.2.1      Market Participant to comply with Risk Based Capital Requirements
A Market Participant must at all times comply with the Risk Based Capital Requirements, unless:
(a)        the Market Participant is only a Principal Trader; or
(b)       the Market Participant is a Clearing Participant of an Approved Clearing Facility and complies with the capital requirements under the Clearing Rules. 
Maximum penalty: $1,000,000
Note: The Risk Based Capital Requirements are contained in Schedule 1A.
Chapter 9: Accounts and audit
Part 9.1 Application of Rules 
9.1.1      Principal Traders and Clearing Participants
This Chapter does not apply to:
(a)        a Market Participant that is only approved as a Principal Trader;
(b)       a Market Participant that is a Clearing Participant of an Approved Clearing Facility and complies with the capital requirements under the Clearing Rules. 
Note: There is no penalty for this Rule.
Part 9.2 Risk Based Capital Requirements—Reporting
9.2.1A   Risk Based Capital Requirements: Forms
In this Part 9.2:
“Ad Hoc Risk-Based Return” means a return containing the information in, and in the form set out in, Part 1 of Form 1 in Schedule 1C to these Rules.
“Annual Audited Risk-Based Return” means a return containing the information in, and in the form set out in, Part 1 of Form 3A in Schedule 1C to these Rules, except for the section Credit Facilities & Overdraft (coded “CFO”).
“Monthly Risk-Based Return” means a return containing the information in, and in the form set out in, Part 1 of Form 3A in Schedule 1C to these Rules.
“Risk-Based Return Declaration” means a declaration containing the information in, and in the form set out in, Part 2 of Form 2 in Schedule 1C to these Rules.
“Summary Risk-Based Return” means a return containing the information in, and in the form set out in, Part 1 of Form 3A in Schedule 1C to these Rules, except for the following sections:
(a)        Underwriting Risk Requirement (coded “URR”);
(b)       Non Standard Risk Requirement (coded “NRR”); and
(c)        Credit Facilities & Overdraft (coded "CFO").
Note: There is no penalty for this Rule.
9.2.1      Risk Based Capital Requirements—Ad hoc or Summary Return on Request by ASIC
A Market Participant that is required to comply with the Risk Based Capital Requirements must, if requested to do so by ASIC, provide ASIC with an Ad Hoc Risk-Based Return or a Summary Risk-Based Return and Risk-Based Return Declaration, authorised by one director or partner of the Market Participant, within the time specified by ASIC in the request.
Maximum penalty: $20,000
9.2.2      Core Capital or Liquid Capital below minimum
(1) Subject to Rule 9.2.6, a Market Participant that is required to comply with the Risk Based Capital Requirements must notify ASIC immediately if its:
(a)        Core Capital is at any time less than the minimum amount required by paragraph S1A.2.1(b); or
(b)       Liquid Capital divided by its Total Risk Requirement is equal to or falls below 1.2.
(2) Subject to Rule 9.2.6, a Market Participant must provide ASIC with, at the option of ASIC, an Ad Hoc Risk-Based Return, or a Summary Risk-Based Return and Risk-Based Return Declaration, disclosing the amount of its Liquid Margin:
(a)        no later than one Business Day after notifying ASIC under subrule (1); and
(b)       from then on, either:
(i)         by 10am on the first Business Day of each week, showing the financial position of the Market Participant on the last Business Day of the prior week, for so long as the amount referred to in paragraph (1)(b) is equal to or less than 1.2 but greater than 1.1; and
(ii)       by 10am on each Business Day, showing the financial position of the Market Participant on the prior Business Day, for so long as the amount referred to in paragraph (1)(b) is 1.1 or less.
(3) The return referred to in subrule (2) must be authorised by one director or partner of the Market Participant.
Maximum penalty: $20,000
9.2.3      Monthly Return
(1) Subject to Rule 9.2.6, a Market Participant that is required to comply with the Risk Based Capital Requirements must prepare and deliver to ASIC within 10 Business Days of the end of each calendar month, the following documents and information:
(a)        if the Market Participant is not a partnership, a Monthly Risk-Based Return, which accurately reflects the Market Participant’s accounts and financial position on the last Business Day of the previous calendar month;
(b)       if the Market Participant is not a partnership, a Risk-Based Return Declaration relating to the Monthly Risk Based Return, authorised by one director of the Market Participant;
(c)        if the Market Participant is a partnership, a Monthly Risk-Based Return, which accurately reflects the Market Participant’s accounts and financial position on the last Business Day of the previous calendar month, or such other alternative form of return as ASIC directs under this paragraph; and
(d)       if the Market Participant is a partnership, a Risk-Based Return Declaration relating to the Monthly Risk-Based Return, authorised by one partner of the Market Participant, or such other alternative form of declaration as ASIC directs under this paragraph.
Maximum penalty: $20,000
9.2.4      Audited Annual Return
(1) Subject to Rule 9.2.6, a Market Participant that is required to comply with the Risk Based Capital Requirements must prepare and deliver to ASIC:
(a)        within 3 months following the end of the Market Participant’s financial year if the Market Participant is not a partnership; or
(b)       within 2 months following the end of the Market Participant’s financial year if the Market Participant is a partnership,
the following documents and information:
(c)        the Market Participant’s statutory accounts, including directors’ declaration and audit report as required under the laws of the Market Participant’s home jurisdiction, which give a true and fair view of the financial position and performance of the Market Participant’s business as at the end of the financial year and which are prepared in accordance with accounting standards and principles which are generally accepted in Australia, unless ASIC determines otherwise;
(d)       if the Market Participant is not a partnership, an Annual Audited Risk-Based Return, which accurately reflects the Market Participant’s accounts and its financial position as at the end of the Market Participant’s financial year;
(e)        if the Market Participant is not a partnership, a Risk-Based Return Declaration relating to the Annual Audited Risk-Based Return, authorised by two directors of the Market Participant or by one director in accordance with a resolution of the board of directors of the Market Participant;
(f)        if the Market Participant is a partnership, an Annual Audited Risk-Based Return, which accurately reflects the Market Participant’s accounts and its financial position as at the end of the Market Participant’s financial year, or such other alternative form of return as ASIC directs under this paragraph;
(g)       if the Market Participant is a partnership, a Risk-Based Return Declaration relating to the Annual Audited Risk-Based Return, authorised by two partners of the Market Participant, or such other alternative form of declaration as ASIC directs under this paragraph;
(h)       an auditor’s report on the Annual Audited Risk-Based Return or alternative form of return directed by ASIC under paragraph (f), in the form set out in Form 5 in Schedule 1C to these Rules, dated and signed by the audit firm;
(i)         a statement (the “Key Risks and Internal Systems Statement”) in the form set out in Form 6 in Schedule 1C to these Rules, dated and signed by two directors of the Market Participant or by one director in accordance with a resolution of the board of directors of the Market Participant (the date of the resolution must be specified), or, if the Market Participant is a partnership, by two partners of the Market Participant; and
(j)         the Market Participant’s group structure chart showing the Market Participant’s corporate ownership structure starting at the ultimate parent, dropping down to the immediate parent, the Market Participant, any subsidiaries (including nominee companies of the Market Participant) and any related/associated companies of the Market Participant.
(2) Subject to Rule 9.2.6, if the financial year end of the Market Participant is other than 30 June, the Market Participant must notify ASIC of its financial year end.
Maximum penalty: $20,000
9.2.5 Partnership Statutory Declaration
Subject to Rule 9.2.6, a Market Participant that is a partnership must give ASIC, within 10 Business Days after the end of June and December each year, for each partner of the Market Participant, a declaration (the “Partnership Statutory Declaration”) in the form set out in Form 7 in Schedule 1C to these Rules, signed by the partner to which the Partnership Statutory Declaration relates and witnessed in accordance with the instructions included on the Partnership Statutory Declaration.
Maximum penalty: $20,000
9.2.6      Double Reporting Exemption for Dual Chi-X/ASX Participants
A Market Participant that is also an ASX Participant does not have to comply with subrule 9.2.2(1), 9.2.2(2), 9.2.3(1), 9.2.4(1) or 9.2.4(2) or Rule 9.2.5 if the Market Participant has complied with the equivalent subrule or Rule in the ASIC Market Integrity Rules (ASX Market-Capital) 2014.
Note: There is no penalty for this Rule.
Part 9.3
Note: There is no Part 9.3.
Part 9.4 General
9.4.1      Alternate Director
Where a Market Participant has appointed an alternate director in accordance with section 201K of the Corporations Act and the constitution of the Market Participant, the alternate director may authorise or sign the Forms referred to in Part 9.2 only if the Market Participant has provided ASIC with:
(a)        the details of the appointment of the alternate director; and
(b)       a statement that the Market Participant’s constitution permits the appointment of the alternate director. 
Note: There is no penalty for this Rule.
Part 9.5 Scope of audits 
9.5.1      Market Participant to assist auditor
(1) A Market Participant must give its auditor access to its premises and Employees and all records, documents, explanations and other information required by the auditor in respect of any audit conducted under Part 9.2.
(2) A Market Participant must: 
(a)        not impose any limitation on the extent of any audit required under Part 9.2; and
(b)       permit and direct the auditor to notify ASIC immediately if any limitation is imposed on the auditor, or if the auditor is hindered or delayed in the performance of the auditor’s duties.
(3) The records of each of the Market Participant’s nominee companies must be included in the audit.
Maximum penalty: $100,000
Schedule 1A: Capital liquidity requirements
Part S1A.1 Definitions and Interpretation
S1A.1.1 Definitions
In this Schedule 1A and in Chapter 9, unless the context otherwise requires:
“Approved Deposit Taking Institution” means:
(a)        an authorised deposit taking institution under section 5 of the Banking Act 1959 (Cth);
(b)       a banking institution which has its activities formally regulated in accordance with the standards of the Basel Committee on Banking Supervision; or
(c)        an institution which has been given a risk weighting by the Australian Prudential Regulation Authority equivalent to an authorised deposit taking institution referred to in paragraph (a) above.
“Approved Institution” means:
(a)        any of the following institutions whose net assets are greater than $30 million at the date of its last published audited balance sheet:
(i)         a life insurance company or general insurance company; or
(ii)       an investment company, trust or other similar institution whose ordinary business is to buy and sell Financial Instruments;
(b)       any body corporate or partnership whose ordinary business is to buy and sell Financial Instruments and which is regulated by a:
(i)         Recognised non-European Union Regulator specified in Table A5.3.1 in Annexure 5 to this Schedule 1A;
(ii)       Recognised European Union Regulator specified in Table A5.3.2 in Annexure 5 to this Schedule 1A; or
(c)        a Fund Manager and an underlying client that has placed money with, or has securities under the control of, the Fund Manager, where:
(i)         the Market Participant has a dealing relationship with the Fund Manager but not the underlying client; and
(ii)       the Fund Manager is placing orders on behalf of the underlying client and not as principal,
provided that the Market Participant maintains adequate documentation in support of paragraphs (a), (b) or (c).
“Approved Subordinated Debt” means an amount owing by a Market Participant under a subordination arrangement which is approved by ASIC under Rule S1A.2.4.
“Approved Subordinated Loan Deed” means, in respect of a subordination arrangement, a deed which:
(a)        is executed:
(i)         by the lender and ASIC under seal or by such equivalent method expressly recognised under the Corporations Act;
(ii)       in the case of a Market Participant which is a company, by the Market Participant under seal or by such equivalent method expressly recognised under the Corporations Act; and
(iii)      in the case of a Market Participant which is a partnership, by each of its partners;
(b)       sets out details of the terms governing any subordinated debt regulated by the subordination arrangement or identifies the document which does so;
(c)        contains those provisions required by ASIC including without limitation, provisions to the effect that:
(i)         alterations to the subordinated loan deed or the terms or details of any subordinated debt regulated by the subordination arrangement cannot be made unless the agreement of all parties is obtained and the variation is executed in the manner required under paragraph (a);
(ii)       ASIC must be satisfied that the Market Participant has made adequate arrangements to ensure that Schedule 1A will be complied with and will continue to be complied with upon the maturity date of any loan for a fixed term;
(iii)      ASIC must be given full particulars of any debt to be regulated by the subordination arrangement under the subordinated loan deed prior to such debt being created; and
(iv)      prior to the Bankruptcy of the Market Participant, repayment of any subordinated debt regulated by the subordination arrangement can only occur in accordance with subrules S1A.2.4(6) and (7); and
(d)       contains specific acknowledgment by the lender of the matters set out in paragraphs S1A.2.4(2)(a) and (b).
“ASX Clear” means ASX Clear Pty Limited (ACN 001 314 503).
“ASX Clear Operating Rules” means the Operating Rules of ASX Clear.
“ASX Operating Rules” means the Operating Rules of ASX.
“ASX Settlement” means ASX Settlement Pty Limited (ACN 008 504 532).
“ASX Settlement Operating Rules” means the Operating Rules of ASX Settlement.
“Bankruptcy” means in respect of an entity:
(a)        the entity becomes an externally administered body corporate within the meaning of the Corporations Act;
(b)       the entity becomes an individual who is an insolvent under administration within the meaning of the Corporations Act;
(c)        if the entity is a partnership, the entity is wound up or dissolved or a liquidator is appointed to it;
(d)       a person takes control of the entity’s property for the benefit of the entity’s creditors because the entity is, or is likely to become, insolvent;
(e)        the entity enters into an arrangement, composition or compromise with, or assignment for the benefit of, all of its creditors or any class of them; or
(f)        anything analogous to, or having a substantially similar effect to the events specified in paragraphs (a) to (e) happens to the entity under the laws of any applicable jurisdiction.
“CFD” means contract for difference.
“Chi-X Australia Operating Rules” means the Operating Rules of Chi-X Australia.
“Classical ETF” means a managed fund that meets all of the following criteria: 
(a)        that is listed and quoted on a stock exchange (and in Australia is registered as a managed investment scheme under the Corporations Act); 
(b)       where, under an open prospectus, the units in the fund can only be subscribed for and redeemed in kind, on demand and via the exchange of a defined basket of Equity securities;
(c)        that has a “passive” investment strategy designed to replicate a stock index at all times and this is evidenced by the holding of physical securities in weightings that predominantly match the stock index the fund has been issued over, and accordingly, any cash or Derivative components must be immaterial and must not be used to gear the fund;
(d)       where the underlying assets are known on a daily basis; and
(e)        that is subscribed for and redeemed in a “primary” market via either a Market Participant or the fund issuer, and existing units are traded in a “secondary” market provided through a stock exchange.
“Client Balance” means an individual Counterparty’s net debit or credit balance with a Market Participant arising from non margined Financial Instruments.
“Core Capital” means:
(a)        in the case of a Market Participant which is a company, the sum of:
(i)         all ordinary issued shares to the extent that those shares are paid-up;
(ii)       all non cumulative Preference Shares;
(iii)      all reserves, excluding revaluation reserves other than Financial Asset Revaluation Reserves; and
(iv)      opening retained profits/losses adjusted for all current year movements; and
(b)       in the case of a Market Participant which is a partnership, the sum of the partners’ current and capital accounts.
“Counterparty” means in respect of a transaction to which a Market Participant is a party, another party to that transaction whether that person is a counterparty or a client.
“Counterparty Risk Requirement” means the greater of:
(a)        zero; and
(b)       the absolute sum of the counterparty risk amounts calculated in accordance with Annexure 1 to this Schedule 1A less any provision raised for doubtful debts.
Note: The provision for doubtful debts must relate to a specific Counterparty receivable for which a counterparty risk amount has been calculated in accordance with Annexure 1 or to cover the possibility of a Counterparty or Client Balance becoming doubtful. A Market Participant must not deduct a provision amount from an individual counterparty risk amount. 
“Debt Derivative” includes:
(a)        a convertible note (except to the extent that Annexure 3 to this Schedule 1A provides for the treatment of a convertible note as an equity position);
(b)       an interest rate Swap;
(c)        a Forward Rate Agreement;
(d)       a forward contract over a Debt Instrument;
(e)        a Future over a Debt Instrument and a Future over an index or basket product based on Debt Instruments;
(f)        an index or basket product based on Debt Instruments; and
(g)       an Option over a Debt Instrument and an Option over any of the products referred to in paragraphs (a) to (f),
but does not include an instrument that falls within the definition of Equity Derivative or Foreign Exchange Derivative.
“Debt Equivalent” means the value of a position in a Debt Derivative that is equivalent to the value had it been a physical position in the underlying Debt Instrument calculated in accordance with Part A3.16 of Annexure 3 to this Schedule 1A.
“Debt Instrument” includes:
(a)        a debt security without call or put provisions;
(b)       a discount security without call or put provisions;
(c)        a non-convertible preference share;
(d)       a redeemable preference share with a fixed and certain date for redemption; and
(e)        an interest in a managed investment scheme investing only in Debt Instruments, mortgages or cash, including an interest in a Hybrid ETF or Other Managed Fund that is issued over physical Debt Instruments only (ignoring any immaterial percentage of cash or Derivatives also included in the Hybrid ETF or Other Managed Fund and used only for hedging purposes),
but does not include an instrument that falls within the definition of Equity.
“Debt Net Position” means an amount calculated in accordance with Part A3.17 of Annexure 3 to this Schedule 1A.
“Derivative” includes:
(a)        an Equity Derivative;
(b)       a Debt Derivative; and
(c)        a Foreign Exchange Derivative,
but does not include an instrument that falls within the definition of Equity or Debt Instrument.
“Equity” includes:
(a)        a share other than a share referred to in paragraphs (c) and (d) of the definition of Debt Instrument;
(b)       a depository receipt;
(c)        an instalment receipt;
(d)       an interest in a managed investment scheme, including an interest in a Hybrid ETF or an Other Managed Fund that is issued over:
(i)         physical Equities only;
(ii)       physical Debt Instruments and property;
(iii)      physical Equities, physical Debt Instruments and property;
(iv)      physical Equities and property; or
(v)       physical property only,
(ignoring any immaterial percentage of cash or Derivatives also included in the Hybrid ETF or Other Managed Fund and used only for hedging purposes), other than an interest referred to in paragraph (e) of the definition of Debt Instrument,
but does not include an instrument that falls within the definition of Debt Instrument.
“Equity Derivative” includes:
(a)        an equity Swap;
(b)       a forward contract over an Equity;
(c)        a Future over an Equity and a Future over a basket or index product based on Equities;
(d)       an index or basket product based on Equities (including a Classical ETF);
(e)        a renounceable or non-renounceable right to subscribe for an equity;
(f)        an Option over an Equity (whether issued or unissued) and an Option over any of the products referred to in paragraphs (a) to (d); and
(g)       an exchange traded CFD over:
(i)         an Equity; or
(ii)       a basket or index product based on Equities,
but does not include an instrument that falls within the definition of Debt Derivative or Foreign Exchange Derivative.
“Equity Equivalent” means the value of a position calculated in accordance with Part A3.8 of Annexure 3 to this Schedule 1A.
“Equity Net Position” means an amount calculated in accordance with Part A3.9 of Annexure 3 to this Schedule 1A.
“Excluded Asset” means:
(a)        a fixed asset;
(b)       an intangible asset;
(c)        a future income tax benefit;
(d)       a non current asset;
(e)        a deposit with or loan to a person other than:
(i)         a deposit or loan with an Approved Deposit Taking Institution;
(ii)       a deposit or loan to the extent the balance is secured by collateral which is Liquid, evidenced in writing and valued at the mark to market value; or
(iii)      a deposit of funds as a margin or deposit with a person licensed to trade or clear Futures or Options to the extent that those funds relate to an open position;
(f)        a deposit with a third party clearing organisation;
(g)       a Related/Associated Persons Balance to the extent the balance is not secured by collateral which is: 
(i)         Liquid;
(ii)       under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(iii)      evidenced in writing by a legally binding agreement between the Market Participant and the Related/Associated Person in circumstances where the Market Participant has established that the Related/Associated Person and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(iv)      valued at the mark to market value;
(h)       a debt which was reported or created more than 30 days previously, other than a debt:
(i)         from another Market Participant that is not an Related/Associated Person; or
(ii)       which is secured by collateral which is Liquid, evidenced in writing and valued at the mark to market value;
(i)         a prepayment (being an expense which has been paid during one accounting period for a term which extends beyond the end of that period) which is not Liquid or which is Liquid but has been made in respect of an item of expenditure that is specifically required to be made by the Market Participant for the Market Participant to comply with the requirements of these Rules or the Market Operating Rules;
(j)         an asset which is not Liquid; or
(k)       an asset which is Liquid but which has a charge against it (in whole or in part) where the purpose of the charge is to raise funds for use outside the ordinary course of the Market Participant’s securities or derivatives business.
“Excluded Liability” means the maximum liability specified in a guarantee or indemnity under paragraph S1A.2.6(1)(c).
“Family Trust” means a trust in which:
(a)        the person or the Immediate Family of the person is the sole or majority beneficiary; or
(b)       the person has the ability to remove the trustee of the trust and replace the trustee with his or her own nominee.
“Financial Asset Revaluation Reserves” means revaluation reserves relating to available for sale financial assets as defined in accordance with accounting standards which are generally accepted in Australia or other accounting standards approved by ASIC under subrule S1A.2.7(3).
“Financial Instrument” means:
(a)        an Equity;
(b)       a Debt Instrument; and
(c)        a Derivative.
“Foreign Exchange Derivative” includes:
(a)        a forward contract over foreign currency;
(b)       a Future over foreign currency;
(c)        an Option over foreign currency; and
(d)       an exchange traded CFD over an exchange rate or foreign currency,
but does not include an instrument that meets the definition of Equity Derivative or Debt Derivative.
“Foreign Exchange Equivalent” means the value of a position calculated in accordance with Part A3.21 of Annexure 3 to this Schedule 1A.
“Forward Rate Agreement” means an agreement in which two parties agree that:
(a)        one party will make payments to the other of an amount of interest based on an agreed interest rate for a specified period from a specified date applied to an agreed principal amount;
(b)       no commitment is made by either party to lend or borrow the principal amount; and
(c)        the exposure is limited to the interest difference between the agreed and actual market rates at settlement.
“Free Delivery” means a trade where delivery of the Financial Instrument is made to a client or Counterparty without receiving payment or where a payment is made without receiving a Financial Instrument, regardless of whether the client or Counterparty is issuer sponsored or participant sponsored.
“Fund Manager” means any licensed responsible entity, agent of a responsible entity, trustee or manager whose ordinary business it is to buy or sell Financial Instruments and make investment decisions on behalf of an independent third party.
“Future” means a contract which is traded on an exchange, subject to a Primary Margin Requirement and which is:
(a)        a contract to make an adjustment between the parties on an agreed future date as to the value on that date of an interest rate, a foreign currency, an Equity, basket or index, or some other agreed factor; or
(b)       a deliverable bond futures contract or deliverable share futures contract.
“Government Debt Instrument” means any form of government financial instrument including a bond, treasury note or other short term instrument, and a Debt Derivative of any
of those instruments where:
(a)        it is issued by, fully guaranteed by, or fully collateralised by a Debt Instrument issued by:
(i)         the Australian Commonwealth, State (including Territories) governments; or
(ii)       a central government or central bank within the OECD;
(b)       it is issued by, or fully guaranteed by, a non-OECD country central government or central bank, has a residual maturity of one year or less and is denominated in local currency and funded by liabilities in the same currency.
 “Group of Connected Persons” means two or more persons or entities where:
(a)        each person or entity is a Related/Associated Person of each other person or entity; or
(b)       the persons who have control of the management of each entity or have been appointed as directors of each entity are substantially the same.
“Hybrid ETF” means a managed fund:
(a)        that is listed and quoted on a stock exchange (and in Australia is registered as a managed investment scheme under the Corporations Act); and
(b)       where, under an open prospectus, the units can only be subscribed for and redeemed in cash or in kind; and
(c)        that is subscribed for and redeemed in a “primary” market and existing units are traded in a “secondary” market; or
(d)       that does not satisfy all of the requirements of a Classical ETF but satisfies the three criteria referred to in paragraphs (a), (b) and (c).
“Immediate Family” in relation to a person means that person’s spouse and any non-adult children.
“In the Money” means:
(a)        in relation to call Options, that the current market price of the underlying instrument is greater than the exercise price; and
(b)       in relation to put Options, that the current market price of the underlying instrument is less than the exercise price.
“Large Exposure Risk Requirement” is the absolute sum of a Market Participant’s:
(a)        counterparty large exposure risk amount calculated in accordance with Annexure 2 to this Schedule 1A; and
(b)       issuer large exposure risk amount calculated in accordance with Annexure 2 to this Schedule 1A.
“Liquid” means realisable or otherwise convertible to cash within 30 days and in the case of a Financial Instrument, means the Financial Instrument meets the following criteria:
(a)        there are genuine independent offers from third parties to the Market Participant;
(b)       prices or rates exist that closely approximate the last sale price or rate in the Financial Instrument (whether exchange traded or over-the-counter);
(c)        payment/settlement can be effected within the settlement conventions applicable to the Financial Instrument; and
(d)       there is sufficient liquidity in the market to ensure a ready sale of the position held.
“Liquid Capital” means the sum of:
(a)        Core Capital;
(b)       cumulative Preference Shares;
(c)        Approved Subordinated Debt; and
(d)       revaluation reserves other than Financial Asset Revaluation Reserves;
less the sum of:
(e)        Excluded Assets; and
(f)        Excluded Liabilities.
“Liquid Margin” means the amount calculated by deducting the Total Risk Requirement amount from the amount of Liquid Capital.
“Market Spot Exchange Rate” means the closing rate of exchange for foreign currencies against Australian dollars on each Business Day, having a settlement period of 2 days.
“Non-Standard Risk Requirement” means the amount calculated in accordance with Rule S1A.2.9 to cover unusual or non-standard exposures.
“OECD” means the Organisation for Economic Co-operation and Development.
“Operational Risk Requirement” means the amount calculated in accordance with subrule S1A.2.3(1) which is required to cover exposures associated with commencing and remaining in business arising separately from exposures covered by other risk requirements.
“Option” means a contract which gives the holder the option or right, exercisable at or before a specified time to:
(a)        buy (whether by way of issue or transfer) or sell a quantity of a Financial Instrument or a foreign currency; or
(b)       be paid an amount of money calculated by reference to the value of a Financial Instrument, foreign currency or index as specified in the contract.
“OTC Derivative” means a Derivative which is not traded on an exchange.
“Other Managed Fund” means a managed fund:
(a)        that is not listed and quoted on a stock exchange (and in Australia is registered as a managed investment scheme under the Corporations Act); or
(b)       that is listed and quoted on a stock exchange but does not satisfy all of the requirements of a Classical ETF or Hybrid ETF.
“Position Risk Factors” are the percentages applied to principal positions as specified in Tables A5.1.1, A5.1.2, A5.1.3 and A5.1.7 of Annexure 5 to this Schedule 1A.
“Position Risk Requirement” is the absolute sum of the position risk amounts for a Market Participant’s:
(a)        Equity and Equity Derivative positions calculated in accordance with Parts A3.1 to A3.9 of Annexure 3 to this Schedule 1A;
(b)       Debt Instrument and Debt Derivative positions calculated in accordance with Parts A3.10 to A3.17 of Annexure 3 to this Schedule 1A; and
(c)        foreign exchange and Foreign Exchange Derivative positions calculated in accordance with Parts A3.18 to A3.22 of Annexure 3 to this Schedule 1A.
“Positive Credit Exposure” means an exposure to a Counterparty such that if the Counterparty were to default on its obligations under:
(a)        an individual transaction; or
(b)       to the extent allowed by Schedule 1A, a group of transactions, contracts, arrangements or agreements,
the Market Participant may incur a financial loss.
“Preference Share” means a preference share that is redeemable solely at the request of the Market Participant.
“Primary Margin Requirement” means the amount which a Market Participant lodges or is notionally required to lodge as a deposit to cover potential daily worse case price movements in the relevant market, lodged in accordance with the rules of an exchange or clearing house against open positions registered in the name of the Market Participant on the exchange or clearing house.
“Qualifying Debt Instruments” means Debt Instruments that are:
(a)        rated investment grade by at least two of the credit rating agencies recognised by the Australian Prudential Regulation Authority and specified in Table A5.1.5 in Annexure 5 to this Schedule 1A;
(b)       rated investment grade by one credit rating agency recognised by the Australian Prudential Regulation Authority and specified in Table A5.1.5 in Annexure 5 to this Schedule 1A, and the issuer has its ordinary shares included in a Recognised Market Index;
(c)        unrated but the Issuer of the Debt Instrument has its ordinary shares included in a Recognised Market Index and the Debt Instruments are reasonably deemed by the Market Participant to be of comparable investment quality to one or more of the categories of Qualifying Debt Instrument as described in this definition;
(d)       issued by, or guaranteed by, Australian local governments and Australian public sector entities other than those which have corporate status or operate on a commercial basis;
(e)        issued by, or fully guaranteed by, a non-OECD country’s central government and central bank and which have a residual maturity of over one year and are denominated in local currency and funded by liabilities in the same currency;
(f)        issued by or collaterised by claims on, an international agency or regional development bank including the International Monetary Fund, the International Bank for Reconstruction and Development, the Bank for International Settlements and the Asian Development Bank;
(g)       issued, guaranteed, first endorsed or accepted by an Australian ADI or a bank incorporated within the OECD or a non-OECD bank accorded the same credit risk weight as an OECD bank by the Australian Prudential Regulation Authority provided that such instruments do not qualify as capital of the issuing institution;
(h)       issued, guaranteed, endorsed or accepted by a non-OECD bank and which have a residual maturity of one year or less provided that such instruments do not qualify as capital of the issuing institution; or
(i)         issued by or guaranteed by OECD country, State and regional governments and OECD public sector entities.
“Recognised Market Index” means an index specified in Table A5.1.6 in Annexure 5 to this Schedule 1A.
“Related/Associated Person” means:
(a)        a partner, director, employee, officer or consultant of a Market Participant or of a company which is a partner of a Market Participant;
(b)       a person who is a member of the Immediate Family of a person referred to in paragraph (a);
(c)        the trustee of a Family Trust of a person referred to in paragraph (a);
(d)       an entity which is:
(i)         controlled by a person referred to in paragraphs (a), (b) or (c) or any of those persons acting together; or
(ii)       a corporation in which a person referred to in paragraphs (a) or (b) is beneficially entitled to more than 50% of the issued capital;
(e)        an entity which is the holding company, or which is controlled by the holding company, of a Market Participant or of a company which is a partner of a Market Participant;
(f)        a person who is a Substantial holder of a Market Participant or of a company which is a partner of a Market Participant;
(g)       an associate of a Market Participant (as defined in each section of Part 1.2, Division 2 of the Corporations Act) or of a company which is a partner of a Market Participant; and
(h)       a lender who is a party to an Approved Subordinated Loan Deed or a related entity or associate of that lender.
“Related/Associated Person Balance” is an amount owing to the Market Participant by a person who is a Related/Associated Person of the Market Participant and excludes an amount owing as a result of:
(a)        the deposit with, loans to or other amounts owing from an Approved Deposit Taking Institution;
(b)       the deposit of funds as a margin or deposit with a person licensed to trade or clear Futures or Options to the extent that those funds relate to an open position; or
(c)        a transaction in a Financial Instrument under Annexure 1 to this Schedule 1A which is made on terms no more favourable to the Related/Associated Person than those on which it would be reasonable to expect the Market Participant to make if it had entered into the transaction on an arm’s length basis, but not including sundry fees, interest or similar amounts owing on such transactions; or
(d)       brokerage or similar amounts owing that were reported or created less than 30 days previously and which arose as a result of a third party clearing arrangement entered in to with a Clearing Participant that is a Related/Associated Person of the Market Participant.
“Securities Lending and Borrowing” means any transaction undertaken by a Market Participant under an Equity or Debt Instrument lending or borrowing agreement, a repurchase or reverse repurchase agreement or an agreement for the sale and buyback of Equity or Debt Instruments.
“Substantial holder” means a person who has or would have a substantial holding if Part 6C of the Corporations Act applied to that corporation.
“Swap” means a transaction in which two counterparties agree to exchange streams of payments over time on a predetermined basis.
“Total Risk Requirement” means the sum of:
(a)        Operational Risk Requirement;
(b)       Counterparty Risk Requirement;
(c)        Large Exposure Risk Requirement;
(d)       Position Risk Requirement;
(e)        Underwriting Risk Requirement; and
(f)        Non-Standard Risk Requirement,
however where an asset or liability is an Excluded Asset or Excluded Liability a risk requirement otherwise applicable under paragraphs (a) to (e) is not included.
“Trading Day” means a day on which a relevant exchange traded or over the counter market has been open for trading.
“Underwriting” means a commitment to take up Equity or Debt Instruments where others do not acquire or retain them under an underwriting agreement, sub underwriting agreement, or other similar agreement calculated using:
(a)        the price stated in the Underwriting agreement; or
(b)       in the case of new float where the price is not known, the indicative price, until the price is known.
“Underwriting Risk Requirement” is the absolute sum of the risk amounts calculated in accordance with Annexure 4 to this Schedule 1A.
Note: There is no penalty for this Rule.
S1A.1.2 Interpretation
(1) Schedule 1A must be interpreted and applied consistently across positions in the same Financial Instruments throughout a period covered by a return required under Part 9.2.
(2) References to dollar amounts are references to Australian dollar amounts.
(3) The Annexures to Schedule 1A form part of Schedule 1A and a reference to Schedule 1A in these Rules includes a reference to those Annexures.
Note: There is no penalty for this Rule.
Part S1A.2 Obligations of Market Participants
S1A.2.1 Core Capital, Liquid Capital and Total Risk Requirement
A Market Participant must ensure that its:
(a)        Liquid Capital is at all times greater than its Total Risk Requirement; and
(b)       Core Capital is at all times not less than $100,000,
provided that in satisfying the requirement in paragraph (b), a Market Participant may satisfy the requirement in accordance with, and subject to, subrule S1A.2.4(8).
Maximum penalty: $1,000,000
S1A.2.3 Risk Requirements and Risk Amounts
(1) A Market Participant must calculate:
(a)        its Operational Risk Requirement; and 
(b)       an operational risk amount, as the sum of:
(i)         the amount of $100,000; and
(ii)       8% of the sum of the Market Participant’s:
(A)       Counterparty Risk Requirement;
(B)       Position Risk Requirement; and
(C)       Underwriting Risk Requirement.
(2) A Market Participant must calculate in accordance with Annexure 1 to this Schedule 1A:
(a)        its Counterparty Risk Requirement; and
(b)       a counterparty risk amount for each of its Positive Credit Exposures to a Counterparty for transactions in Financial Instruments referred in Annexure 1 to this Schedule 1A, except those transactions which relate to Excluded Assets.
(3) A Market Participant must calculate in accordance with Annexure 2 to this Schedule 1A:
(a)        its Large Exposure Risk Requirement; and
(b)       its large exposure risk amount for each:
(i)         Counterparty; and
(ii)       Equity Net Position and Debt Net Position relative to:
(A)       Liquid Capital; and
(B)       an issue or issuer.
(4) A Market Participant must calculate in accordance with Annexure 3 to this Schedule 1A:
(a)        its Position Risk Requirement;
(b)       a position risk amount for all positions in Financial Instruments, except those positions which are Excluded Assets; and
(c)        a position risk amount for other assets and liabilities which are denominated in a currency other than Australian dollars except for those assets which are Excluded Assets.
(5) A Market Participant must calculate in accordance with Annexure 4 to this Schedule 1A:
(a)        its Underwriting Risk Requirement; and
(b)       an underwriting risk amount for each Underwriting.
(6) A Market Participant must calculate a Non-Standard Risk Requirement in accordance with Rule S1A.2.9.
Maximum penalty: $100,000
S1A.2.3A Authorisation
(1) A Market Participant must be authorised by ASIC in writing for each of the risk calculation methods it uses for the purposes of Rule S1A.2.3.
(2) An authorisation given by ASIC under subrule (1) will specify which risk calculation methods the Market Participant is authorised to use. 
(3) A Market Participant must obtain an authorisation from ASIC under subrule (1) prior to the use of a particular risk calculation method.
(4) A Market Participant will only be authorised to use a particular risk calculation method under subrule (1) after having satisfactorily demonstrated its ability to calculate risk amounts under that method.
Maximum penalty: $100,000
S1A.2.4 Approved Subordinated Debt
(1) A Market Participant entering into a subordination arrangement may only include an amount owing under such an arrangement in its Liquid Capital if:
(a)        the subordination arrangement has the prior approval of ASIC under subrules (2) and (3); and
(b)       the amount is notified to and approved by ASIC prior to being drawn down under the subordination arrangement and complies with subrule (4) where relevant.
(2) ASIC will not approve a subordination arrangement unless in the opinion of ASIC:
(a)        subject to subrule (6), the amount owing to the lender under the subordination arrangement will not be repaid until all other debts which the Market Participant owes to any other persons are repaid in full; and
(b)       the obligation to pay any amount owing under the subordination arrangement is suspended if Rule S1A.2.1 is no longer complied with.
(3) ASIC will not approve a subordination arrangement unless the Market Participant has executed an Approved Subordinated Loan Deed in respect of the subordination arrangement.
(4) If a Market Participant is a partnership which has entered into an approved subordination arrangement under subrules (2) and (3) and there is a change in the composition of the Market Participant, then an amount owing under the previously approved subordination arrangement must not be included in its Liquid Capital unless ASIC is of the opinion that this arrangement has been renewed or amended so as to ensure that all partners after the change in composition are bound by it.
(5) A Market Participant must comply with the terms of the Approved Subordinated Loan Deed and any associated agreement to which it, ASIC, and the lender are parties and must ensure the lender’s compliance with these documents.
(6) Prior to its Bankruptcy, a Market Participant may repay an amount owing under an approved subordination arrangement only with the prior approval of ASIC.
(7) ASIC will not withhold its approval under subrule (6) if in the opinion of ASIC:
(a)        the Market Participant’s Liquid Capital divided by its Total Risk Requirement is capable of continuing to be greater than 1.2 on repayment; and
(b)       the Market Participant’s Core Capital is capable of continuing to be equal to or greater than the amount required under Rule S1A.2.1 when Approved Subordinated Debt is included under subrule (8).
(8) If a Market Participant does not hold sufficient Core Capital under paragraph S1A.2.1(b), then it may with the prior approval of ASIC include amounts owing under an approved subordination arrangement in calculating Core Capital for a 6 month period commencing on the date that the Market Participant first does not hold sufficient Core Capital.
(9) In forming an opinion as to whether a Market Participant is capable of continuing to meet the requirements in paragraphs (7)(a) and (b), ASIC may consider matters such as: 
(a)        the state of the overall market and the trend of the individual Market Participant’s share of that market; 
(b)       the ability of the Market Participant to continue as a going concern for a period that may exceed 30 days;
(c)        any waivers that exist at the time of the request; and 
(d)       the existence of any outstanding litigation.
Maximum penalty: $100,000
S1A.2.4A Excluded Assets
(1) Subject to subrule (2), where a Market Participant has an asset due from one entity (which would ordinarily be treated as an Excluded Asset) which is linked to an offsetting liability payable to another entity, the Market Participant may net the asset and liability so that only the net amount (if positive) is reported as an Excluded Asset.
(2) The Market Participant may only net an asset with a liability and report the net amount as an Excluded Asset under subrule (1) if the Market Participant:
(a)        has obtained written authorisation from ASIC for the purposes of this Rule;
(b)       has a documented, legally binding contract or agreement with the Counterparty to the liability that specifies that the liability cannot be enforced unless the asset is realised;
(c)        continues to report the asset and liability on a gross basis in the balance sheet section of the Monthly Risk-Based Return or alternative form of return required by Rule 9.2.3;
(d)       reports the net amount as an “Other Prescribed Asset” in the “Core Capital, Liquid Capital, Liquid Margin and Ratio” section of the Monthly Risk-Based Return or alternative form of return required by Rule 9.2.3; and
(e)        includes the following details in the “Additional Comments” section of the Monthly Risk-Based Return or alternative form of return required by Rule 9.2.3:
The following assets and liabilities have been netted for the purpose of calculating the amount included in the Excluded Asset “other prescribed asset” line of the “Core Capital, Liquid Capital, Liquid Margin and Ratio” section of the capital liquidity return.
Asset—describe the nature of the asset/s $
less Liability—describe the nature of the liability/s     $( )
Excluded Asset—other prescribed asset $ net amount
(3) A Market Participant must treat the following amounts as Excluded Assets if they remain outstanding for greater than 30 calendar days:
(a)        Underwriting fees;
(b)       fees due for managing a client portfolio;
(c)        corporate advisory fees; and
(d)       other sundry debtors.
Note: There is no penalty for this Rule.
S1A.2.5 Redeemable Preference Shares
(1) A Market Participant must not redeem any redeemable Preference Shares issued by it in whole or in part without the prior written approval of ASIC.
(2) ASIC will not withhold its approval under subrule (1) if in the opinion of ASIC the Market Participant’s Liquid Capital divided by its Total Risk Requirement is capable of continuing to be greater than 1.2 on redemption.
(3) In forming an opinion as to whether a Market Participant is capable of continuing to meet the requirement in subrule (2), ASIC may consider matters such as: 
(a)        the state of the overall market and the trend of the individual Market Participant’s share of that market; 
(b)       the ability of the Market Participant to continue as a going concern for a period that may exceed 30 days;
(c)        any waivers that exist at the time of the request; and 
(d)       the existence of any outstanding litigation.
Maximum penalty: $100,000
S1A.2.6 Guarantees and Indemnities
(1) A Market Participant may only give a guarantee or indemnity:
(a)        for the purposes of these Rules, the ASX Market Integrity Rules, the Chi-X Australia Operating Rules, the ASX Operating Rules, the ASX Clear Operating Rules or the ASX Settlement Operating Rules;
(b)       in the ordinary course of the conduct of its securities or derivatives business;
(c)        outside the ordinary course of its securities or derivatives business if a maximum liability is specified in the guarantee or indemnity at the time it is entered into; or
(d)       to settle legal proceedings that have been threatened or issued against it,
and must not give a cross-guarantee.
(2) For the purposes of paragraphs (1)(b) and (c), the expression “ordinary course of the conduct of its securities or derivatives business” includes, but is not limited to, a guarantee or indemnity given by a Market Participant to:
(a)        a lessor for lease rental commitments on premises, computer equipment and other property, plant and equipment by the service company of the Market Participant where those premises and equipment are for use exclusively or predominantly by the Market Participant; 
(b)       financial institutions for withdrawal of funds by the Market  Participant against uncleared cheques; 
(c)        ASIC to support the issuance of an Australian financial services licence to the Market Participant; and
(d)       a lessor for lease rental payments on a residence for a member of staff, normally based overseas, who is temporarily located in Australia to perform their duties,
but would not normally include:
(a)        charges, guarantees or indemnities given over the financial performance of a subsidiary or Related/Associated Person of the Market Participant such as a separately incorporated futures broker; and
(b)       charges, guarantees or indemnities given to support Underwriting activities that are not booked in the Market Participant. 
(3) A Market Participant that is a member of a consolidated group within the meaning of section 703-5 of the Income Tax Assessment Act 1997 (Cth) must, when it first becomes a member of that group, report in the “Additional Comments” section of the next Monthly Risk-Based Return required by Rule 9.2.3:
(a)        the date its group elected to become a consolidated group;
(b)       the date it entered into a tax sharing agreement (if applicable);
(c)        the date it entered into a tax funding agreement (if applicable); and 
(d)       any other information that may be relevant in assessing the Market Participant’s financial position as a result of it being part of a consolidated group,
and any changes to these details must be reported in the “Additional Comments” section of subsequent Monthly Risk-Based Returns required by Rule 9.2.3. 
Maximum penalty: $100,000
S1A.2.7 Records and Accounts
(1) A Market Participant must maintain records and working papers in sufficient detail to show continuous compliance with Rule S1A.2.1 for seven years.
(2) The records and working papers referred to in subrule (1) must, at a minimum:
(a)        show the nature of the outstanding transactions and commitments for which the Market Participant was liable;
(b)       disclose the financial position of the Market Participant at any point in time;
(c)        detail and support the calculations required to quantify the Total Risk Requirement and demonstrate that the Market Participant was complying with the Risk Based Capital Requirements; 
(d)       permit the Market Participant to prepare a return required by these Rules using those records if so requested; and
(e)        permit the Market Participant to reproduce a calculation of its Liquid Capital or Total Risk Requirement at the close of business on each day in the seven year period.
(3) A Market Participant must prepare its accounts and returns in accordance with accounting standards which are generally accepted in Australia, unless ASIC approves otherwise.
(4) A Market Participant must take any amounts arising from the marking-to-market of principal positions in Financial Instruments to the Market Participant’s profit and loss account immediately and include those amounts in the Market Participant’s overall accounting for taxation.
(5) A Market Participant must record a transaction in its accounts on the date on which it enters into an irrevocable commitment to carry out the transaction.
Maximum penalty: $100,000
S1A.2.8 Valuations and Foreign Currencies
(1) A Market Participant must mark to market each of its principal positions in Financial
Instruments unless Schedule 1A provides otherwise:
(a)        at least once every Business Day; and
(b)       in the following manner:
(i)         subject to subparagraphs (ii) to (v), a position must be valued at its closing market price:
(A)       which is the current bid price for a long position; and
(B)       which is the current offer price for a short position;
or at last price, closing price or mid price;
(ii)       an Option or rights position may be valued using a value derived from an option pricing model approved by ASIC for use in the contingent loss matrix method;
(iii)      an exchange traded Option position may be valued using the “fair value” published by a reputable independent information source, where the “fair value” source is used consistently across all exchange traded Option positions of the Market Participant at all times;
(iv)      an Option or rights position which does not have a published market price under subparagraph (i) or which cannot be valued using an options pricing model under subparagraph (ii) or the “fair value” under subparagraph (iii) must be valued as follows:
(A)       for a purchased Option or right, the In the Money amount multiplied by the quantity underlying the Option; and
(B)       for a written Option, the sum of the In the Money amount multiplied by the quantity underlying the Option and the initial premium received for the Option;
(v)       a Swap or a Forward Rate Agreement must be valued:
(A)       having regard to the net present value of the future cash flows of the contract; and
(B)       using current interest rates relevant to the periods in which the cash flows will arise.
(2) For the purposes of sub-subparagraph (1)(b)(iv)(B), if a written Option was In the Money at the time the contract was written, the In the Money amount for the purposes of this Rule may be taken to be the current In the Money amount less the In the Money amount at the time the contract was written.
(3) If a Market Participant holds a Financial Instrument denominated in a foreign currency then it:
(a)        must calculate a risk amount for each risk type in that foreign currency; and
(b)       convert the risk amount in paragraph (a) to Australian dollars at the Market Spot Exchange Rate,
in all cases other than where the Market Participant is calculating risk amounts for the purposes of Parts A3.18 to A3.22 of Annexure 3 to this Schedule 1A or where this Schedule 1A expressly provides otherwise.
Maximum penalty: $100,000
S1A.2.9 Unusual or Non-Standard Exposures
If a Market Participant has an exposure arising from a transaction which is not:
(a)        specifically described in this Schedule 1A; or
(b)       is not in a form which readily fits within this Schedule 1A,
the risk requirement of a Market Participant in relation to that exposure is the full market value of the transaction unless ASIC approves otherwise.
Note: There is penalty for this Rule.
S1A.2.9A Margin lending facilities
Where a Market Participant offers margin lending facilities to clients:
(a)        the risk requirement for the exposure with respect to margin calls is:
(i)         equal to 100% of the margin call that the Market Participant makes on a client, where that margin call has either not been paid by the client, or sufficient of the underlying securities have not been sold by the Market Participant to cover the margin call; and
(ii)       applies from the time the margin payment was due; and
(b)       where the client’s actual gearing level exceeds the maximum permitted gearing level by more than 5%, the full amount needed to bring the loan balance back to the maximum permitted gearing level must be taken as the risk requirement for the exposure immediately, regardless of whether the Market Participant has made a margin call on the client.
Maximum penalty: $100,000
S1A.2.9B Hybrid ETFs
Where a Market Participant holds a principal position in a Hybrid ETF that contains a material percentage of assets other than physical Equity securities, physical Debt Instruments or property, the Market Participant must treat the position as a non-standard exposure and the risk requirement must be the full market value of the Hybrid ETF, unless ASIC approves otherwise.
Maximum penalty: $100,000
S1A.2.9C Other Managed Funds
Where a Market Participant has a principal position in an Other Managed Fund that contains a material percentage of assets other than physical Equity securities, physical Debt Instruments or property, the Market Participant must treat the principal position as a non­standard exposure and the risk requirement must be the full market value of the Other Managed Fund, unless ASIC approves otherwise.
Maximum penalty: $100,000
S1A.2.10 Underwriting Register
A Market Participant must maintain a register of its Underwritings which records:
(a)        the date of commencement, crystallisation and termination of each Underwriting and the parties to each Underwriting;
(b)       the identity, number and price of the Equities or Debt Instruments the subject of each Underwriting;
(c)        the amount underwritten by the Market Participant under each Underwriting; and
(d)       any reduction in the amount underwritten under each Underwriting due to an amount being:
(i)         sub-underwritten; or
(ii)       received under a client placement,
and the date that this reduction occurs.
Maximum penalty: $100,000
Schedule 1B
Note: There is no Schedule 1B.
Annexure 1 to Schedule 1A: Counterparty Risk Requirement
Part A1.1 Counterparty Risk Requirement
A1.1.1 Nature of counterparty risk amount
(1) For each type of counterparty risk that gives rise to a Positive Credit Exposure, a counterparty risk amount:
(a)        must be calculated in accordance with the methods set out in this Annexure 1; and
(b)       may be reduced by a counterparty risk weighting in accordance with Part A1.8.
(2) For the purposes of subrule A1.2.2(1), a Positive Credit Exposure exists on a Client Balance regardless of whether the Client Balance is positive or negative.
A1.1.1A Treatment: Classical ETFs
(1) Subject to subrule (2), a Market Participant is not required to calculate a counterparty risk amount under this Annexure in relation to a subscription for or redemption of a unit in a Classical ETF.
(2) In the event of default in the settlement of a primary market transaction in Classical ETFs:
(a)        in the case of a subscription for Classical ETF units, where the Market Participant transfers underlying securities and does not receive the corresponding Classical ETF units or some other cash consideration; or
(b)       in the case of a redemption, where the Market Participant transfers Classical ETF units and does not receive the corresponding underlying securities, or some other cash consideration,
a counterparty risk amount must be calculated under the Free Delivery method from the time those assets or cash were due to be settled.
(3) A Market Participant is required to calculate a counterparty risk amount under this Annexure for all secondary market transactions in Classical ETF units.
A1.1.1B Treatment: Hybrid ETFs
(1) Subject to subrule (2), a Market Participant is not required to calculate a counterparty risk amount under this Annexure in relation to a subscription for or redemption of a unit in a Hybrid ETF.
(2) In the event of a default in the settlement of a primary market transaction in Hybrid ETFs:
(a)        in the case of a subscription for Hybrid ETF units, where the Market Participant transfers cash and does not receive the corresponding Hybrid ETF units; or
(b)       in the case of a redemption, where the Market Participant transfers Hybrid ETF units and does not receive the corresponding cash,
a counterparty risk amount must be calculated under the Free Delivery Method from the time those assets or cash were due to be settled.
(3) A Market Participant is required to calculate a counterparty risk amount under this Annexure for all secondary market transactions in Hybrid ETF units.
A1.1.1C Treatment: Other Managed Funds
A Market Participant is not required to calculate a counterparty risk amount under this Annexure in relation to a subscription for or redemption of a unit in an Other Managed Fund.
Part A1.2 Methods
A1.2.1 Overview
There are separate methods for measuring counterparty risk amounts for each of the following transaction types:
Table A1.1:    Method for measuring counterparty risk: Transaction type
Transaction Type                                     

Non Margined Financial Instrument
Free Delivery
 
Securities Lending and Borrowing

Margined Financial Instrument
OTC Derivative or a Warrant held as principal
Sub  Underwritten Position
 

A1.2.2 Non-margined Financial Instruments method
(1) For unsettled trades in Financial Instruments which are not margined and not covered by one of the other methods in this Annexure, the counterparty risk amount is 3% of the Client Balance, where this balance does not include trades which remain unsettled with the Counterparty for greater than 10 Business Days following the transaction date and regardless of whether the Counterparty is issuer or participant sponsored.
(2) A Market Participant may reduce the Client Balance by the amount of Financial Instruments held by the Market Participant on behalf of the Counterparty if they specifically relate to the sale trades pending settlement with the market or by the amount of collateral held by the Market Participant on behalf of the specific Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction and is not the securities underlying the Counterparty’s purchase; 
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark to market value and offset on a transaction-by­transaction basis; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the Counterparty in circumstances where:
(i)         the Market Participant has established that the Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions specified in the collateral agreement. 
(3) For unsettled trades in Financial Instruments which are not margined and not covered by one of the other methods in this Annexure, the counterparty risk amount for trades remaining unsettled for greater than 10 Business Days following the transaction date is at the choice of the Market Participant:
(a)        either:
(i)         3% of the contract value; or
(ii)       the excess of:
(A)       the contract value over the market value of each Financial Instrument in the case of a client purchase; and
(B)       the market value of each Financial Instrument over the contract value in the case of a client sale,
whichever is the greater; or
(b)       100% of the contract value for a client purchase or 100% of the market value for a client sale.
(4) A Market Participant may reduce the contract values and the excesses by the amount of collateral held by the Market Participant on behalf of the Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction and is not the securities underlying the client purchase;
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark to market value and offset on a transaction by transaction basis; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the Counterparty in circumstances where:
(i)         the Market Participant has established that the Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such 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 client from the time that the trade is executed;
(b)       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 not the clearer for that transaction, the Market Participant must calculate a counterparty risk amount on its exposure to that client from the time that the clearer seeks recourse from the Market Participant for a client failing to settle its obligations with the Clearing Participant;
(c)        where the Market Participant has entered into an on-market or off-market purchase or sale transaction as agent for two clients (including where either of the clients 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 the two clients from the time that the trade is executed;
(d)       where the Market Participant has entered into an on-market or off-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 acting as principal on one side of the transaction and the Market Participant is not the clearer for that transaction, the Market Participant must calculate:
(i)         a counterparty risk amount on its exposure to its Clearing Participant from the time that the trade is executed until the clearer has settled; and
(ii)       a counterparty risk amount on its exposure to the client from the time that the clearer seeks recourse from the Market Participant for a client failing to settle its obligations with the Clearing Participant.
(e)        where the Market Participant has entered into:
(i)         an on-market purchase or sale transaction as principal;
(ii)       an off-market client facilitation; or
(iii)      an off-market underwritten placement of existing shares via a book build,
and does not clear its own trades, the Market Participant must calculate a counterparty risk amount on its exposure to its Clearing Participant from the time that the trade is executed until the clearer has settled;
(f)        where the Market Participant acts as underwriter of an initial public offering or a placement of new shares, the Market Participant must calculate a counterparty risk amount on its exposure to each buying client from which it receives an application, from the time that the Market Participant pays the issuer until such time as the buying client pays the Market Participant;
(g)       where the Market Participant executes an agency transaction in unlisted securities or through a foreign broker, the Market Participant must calculate a counterparty risk amount on its exposure to both Counterparties; 
(h)       where the Market Participant has trades sitting in a client suspense account, the Market Participant must treat each individual trade as a Client Balance and calculate a counterparty risk amount on each Client Balance, until the trade is actually booked to a client;
(i)         where the Market Participant has amounts owing as a result of day trading losses, failed transactions fees or interest charged on failed trades, the Market Participant must include these amounts in the Client Balance and where the amount remains unsettled after 10 Business Days, the Market Participant must calculate a counterparty risk amount as 100% of the amount owing;
(j)         where the Market Participant executes a transaction on behalf of another Market Participant or Clearing Participant which is trading as principal, then the executing participant must establish the entity that is trading as principal as a client and calculate a Client Balance for that entity;
(k)       where the Market Participant executes a transaction on market with another Market Participant and the trade is removed from novation by the Market Participant and its Counterparty so that the Market Participant and its Counterparty can settle the trade directly or in another clearing house, the Market Participant must calculate a counterparty risk amount for its exposure to the Counterparty or the other clearing house;
(l)         where the Market Participant executes a transaction that is reported to, but not registered with, the Approved Clearing Facility (and therefore not novated to the Approved Clearing Facility) and the transaction gives rise to a counterparty exposure for the Market Participant, the Market Participant must calculate a counterparty risk amount on its exposure to the Counterparty or client; and
(m)      where a transaction:
(i)         is executed in a deferred settlement market (where the normal settlement period is extended by the operator of the market for a particular security and the extension applies to all transactions in that security and all participants in that market); or 
(ii)       is a forward transaction (where the two parties to a transaction have agreed to a time for settlement that is later than the normal settlement period for that type of transaction),
and the Market Participant:
(iii)      clears its own trades, the Market Participant must calculate a counterparty risk amount from the time the transaction is executed until the time the transaction is settled, even if the time until settlement date is greater than 30 days;
(iv)      is not the clearer for that transaction, the Market Participant must calculate a counterparty risk amount on its exposure to the client from the time that the clearer seeks recourse from the Market Participant for a client failing to settle its obligations with the Clearing Participant.
(11) For the purposes of determining a Client Balance when dealing with a Fund Manager, the Market Participant’s Counterparty is determined as follows: 
(a)        if the Market Participant is immediately provided with the underlying client details by the Fund Manager, or if the Market Participant has a standing instruction for the underlying client details to be provided, the Market Participant must treat the underlying client as the Counterparty;
(b)       if the Market Participant books trades directly to the Fund Manager or its nominee company and the Fund Manager does not provide details of the underlying client, the Market Participant is entitled to treat the Fund Manager as the Counterparty.
A1.2.3 Free Delivery method
(1) For a Free Delivery in a Financial Instrument, the counterparty risk amount for the Counterparty is:
(a)        8% of that part of the contract value subject to a Free Delivery, where payment or delivery of the Financial Instrument which is the subject of a Free Delivery remains outstanding for less than 2 Business Days following the settlement date; and
(b)       100% of that part of the contract value subject to a Free Delivery, where payment or delivery of the Financial Instrument remains outstanding for greater than 2 Business Days following the settlement date.
For the purposes this subrule, “settlement date” means the date that the Market Participant makes the Free Delivery (that is, the day that the Market Participant settles with the client or Counterparty) and not the market settlement date.
(2) A Market Participant may reduce the contract value by the amount of collateral held by the Market Participant on behalf of the Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction and is not the securities underlying the client purchase;
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark to market value and offset on a transaction by transaction basis; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the Counterparty in circumstances where:
(i)         the Market Participant has established that the Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions specified in the collateral agreement. 
(3) For the purposes of subrule (2), if the security lodged as collateral is subject to:
(a)        a trading halt, the last market value may be used; and
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
(4) Without limitation, the Market Participant must calculate a counterparty risk amount under this method where the Market Participant has applied for stock, allocation interest units or instalment receipts on behalf of clients and the stock, allocation interest units or instalment receipts are registered into the client’s issuer or participant sponsored account prior to the client paying, from the time the Market Participant pays the issuer or issuer’s agent until the time the client pays the Market Participant.
(5) Where a Market Participant makes a partial Free Delivery whereby:
(a)        for a client purchase, the Market Participant delivers Financial Instruments to the client or Counterparty when the client or Counterparty has made a partial payment; or
(b)       for a client sale, the Market Participant makes either full or part payment to the client or Counterparty when the client or Counterparty has not provided any or all of the particular Financial Instruments,
only the part of the contract value that the Market Participant has settled with the client or Counterparty but which the client or Counterparty has not yet settled with the Market Participant is included in the calculation under this method while the part of the contract value that the Market Participant has not yet settled with the client or Counterparty continues to form part of the Client Balance and continues to be subject to a counterparty risk amount under Rule A1.2.2.
A1.2.4 Securities Lending and Borrowing method
(1) For the purposes of this Rule, “counterparty exposure” means the amount by which the market value of Equity or Debt Instruments or cash given by the Market Participant to the Counterparty exceeds the market value of Equity or Debt Instruments or cash received by the Market Participant from the Counterparty.
(2) Counterparty exposure may be calculated on a net basis where the relevant transactions are subject to a written agreement that supports netting across different transactions.
(3) For a Securities Lending and Borrowing transaction, the counterparty risk amount for a Counterparty, from the transaction date is:
(a)        zero, if across all Counterparties to Securities Lending and Borrowing transactions, the sum of each positive counterparty exposure is less than or equal to $10,000;
(b)       either:
(i)         8% of the counterparty exposure, where:
(A)       the Securities Lending and Borrowing is subject to a written agreement that supports netting across different transactions; and
(B)       the value of the counterparty exposure is less than or equal to 15% of the market value of Equity or Debt Instruments or cash received by the Market Participant from the Counterparty; or
(ii)       8% of the amount equivalent to 15% of the market value of the Equity or Debt Instruments or cash received by the Market Participant from the Counterparty plus 100% of the amount of the difference between the counterparty exposure and 15% of the market value of Equity or Debt Instruments or cash received by the Market Participant from the Counterparty, where:
(A)       the Securities Lending and Borrowing is subject to a written agreement that supports netting across different transactions; and
(B)       the value of the counterparty exposure is greater than 15% of the market value of the Equity or Debt Instruments or cash received by the Market Participant from the Counterparty; or
(c)        100% of the counterparty exposure, if:
(i)         paragraph (a) and paragraph (b) do not apply; or
(ii)       if paragraph (b) does apply but the Market Participant elects to calculate the amount under this paragraph (c).
(4) For the purposes of this Rule, in determining the market value of securities given or received by the Market Participant, if the securities are subject to:
(a)        a trading halt, the last market value may be used; and
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
A1.2.5 Margined Financial Instruments method
(1) For trades in Financial Instruments which are margined, the counterparty risk amount for a Counterparty:
(a)        is the full value of the outstanding settlement amount, premium, deposit or margin call that the Counterparty is required to pay to the Market Participant, regardless of whether or not the Market Participant is required to pay that amount to an exchange, clearing house or other entity;
(b)       is the full value of the outstanding settlement amount, premium, deposit or margin call that is due from an entity with respect to client or house trades cleared by that entity; and
(c)        commences at the time that amounts are normally scheduled for payment to the relevant exchange or clearing house.
(2) A Market Participant may reduce the unpaid settlement amount, premium, deposit or margin call by the amount of cash paid by the Counterparty or collateral held by the Market Participant on behalf of the Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction and is different to any cash or collateral paid to the relevant exchange or clearing house in respect to specific transactions;
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark to market value; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the client or Counterparty in circumstances where:
(i)         the Market Participant has established that the client or Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the client or Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions
specified in the collateral agreement. 
(3) For the purposes of paragraph (1)(a):
(a)        the obligation to calculate a risk amount for amounts owing from “normal agency clients” excluding other participants in the relevant market will be deemed to be from the time that amounts are normally scheduled for payment to the relevant exchange or clearing house, regardless of whether the Market Participant actually has to make a payment to the exchange or clearing house; and
(b)       the obligation to calculate a risk amount for amounts owing from other participants in the relevant market will be deemed to be from the close of business on the day the payment is due to be received.
(4) For the purposes of paragraph (1)(b), where a Market Participant undertakes a trade as principal in an exchange traded Derivatives and does not clear its own trades, the Market Participant must calculate a counterparty risk amount on its exposure to its Clearing Participant under this method that will equal the amount owed to the Market Participant by the clearer and will apply from close of business on the day the payment is due until the clearer has paid.
(5) For the purposes of subrule (2), if the security lodged as collateral is subject to:
(a)        a trading halt, the last market value may be used; or
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
A1.2.6 OTC Derivatives and Warrants executed as principal method
(1) For an OTC Derivative or warrant held as principal, the counterparty risk amount for a Counterparty is:
(a)        zero, for a written Option position where the premium due has been received in full;
(b)       100% of the premium for a written Option position where the premium due has not been received, from the time the Option is dealt until the premium is paid; and
(c)        otherwise, 8% of the aggregate of the credit equivalent amount which is calculated as the sum of:
(i)         a current credit exposure being the mark to market valuation of all contracts with a Positive Credit Exposure; and
(ii)       a potential credit exposure being the product of the absolute value of a contract’s nominal, notional or actual principal amount and the applicable potential credit exposure factor specified in Table A5.2.2 in Annexure 5 to Schedule 1A.
(2) A Market Participant may reduce the premium or credit equivalent amount by the amount of collateral held by the Market Participant on behalf of the Counterparty if:
(a)        the collateral is Liquid and only to the extent that it is Liquid;
(b)       the collateral is unrelated to a particular or specific transaction; 
(c)        the collateral is under the control of the Market Participant, able to be accessed by the Market Participant without the approval of a third party and not otherwise encumbered;
(d)       the collateral is valued at the mark to market value and where paragraph (1)(c) applies is deducted from the credit equivalent amount before multiplying the amount by 8%; and
(e)        the collateral arrangement is evidenced in writing by a legally binding agreement between the Market Participant and the Counterparty in circumstances where:
(i)         the Market Participant has established that the Counterparty and the persons signing the agreement have the legal capacity to enter into the agreement and provide the nominated collateral; and
(ii)       the agreement provides for the Market Participant to deal with that collateral in the event that the Counterparty defaults on its settlement of the relevant transactions to recover any amounts owed to the Market Participant,
and the Market Participant may only apply such collateral in accordance with the conditions specified in the collateral agreement. 
(3) For the purposes of subrule (2), if the security lodged as collateral is subject to:
(a)        a trading halt, the last market value may be used; or
(b)       a suspension, the market value should be taken as nil on the basis that the security is not Liquid.
(4) For the purposes of calculating a current credit exposure under subparagraph (1)(c)(i):
(a)        subject to paragraph (b), a calculation of a current credit exposure must be done on a transaction by transaction and Counterparty by Counterparty basis; 
(b)       where the Market Participant has more than one transaction of the same type with the same Counterparty, the Market Participant may net the positive and negative current credit exposures on those transactions, provided that:
(i)         the Market Participant has a legally binding and enforceable netting agreement with the Counterparty that covers the relevant transactions; and
(ii)       if, after netting, the current credit exposure to the Counterparty is negative, the Market Participant must calculate the current credit exposure as zero for the purpose of calculating the counterparty risk amount;
(c)        the Market Participant may only net the positive and negative current credit exposures arising from transactions denominated in different currencies, where the netting agreement referred to in subparagraph (b)(i) allows for multi-currency netting;
(d)       “mark to market valuation” means the market value for OTC Derivatives such as Options and warrants and the market to market gain/loss for OTC Derivatives where payments to/from the parties are based on changes in the price of the underlying product (for example, Swaps, forward foreign exchange); and
(e)        in the case of a warrant transaction:
(i)         if the warrant is subject to a trading halt (due to the underlying security being subject to a trading halt), the last market value may be used;
(ii)       if the warrant is subject to suspension, the warrant should be treated as an Excluded Asset on the basis that it is not Liquid.  
(5) For the purposes of calculating a potential credit exposure under subparagraph (1)(c)(ii):
(a)        a potential credit exposure must be calculated on every transaction, including those transactions with a negative or zero current credit exposure;
(b)       the potential credit exposures must not be netted; and
(c)        in the case of an equity Option or warrant, the notional face value is the underlying number of shares multiplied by the strike price. 
(6) For the purposes of subrule (1), “as principal” includes where the Market Participant enters into an off market facilitation role whereby the Market Participant “purchases” the Derivatives contract from client A and “sells” it to client B and neither client A nor B are aware of the identity of the other.
(7) A Market Participant must calculate a counterparty risk amount under this method for transactions in OTC Derivatives and warrants including, but not limited to, transactions in:
(a)        interest rate Options;
(b)       foreign currency Options;
(c)        single-currency interest rate Swaps;
(d)       cross-currency interest rate Swaps; 
(e)        basis Swaps;
(f)        Forward Rate Agreements; and
(g)       forward foreign exchange contracts,
but is not required to calculate a counterparty risk amount under this method for transactions in foreign exchange contracts with an original maturity of 14 calendar days or less.
A1.2.7 Sub Underwritten Positions method
There is no Sub Underwritten Positions method at this time.
A1.2.8 Counterparty risk weighting
(1) Subject to subrules (2) to (6), a Market Participant may choose to calculate its counterparty risk amount in relation to a Counterparty as the counterparty risk amount calculated in accordance with Parts A1.2 to A1.7 multiplied by the counterparty risk weighting applicable for that Counterparty specified in Table A5.2.1 in Annexure 5 to Schedule 1A.
(2) A Market Participant can only calculate its counterparty risk amount for a Counterparty in accordance with subrule (1) above if it calculates the counterparty risk amount in this manner for that Counterparty consistently across all methods within this Annexure 1.
(3) For the purposes of calculating the counterparty risk amount in relation to a Counterparty that the Market Participant has classified as an Approved Institution under paragraph (a) of the definition of Approved Institution and that is a subsidiary or member of a group of companies or funds, the Market Participant may only apply the counterparty risk weighting for Approved Institutions specified in Table A5.2.1 in Annexure 5 to Schedule 1A to that counterparty risk amount where:
(a)        the requirements of paragraph (a) of the definition of Approved Institution are met in relation to the individual subsidiary or member of the group (that is, the individual subsidiary or member must have net assets greater than $30 million); 
(b)       the Market Participant has a copy of the individual subsidiary or members’ balance sheet that demonstrates that the individual subsidiary or member meets the requirements of paragraph (a); and
(c)        after the documentation is first obtained by the Market Participant for the purposes of paragraph (b) the Market Participant reconfirms the classification of the Counterparty as an Approved Institution on an annual basis. 
(4) For the purposes of calculating the counterparty risk amount in relation to a Counterparty that the Market Participant has classified as an Approved Institution under paragraph (b) of the definition of Approved Institution, the Market Participant may only apply the counterparty risk weighting for Approved Institutions specified in Table A5.2.1 in Annexure 5 to Schedule 1A to that counterparty risk amount where:
(a)        the Market Participant has records demonstrating that the Counterparty is in fact regulated by a Recognised non-European Union Regulator or a Recognised European Union Regulator as specified in Tables A5.3.1 and A5.3.2 in Annexure 5 to Schedule 1A and that the Counterparty’s ordinary business is the purchase and sale of Financial Instruments; and
(b)       after the documentation is first obtained by the Market Participant for the purposes of paragraph (a) the Market Participant reconfirms the classification of the Counterparty as an Approved Institution on an annual basis.
(5) Where:
(a)        an exposure to a Counterparty has been guaranteed by an Approved Deposit Taking
Institution; and
(b)       the guarantee referred to in paragraph (a) is provided to the Market Participant performing the counterparty risk calculation in writing and provides for direct, explicit, irrevocable and unequivocal recourse to the guarantor,
a counterparty risk weighting of 20% may be applied to the part of the exposure that is covered by the guarantee (the remainder, if any, must be weighted according to the risk weighting of the Counterparty).
(6) Subrule (5) does not apply to indirect guarantees (for example, a guarantee of a guarantee) and letters of comfort.
Annexure 2 to Schedule 1A: Large exposure risk requirement
Part A2.1 Counterparty large exposure risk requirement
A2.1.1 Nature of counterparty large exposure risk amount
The counterparty large exposure risk amount is the absolute sum of the individual counterparty large exposure risk amounts calculated using the method of calculation set out in this Annexure 2.
A2.1.2 Method
(1) The counterparty large exposure amount is:
(a)        zero, if there are no exposures to a Counterparty in respect of transactions at the times specified in Table A2.1;
(b)       zero, if there are aggregate exposures to a Counterparty in respect of transactions at the times specified in Table A2.1 and where these aggregate exposures are less than or equal to 10% of the Market Participant’s Liquid Capital; or
(c)        100% of the counterparty risk amount for the exposure calculated in accordance with Annexure 1 to Schedule 1A, if there are aggregate exposures to a Counterparty in respect of transactions referred to in column 1 of Table A2.1 at the times specified in column 3 of Table A2.1 and where these aggregate exposures are greater than 10% of the Market Participant’s Liquid Capital.
Table A2.1:    Aggregate exposure to Counterparty by transaction type
Transaction Type
Subject to counterparty large exposure
Time of Exposure
Reference in Annexure 1

Non-Margined Financial Instrument
Yes
Greater than 10 Business Days after transaction date
Subrule A1.2.2(3)

Free Delivery
No
N/A
N/A

Securities Lending and Borrowing
Yes
Date the transaction is due to be closed out (that is, the day the Counterparty is scheduled to return the Market Participant’s cash and/or securities and has failed to do so)
Rule A1.2.4

Margined Financial Instrument
Yes
24 hours after the time that amounts are normally scheduled for payment to the relevant exchange or clearing house
Rule A1.2.5

OTC Derivative or Warrant held as principal
Yes
Date any payment or delivery is due under the transaction
Rule A1.2.6

Sub Underwritten Positions
No
N/A
N/A

(2) The counterparty large exposure risk amount calculated in respect of a transaction cannot exceed the maximum loss for that transaction.
(3) For the purposes of subrule (2), the maximum loss for:
(a)        an agency purchase transaction in non-margined Financial Instruments is the contract value;
(b)       an agency sale transaction in non-margined Financial Instruments is deemed to be the market value;
(c)        a Securities Lending and Borrowing transaction is deemed to be the counterparty exposure calculated as the difference between the market value of securities or cash given by the Market Participant to the Counterparty and the market value of securities or cash received by the Market Participant from the Counterparty;
(d)       for transactions in margined Financial Instruments is deemed to be the outstanding settlement amount, premium, deposit or margin call that is owed to the Market Participant
(e)        for an OTC Derivative transaction in a written Option position is the full value of the premium owed to the Market Participant;
(f)        for a transaction in a purchased Option or other OTC Derivative position is deemed to be the current credit exposure calculated under subparagraph A1.2.6(1)(c)(i), where the current credit exposure is recalculated on a daily basis while the transaction remains outstanding.
(4) To calculate aggregate exposures to a Counterparty, a Market Participant must:
(a)        aggregate exposures to persons forming part of a Group of Connected Persons; and
(b)       not include exposures other than Positive Credit Exposures specified in Table A2.1.
Part A2.2 Issuer large exposure risk requirement
A2.2.1 Nature of an issuer large exposure risk amount 
The issuer large exposure risk amount is the absolute sum of the individual issuer large exposure risk amounts calculated from the transaction date using the method of calculation set out in this Annexure 2.
A2.2.2 Overview
(1) The issuer large exposure risk amount for an issuer is subject to two tests, measuring the net position relative to Liquid Capital and relative to the issuer.
(2) In calculating the issuer large exposure amounts for exposures to:
(a)        equity positions, the method set out in Rule A2.3.1 applies;
(b)       debt positions, the method set out in Rule A2.3.2 applies; and
(c)        both equity positions and debt positions where no risk amount arises under Rule A2.3.1 or Rule A2.3.2, the method set out in Rule A2.3.3 applies.
(3) The methods referred to in subrule (2) are summarised in the Tables below:
Table A2.2:    Issuer Large Exposure—Equity Positions
 
Equity Method
 

 
Compared to Liquid Capital
Compared to Issue
Risk amount

Equity Net Position from transaction date
If equity net position is £25%, is a risk amount required?
No
If equity net position is >25%, is a risk amount required?
Yes (a)
If equity net position is £5%, is a risk amount required?
No
If equity net position is >5%, is a risk amount required?
Yes (b)
Take the greater of (a) and (b)
 


Table A2.3:    Issuer Large Exposure—Debt Positions
 
Debt Method
 

 
Compared to Liquid Capital
Compared to Issue
Risk amount

Debt Net Position from transaction date
If debt net position is £25%, is a risk amount required?
No
If debt net position is >25%, is a risk amount required?
Yes (a)
If debt net position is £10%, is a risk amount required?
No
If debt net position is >10%, is a risk amount required?
Yes (b)
Take the greater of (a) and (b)


Table A2.4:    Issuer Large Exposure—Equity and Debt Positions
 
Equity and Debt Method
 

 
Compared to Liquid Capital only
Risk amount

Equity Net Position and Debt Net Position from transaction date
If equity net position and debt net position is £25%, is a risk amount required?
No
If equity net position and debt net position is >25%, is a risk amount required?
Yes (c), but only if a zero amount has been calculated in Table A2.2 or Table A2.3
Take (c)


A2.2.3 Application
(1) An issuer large exposure risk amount does not arise in relation to:
(a)        a Financial Instrument whose value is based on Government Debt Instrument or an interest rate;
(b)       a Forward Rate Agreement;
(c)        an interest rate or currency Swap;
(d)       an interest rate leg of an equity Swap; and
(e)        a Future on an index, an equity Swap based on an index or any other index-linked Derivative where that Future, equity Swap or index-linked Derivative is not broken down into its constituent positions by a Market Participant for the purposes of calculating a position risk amount.
(2) An issuer large exposure risk amount must be calculated in the following manner:
(a)        the Equity leg of an equity Swap the value of which is based on the change in value of an individual Equity is treated as an exposure to the issuer of the Equity for the face value of the equity leg of the equity Swap;
(b)       a Future or forward contract over:
(i)         a Debt Instrument other than a Government Debt Instrument; or
(ii)       an Equity,
is treated as an exposure to the underlying issuer for the face value of the Future or forward contract;
(c)        a Future on an index, an equity Swap based on an index or any other index-linked Derivative (including a Classical ETF) where that Future, equity Swap or index-linked derivative is broken down into its constituent positions by a Market Participant for the purposes of calculating a position risk amount, is treated as an exposure to each underlying constituent position; and
(d)       an Option or right over a Financial Instrument (other than a Financial Instrument referred to in subrule (1) above) is treated as an exposure at:
(i)         the full value of the underlying position;
(ii)       the delta weighted value of the underlying instrument generated by a model approved by ASIC under the contingent loss matrix method; or
(iii)      the delta weighted value of the underlying instrument where a delta is published by a relevant exchange, clearing house or an independent market information source.
(3) Where a Market Participant has positions in Hybrid ETFs or Other Managed Funds:
(a)        only the test against Liquid Capital (under subrule A2.3.1(2), A2.3.2(3) or A2.3.3(2)) needs to be applied to those positions; and,
(b)       the test against Liquid Capital must be applied separately for each different Hybrid ETF or Other Managed Fund issued by the same issuer.
(4) Where a Market Participant:
(a)        is not an active trader in bank bills;
(b)       holds bank bills as a passive investment, with the intention that the bank bills be held to maturity; and
(c)        calculates the position risk amount under subrule A3.11.2(3) as the face value of the bills multiplied by the appropriate standard method Position Risk Factor, 
the Market Participant may also calculate its issuer large exposure risk amount for its position in bank bills using the face value of the bills.
(5) A delta weighted value under paragraph (2)(d) may be offset against the corresponding underlying instrument in calculating an Equity Net Position or Debt Net Position under Rules A2.3.1, A2.3.2 and A2.3.3.
Part A2.3 Methods
A2.3.1 Equity method
(1) A Market Participant’s issuer large exposure risk amount in relation to an issuer is the greater of the following amounts:
(a)        the risk amount calculated by comparing the Equity Net Position to Liquid Capital under subrule (2); and
(b)       the risk amount/s calculated by comparing the Equity Net Position to the issue/s under subrule (3).
(2) If the absolute value of an Equity Net Position to an Issuer is greater than 25% of the Market Participant’s Liquid Capital the risk amount is:
(a)        12% for each single Equity in a Recognised Market Index; and
(b)       16% for any other single Equity, of the amount in excess of 25% of Liquid Capital.
(3) If the absolute value of an Equity Net Position to an Individual Issue/s is greater than 5% of that issue, the risk amount/s is:
(a)        12% for each single Equity in a Recognised Market Index; and
(b)       16% for any other single Equity, of the amount in excess of 5% of the issue/s.
(4) For the purposes of subrule (2):
(a)        “Issuer” means:
(i)         in the case of principal positions in physical Equity securities, the entity that has issued those securities; and
(ii)       in the case of Derivative positions, means the entity that has issued the securities underlying the Derivatives position and does not mean the Counterparty to the Derivative transaction; and
(b)       the Equity Net Position to a particular Issuer is the aggregate of all Equity Net Positions for different issues of securities issued by that Issuer where:
(i)         the Equity Net Positions relate to particular underlying instruments issued by a single Issuer (for example, ordinary shares, Preference Shares); and
(ii)       Equity Net Positions for different instruments issued by a single Issuer must not be offset when calculating the total Equity Net Position to that issuer. 
(5) For the purposes of subrule (3), the instruments in column 1 of Table A2.5 are considered to comprise the “Individual Issue” for a particular Equity product referred to in column 2:
Table A2.5:    Individual Issues
“Individual Issue”
Equity Product
“Individual Issue” Detail

Ordinary shares
Ordinary shares
Ordinary shares on issue, as published by an information source.

Exchange traded Options (ETOs)
The ordinary shares underlying the ETO, as published by an information source.

Exchange traded warrants
The ordinary shares underlying the exchange traded warrant, as published by an information source.

Exchange traded convertible notes that are treated as an Equity position for the purposes of the position risk calculation
Ordinary shares on issue, as published by an information source.

Classical ETF (which is broken down into its constituent positions)
Ordinary shares on issue for each company in the stock index on which the classical ETF is based, as published by an information source.

Futures or forward contracts over ordinary shares
The ordinary shares underlying the Futures or forward contracts, as published by an information source.

Ordinary shares or Preference shares (depends on underlying)
Over the counter (OTC) Options over physical shares
The ordinary shares or Preference Shares (as applicable) underlying the OTC Option, as published by an information source.

Equity Swap
The ordinary shares or Preference Shares (as applicable) underlying the Equity Swap, as published by an information source.

Preference shares
Preference Shares
Preference Shares on issue, as published by an information source.
Where a company has issued more than one series of Preference Shares, each series should be considered to be a separate “individual issue” (for example, ABC 7% Preference Shares and ABC 7.1% Preference Shares need to be considered separately).

Company issued option series
Company issued Options
Company issued Option “series”, as published by an information source.
Each company Option “series” will have different terms and conditions (for example, if ABC has issued company Options expiring on 31/1/05 with a strike of $1 as well as company Options expiring on 31/3/05 with a strike of $1, these are two different “series” and need to be considered separately).

A2.3.2 Debt method
(1) A Market Participant’s issuer large exposure risk amount in relation to an issuer is the greater of the following amounts:
(a)        the risk amount calculated by comparing the Debt Net Position to Liquid Capital under subrule (3); and
(b)       the risk amount/s calculated by comparing the Debt Net Position to the issue/s under subrule (4).
(2) In calculating the issuer large exposure risk amount under this method:
(a)        an individual issue refers to an individual series or tranche of an individual series issued by an individual issuer;
(b)       long and short positions may be offset across series for the purposes of determining large exposure to an issuer; and
(c)        a large exposure to an individual issuer is the sum of all series issued by that issuer.
(3) If the absolute value of a Debt Net Position to an issuer is greater than 25% of the Market Participant’s Liquid Capital, the risk amount is:
(a)        the relevant standard method Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A multiplied by the amount in excess of 25%; and
(b)       if more than one series is held, the Position Risk Factor for the longest dated instrument should be applied to the excess over 25%.
(4) If the absolute value of a Debt Net Position to an individual issue/s is greater than 10% of that issue, the risk amount/s is:
(a)        the relevant standard method Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A multiplied by the excess over 10%; and
(b)       if more than one series is held, the risk amount is the aggregate of the risk amounts calculated under paragraph (a) for each individual series.
A2.3.3 Equity and Debt method
(1) A Market Participant’s issuer large exposure risk amount in relation to an issuer is based on the absolute sum of the Equity Net Positions and Debt Net Positions.
(2) If the absolute sum of the Equity Net Positions and Debt Net Positions is greater than 25% of a Market Participant’s Liquid Capital, then the risk amount is the relevant standard method Position Risk Factor specified in Table A5.1.1 or Table A5.1.2 in Annexure 5 to Schedule 1A multiplied by the excess over 25% according to the following:
(a)        if the Equity Net Positions represent the greatest proportion of the aggregate Net Position, the standard method Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A;
(b)       if the Debt Net Positions represent the greatest proportion of the aggregate Net Position,
(i)         the relevant standard method Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A; and
(ii)       if more than one series is held, the Position Risk Factor for the longest dated instrument; or
(c)        if the Equity Net Position and Debt Net Positions are held in equal proportions, the greatest of the standard method Position Risk Factors specified in Tables A5.1.1 or A5.1.2 in Annexure 5 to Schedule 1A.
Annexure 3 to Schedule 1A: Position risk requirement
Part A3.1 Equity position risk amount
A3.1.1 Nature of equity position risk amount
The equity position risk amount in relation to a Market Participant’s equity positions is the absolute sum of the individual position risk amounts for equity positions calculated for each country using the methods of calculation set out in this Annexure 3.
A3.1.2 Overview of methods
(1) The standard method and building block method are the two main methods for measuring the equity position risk amount. They are supplemented by other methods, the use of which largely depends on the Financial Instruments in which principal positions are taken.
(2) In calculating the equity position risk amount, the following methods must be used:
Table A3.1:    Methods
Nature of Positions
Standard Method
Building Block Method
Contingent Loss Matrix Method
Margin Method
Basic Method
Arbitrage Method

Physical (not equity derivative)
Yes
 Yes
Yes, in conjunction with positions in options
No
No
Yes, subject to certain condition

Non-option equity derivatives
Yes, if converted to equity equivalent positions
Yes, if converted to equity equivalent positions
Yes, in conjunction with positions in options
Yes, if exchange traded and margined and not calculated under any other method
No
Yes, if arising as a result of futures arbitrage strategy

Equity options
No
Yes, if satisfy relevant criteria and not permitted to use contingent loss matrix method
Yes. Pricing model must be approved by ASIC
Yes, if exchange traded and margined and not calculated under any other method
Yes, if not permitted to use contingent loss matrix method
No

(3) For the purposes of Parts A3.1 to A3.9, a right over an equity must be treated as an Option position.
A3.1.2A Equity position risk amount
Without limitation, a Market Participant must calculate an equity position risk amount under this Annexure 3 in the following circumstances:
(a)        where the Market Participant has entered into an on-market purchase or sale transaction as principal, the Market Participant will be required to calculate an equity position risk amount unless the trade is done for the purposes of unwinding an existing principal position;
(b)       where the Market Participant has entered into an off-market purchase or sale and acts as principal on one side of the transaction, the Market Participant will be required to calculate an equity position risk amount from the time that the trade is executed until the trade is sold to the client;
(c)        where the Market Participant agrees to buy stock as principal from its client and then seeks to close its principal position by selling the stock to other clients (an off-market client facilitation), the Market Participant will be required to calculate an equity position risk amount on the long Equity position from the time the trade is executed until the position is sold to the other clients (a position risk amount will continue to be required on any part of the position that is not closed out), regardless of whether the client facilitation is fully completed within the day;
(d)       where the Market Participant conducts an off market underwritten placement of existing shares via a book build, the Market Participant will be required to calculate an equity position risk amount from the time that the deadline for the placement is reached, for any shares that have not been sold to buying clients by that time, where the position risk amount is based on the “final” price for the placement; 
(e)        where the Market Participant acts as underwriter of an initial public offering or a placement of new shares, the Market Participant will be required to calculate an equity position risk amount from the time that the closing date for applications is reached, on any shortfall in applications as at that date, where for the purposes of calculating the position risk amount, the “cost” or “subscription” price should be taken as the market value of the securities prior to their listing and trading; and
(f)        where the Market Participant has applied for stock, allocation interest units or instalment receipts on behalf of clients and the Market Participant has been given a Firm Allocation and there is a shortfall once the public offer closes, the Market Participant will be required to calculate an equity position risk amount on the shortfall from the date that the Market Participant has outlaid the funds or the date that the public offer closes, whichever is later.
A3.1.2B Treatment—Securities subject to a trading halt or suspension
Where a Market Participant holds a principal position in a security that is subject to:
(a)        a trading halt, the position does not have to be treated as an Excluded Asset (where the position otherwise  meets the definition of Liquid) and a position risk amount must be
calculated; and
(b)       suspension, the position must be treated as an Excluded Asset on the basis that the security is not Liquid.
A3.1.2C Treatment—Classical ETFs
A Market Participant must take the following into account when calculating a position risk amount for a principal position in Classical ETF units:
(a)        there is no difference between the primary market and secondary market for the purposes of calculating position risk amounts;
(b)       principal positions in Classical ETFs commence at T0 and the underlying risk variable is the market price of the Classical ETF unit;
(c)        the Equity Equivalent of the Classical ETF is set out in Rule A3.8.5;
(d)       the Position Risk Factors to be applied are set out in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(e)        if the Market Participant is unlikely to be able to liquidate its position in a Classical ETF within 30 days, taking into account factors including the size of its position and the volume of that Classical ETF traded in the market, it must treat the position as an Excluded Asset and exclude the market value of that position from Liquid Capital.
A3.1.2D Treatment—Hybrid ETFs
A Market Participant must take the following into account when calculating a position risk amount for a principal position in units in a Hybrid ETF classified as Equities:
(a)        there is no difference between the primary market and secondary market for the purposes of calculating position risk amounts;
(b)       principal positions in Hybrid ETFs commence at T0 and the underlying risk variable is the market price of the Hybrid ETF unit;
(c)        a Hybrid ETF cannot be broken down into any notional positions in the underlying;
(d)       the Position Risk Factors to be applied are set out in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(e)        if the Market Participant is unlikely to be able to liquidate its position in a Hybrid ETF within 30 days, taking into account factors including the size of its position and the volume of that Hybrid ETF traded in the market, it must treat the position as an Excluded Asset and exclude the market value of that position from Liquid Capital.
A3.1.2E Treatment—Other Managed Funds
A Market Participant must take the following into account when calculating a position risk amount for a principal position in units Other Managed Fund classified as Equities:
(a)        principal positions in Other Managed Funds commence at T0 and the underlying risk variable is the market price of the Other Managed Fund unit;
(b)       the Other Managed Fund cannot be broken down into any notional positions in the underlying;
(c)        the Position Risk Factors to be applied are set out in Table A5.1.1 in Annexure 5 to Schedule 1A;
(d)       if the Market Participant is unlikely to be able to liquidate its position in an Other Managed Fund within 30 days, taking into account factors including the size of its position relative to the size of the fund, it must treat the position as an Excluded Asset and exclude the market value of that position from Liquid Capital; and
(e)        if a daily price cannot be obtained and/or if the numbers of units on issue cannot be determined on a daily basis, the position must be treated as an Excluded Asset as it would not be possible to value the investment in accordance with the requirements of Rule S1A.2.8.
A3.1.2F Exchange traded CFDs
A Market Participant must take the following into account when calculating a position risk amount for a principal position in an exchange traded CFD classified as an Equity Derivative:
(a)        principal positions in exchange traded CFDs commence at T0;
(b)       the Position Risk Factors to be applied are set out in Table A5.1.1 in Annexure 5 to Schedule 1A;
(c)        if the Market Participant is unlikely to be able to liquidate its position in an exchange traded CFD within 30 days, taking into account factors including the size of its position and the volume of that exchange traded CFD traded in the market, it must treat that exchange traded CFD as an Excluded Asset and exclude the market value of that position from Liquid Capital.
Part A3.2 Standard method—Equity position risk
A3.2.1 Application
(1) Physical Equity positions may be included in the standard method.
(2) Equity Derivative positions other than Options may be included in the standard method if the positions are converted to Equity Equivalents according to Part A3.8.
(3) Equity Derivative positions which are Options may be included in the standard method only if they are purchased positions or if they are written positions which are exchange traded and subject to daily margin requirements and the purchased or written positions are:
(a)        In the Money by at least the relevant standard method Position Risk Factor for the underlying position specified in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(b)       converted to Equity Equivalents according to Part A3.8.
If the above criteria are not met, the Options must be treated under one of the option methods set out in Parts A3.4, A3.5 and A3.6.
A3.2.2 Method
The position risk amount for equity positions to which the standard method is applied is the absolute sum of the product of individual Equity Net Positions at the mark to market value and the applicable Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A.
Part A3.3 Building block method––Equity position risk
A3.3.1 Application
(1) Physical Equity and Equity Derivative positions may be included in the building block method if there are at least 5 long or 5 short Equity Net Positions in the one country and which are included in Recognised Market Indexes.
(2) Equity Derivative positions other than Options may be included in the building block method if the positions are converted to Equity Equivalents according to Part A3.8.
(3) Equity Derivative positions which are Options may be included in the building block method only if they are purchased positions or if they are written positions which are exchange traded and subject to daily margin requirements and the purchased or written positions are:
(a)        In the Money by at least the relevant standard method Position Risk Factor for the underlying position specified in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(b)       converted to Equity Equivalents according to Part A3.8.
If the above criteria are not met, the Options must be treated under one of the option methods set out in Parts A3.4, A3.5 and A3.6.
A3.3.2 Method
(1) The position risk amount for equity positions to which the building block method is applied is the aggregate of a specific risk and a general risk amount for each Equity Net Position at the mark to market value.
(2) The specific risk amount is calculated as the aggregate of each Equity Net Position, multiplied by the relevant specific risk Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A. The aggregate is calculated by reference to the absolute value of each Equity Net Position.
(3) The general risk amount is calculated by:
(a)        multiplying each Equity Net Position by the relevant general risk Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(b)       aggregating the results of these calculations. In aggregating these calculations, positive and negative signs (that is, long and short positions respectively) may be offset in determining the aggregate number.
The absolute value of this aggregate number is the general risk amount.
Part A3.4 Contingent loss matrix method—Equity position risk
A3.4.1 Application
(1) Equity Derivative positions which are Options together with physical Equity and other Equity Derivative positions may be included in the contingent loss matrix method but only if used in conjunction with an option pricing model approved by ASIC and only if the Market Participant is able to mark to market the physical Equities and Equity Derivative positions.
(2) A Market Participant that applies to ASIC to be authorised to use the contingent loss matrix method must provide ASIC with:
(a)        the technical specifications for its proposed pricing model;
(b)       details concerning the parameters used in the proposed pricing model;
(c)        details concerning the way in which the pricing model is integrated into the Market Participant’s overall risk management systems; and
(d)       details concerning the extent to which the Market Participant is able to automate the calculation of the contingent loss matrix.
(3) A Market Participant applying the contingent loss matrix method may use method 2 as set out in Rule A3.4.3 if there are 5 long or 5 short Equity Net Positions which are included in Recognised Market Indexes in any one country, otherwise it must use method 1 as set out in Rule A3.4.2.
A3.4.2 Method 1
(1) This method calculates the risk amount in one step for each underlying in a manner similar to the standard method.
(2) The position risk amount for equity positions to which this method is applied is the greatest loss arising from simultaneous prescribed movements in the closing market price of the underlying position and the option implied volatility.
(3) The prescribed movements are the Position Risk Factors for the standard method specified in Table A5.1.1 in Annexure 5 to Schedule 1A.
(4) A separate matrix must be constructed for each option portfolio and associated hedges in each country.
(5) Changes in the value of the option portfolio must be analysed over a fixed range of changes above and below the current market price of the underlying position and implied option volatility as follows:
(a)        the relevant Position Risk Factor is to be divided into seven equally spaced price shift intervals (including the current market price); and
(b)       the relevant implied volatility Position Risk Factor is to be divided into three equally spaced volatility shift intervals (including the current market implied volatility).
(6) Each option portfolio is to be re-priced using the adjusted underlying position and volatility price as described in subrule (5). The value in each element of the contingent loss matrix will be the difference between the revalued option portfolio and the option portfolio calculated using the closing market price.
(7) The absolute value of the aggregate of the greatest loss for each matrix is the position risk amount.
A3.4.3 Method 2
(1) This method calculates the risk amount as the aggregate of a specific risk and a general risk amount for each underlying in a manner similar to the building block method.
(2) The specific risk amount is calculated as the aggregate of the delta weighted value of the underlying instrument calculated by the option pricing model approved by ASIC, multiplied by the relevant specific risk Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A.
(3) The general risk amount is calculated in the manner described in Rule A3.4.2 replacing subrules A3.4.2(3) and A3.4.2(7) as described below.
(4) The prescribed movements referred to in subrule A3.4.2(3) are replaced with the Position Risk Factors for the building block method specified in Table A5.1.1 in Annexure 5 to Schedule 1A.
(5) The position risk amount calculated in subrule A3.4.2(7) is replaced with the general risk amount which is the absolute value of the greatest loss in a single country matrix.
(6) A single country matrix is constructed by superimposing each separate matrix under subrule A3.4.2(4) so that the values in the corresponding matrix elements are netted to form a single value for each element.
Part A3.5 Margin method—Equity position risk
A3.5.1 Application
Equity Derivative positions which are exchange traded and have a positive Primary Margin Requirement must be included in the margin method if the Market Participant:
(a)        has not been approved by ASIC to use the contingent loss matrix method; and
(b)       is not permitted to use any of the other Methods set out in Rule A3.1.2.
A3.5.2 Method
The position risk amount for Equity Derivative positions under the margin method is 100% of the Primary Margin Requirement for those Equity Derivative positions as determined by the relevant exchange or clearing house multiplied by 4.
Part A3.6 Basic method—Equity position risk
A3.6.1 Application
Equity Derivative positions which are purchased (long) or written (short) Options may be included in the basic method.
A3.6.2 Method
(1) The position risk amount for a purchased Option is the lesser of:
(a)        the mark to market value of the underlying equity position multiplied by the standard method Position Risk Factor for the underlying position specified in Table A5.1.1 in Annexure 5 to Schedule 1A; and
(b)       the mark to market value of the Option,
where:
(c)        the market value of the Option should be calculated as the current price of the Option multiplied by the number of Options/number of shares underlying the Option; and
(d)       the notional market value of the physical Equities position underlying the Option is calculated by taking the number of shares underlying the position multiplied by the current price of that stock.
(2) The position risk amount for a written Option is the mark to market value of the underlying equity position multiplied by the standard method Position Risk Factor for the underlying position specified in Table A5.1.1 in Annexure 5 to Schedule 1A reduced by:
(a)        any excess of the exercise value over the current market value of the underlying position in the case of a call Option, but limited to nil if it would otherwise be negative; or
(b)       any excess of the current market value of the underlying position over the exercise value in the case of a put Option, but limited to nil if it would otherwise be negative.
Part A3.7 Arbitrage method––Equity position risk
A3.7.1 Application
Equity Derivative positions arising as a result of Futures arbitrage strategies may be included in the arbitrage method if the Market Participant has a position in:
(a)        two Futures over similar indexes; or
(b)       a Future over a broadly based index and a position in a matching physical basket, and if the requirements set out below are satisfied.
A3.7.2 Method—similar indexes
(1) A Market Participant’s position risk amount for a position in two Futures over similar indexes is 2% of the Equity Equivalent of one of the Futures over an index position at the mark to market value but only if the Market Participant:
(a)        has an opposite position in a Future over the same index at a different date or in a different market; or
(b)       has an opposite position in a Future at the same date in a different but similar index (where two indexes are similar if they contain sufficient common components that account for at least 70% of each index).
The position risk amount for the opposite Future position is nil.
(2) For the purposes of subrule (1), if the market value of each side of the arbitrage Futures position is different, the Market Participant must use the side that results in the higher position risk.
A3.7.3 Method—a broadly based index and a matching basket of the stocks from that index
(1) A Market Participant may calculate the position risk amount for a Future over an index and a position in a matching physical basket under one of two possible methodologies:
(a)        the position in the Future over an index may be disaggregated into the notional physical positions and the position risk amount for these notional positions and the physical basket may then be calculated in accordance with the standard method or building block method for equity positions; or
(b)       2% of the mark to market value of the Future over the index if:
(i)         the arbitrage trades have been specifically entered into and are separately monitored over the life of the arbitrage;
(ii)       the mark to market value of the physical basket is greater than 80% and less than 120% of the mark to market value of the notional position in the Future over the index; and
(iii)      the sum of the index weights of the individual positions in the required physical basket is greater than 70% of the Future over the index, where the required physical basket is calculated by:
(A)       ranking all mark to market positions in the physical basket in ascending dollar value;
(B)       converting each dollar value position to a percentage of the total dollar value of the physical basket; and
(C)       adding the percentages in ascending order until the total of these percentages exceeds 70%.
(2) For the purposes of paragraph (1)(a):
(a)        notional positions will equal the market value of the index Futures position multiplied by the weight of each stock in the index;
(b)       the sum of all notional stock positions will then equal the market value of the Futures position; and
(c)        each stock in the physical basket can be offset against the corresponding notional position in the corresponding stock.
Part A3.8 Calculation of Equity Equivalent positions––Equity position risk
A3.8.1 Swaps
(1) The Equity Equivalent for a Swap is two notional positions, one for each leg of the Swap under which:
(a)        there is a notional long position in an Equity or Equity Derivative on the leg of the Swap on which an amount is received; and
(b)       there is a notional short position in an Equity or Equity Derivative on the leg of the Swap on which an amount is paid.
If one of the legs of the Swap provides for payment or receipt based on some reference to a Debt Instrument or Debt Derivative, the position risk amount for that leg of the Swap should be assessed in accordance with Parts A3.10 to A3.17.
(2) For the purposes of subrule (1), the notional position is the mark to market value of the Equity positions underlying the Swap (that is, the number of shares underlying the Swap multiplied by the current market price of those shares).
A3.8.2 Options
The Equity Equivalent for an Option is:
(a)        for purchased call Options and written put Options, a long position at the mark to market value of the underlying equity position, or in the case of an Option on an index or physical basket the mark to market value of either the index, basket, or the notional position in the underlying; or
(b)       for purchased put Options and written call Options, a short position at the mark to market value of the underlying equity position, or in the case of an Option on an index or physical basket, the mark to market value of either the index, basket, or the notional position in the underlying.
A3.8.3 Futures and forward contracts
The Equity Equivalent:
(a)        for a Future and forward contract over a single Equity, is the mark to market value of the underlying; or
(b)       for a Future and a forward contract over an index or a physical basket, is the mark to market value of either the index, basket, or the notional position in the underlying.
A3.8.4 Convertible notes
(1) The Equity Equivalent of a convertible note, is either:
(a)        if the Market Participant:
(i)         does not use the contingent loss matrix method;
(ii)       the premium is In the Money by less than 10%, where premium in this context means the mark to market value of the convertible note less the mark to market value of the underlying Equity, expressed as a percentage of the mark to market value of the underlying Equity; and
(iii)      there are less than 30 days to the conversion date,
the mark to market value of the underlying Equity; or
(b)       if the Market Participant uses the contingent loss matrix method, as calculated according to that method,
but otherwise the convertible note (or, in the case of a convertible note which is evaluated in accordance with the procedure stated in paragraph (b) the debt component of the convertible note) must be treated as a debt position in accordance with Debt Equivalent requirements.
(2) For the purposes of subrule (1), the market value of the Equity is the value of the note if it is immediately converted to Equity at current market prices (that is, the conversion ratio times the number of notes times the current price of the issuer’s Equity per share).
A3.8.5 Other positions—Classical ETFs
The Equity Equivalent of a Classical ETF is:
(a)        the mark to market value of the classical ETF; or
(b)       the mark to market value of the notional position in the underlying,
and any cash component of the Classical ETF should be treated as if it was a position in an Equity.
A3.8.5A Other positions—Exchange traded CFDs
(1) The Equity Equivalent for an exchange traded CFD over a single Equity, is the mark to market value of the underlying.
(2) The Equity Equivalent for an exchange traded CFD over an index or a physical basket, is the mark to market value of either the index, basket or the notional position in the underlying.
Part A3.9 Calculation of equity net positions––Equity position risk
A3.9.1 Equity net positions
(1) The equity net positions are either the long or short positions resulting from offsetting equity positions and Equity Equivalents calculated in the following way:
(a)        A Market Participant may net a long position against a short position only where the positions are in the same actual instrument. This includes Equity Equivalent positions calculated in accordance with Part A3.8. For the purposes of this paragraph:
(i)         depository receipts may be treated as if they are the same positions in the corresponding instrument and at the same value if:
(A)       the positions in the depository receipt and underlying have been entered into as a specific arbitrage and have the certainty of a locked-in profit (or loss);
(B)       the profit (or loss) in sub-subparagraph (A) is Liquid; and
(C)       all conversion costs and foreign exchange costs are immediately provided and are separately monitored over the life of the arbitrage,
but otherwise must be valued at the current exchange rate; and
(ii)       instalment receipts may be treated as if they are positions in the corresponding instrument.
(b)       If the contingent loss matrix method is not used for Options, then an Option position can only be offset if it is In the Money by at least the standard method Position Risk Factor specified in Table A5.1.1 in Annexure 5 to Schedule 1A applicable to the underlying position.
(2) For the purposes of subrule (1), a Market Participant:
(a)        must not offset Securities Lending and Borrowing transactions against underlying long and short Equity net positions; and
(b)       must treat any securities that have been lent out under a Securities Lending and Borrowing arrangement or that have been sold under a repurchase agreement as a principal position of the Market Participant and must calculate a position risk amount on that position, notwithstanding that a counterparty risk amount must also be calculated under the Securities Lending and Borrowing method in Rule A1.2.4;
(c)        may only offset positions in quoted securities issued by a listed entity and quoted on multiple exchanges where the securities quoted on multiple exchanges are identical;
(d)       may only offset positions in listed stocks that are subject to a merger and which involve the conversion/exchange of scrip once it is legally certain the conversion/exchange will proceed.
Part A3.10 Debt position risk amount
A3.10.1 Nature of debt position risk amount
The debt position risk amount in relation to a Market Participant’s debt positions is the absolute sum of the individual position risk amounts calculated for debt positions for each currency using the methods of calculation set out in this Annexure 3.
A3.10.2 Overview of methods
(1) The standard method and building block method are the two main methods for measuring the debt position risk amount. They are supplemented by other methods, the use of which largely depends on the Financial Instruments in which principal positions are taken.
(2) In calculating the debt position risk amount, the following methods must be used:
Table A3.2:    Overview of methods
Nature of Positions
Standard Method
Building Block Method
Contingent Loss Matrix Method
Margin Method
Basic Method

Physical (not equity derivative)
Yes
 Yes
Yes, in conjunction with positions in options
No
No

Non-option equity derivatives
No
Yes, if converted to equity equivalent positions
Yes, in conjunction with positions in options
Yes, if exchange traded and margined and not calculated under any other method
No

Debt options
No
Yes, if satisfy relevant criteria and not permitted to use contingent loss matrix method
Yes. Pricing model must be approved by ASIC
Yes, if exchange traded and margined and not calculated under any other method
Yes, if not permitted to use contingent loss matrix method

A3.10.2A Treatment—Hybrid ETFs
A Market Participant must take the following into account when calculating a position risk amount for a principal position in units in Hybrid ETFs classified as Debt Instruments:
(a)        there is no difference between the primary market and secondary market for the purposes of calculating position risk amounts;
(b)       principal positions in Hybrid ETFs commence at T0 and the underlying risk variable is the market price of the Hybrid ETF unit;
(c)        a Hybrid ETF cannot be broken down into any notional positions in the underlying; and
(a)        the Position Risk Factors to be applied are set out in Rule A5.1.2A; and
(b)       if the Market Participant is unlikely to be able to liquidate its position in a Hybrid ETF within 30 days, taking into account factors including the size of its position and the volume of that Hybrid ETF traded in the market, it must treat the position as an Excluded Asset and exclude the market value of that position from Liquid Capital.
A3.10.2B Treatment—Other Managed Funds
A Market Participant must take the following into account when calculating a position risk amount for a principal position in units in Other Managed Funds classified as Debt Instruments:
(a)        principal positions in Other Managed Funds commence at T0 and the underlying risk variable is the market price of the Other Managed Fund unit;
(b)       the Other Managed Fund cannot be broken down into any notional positions in the underlying;
(c)        the Position Risk Factors to be applied are set out in Rule A5.1.2B;
(d)       if the Market Participant is unlikely to be able to liquidate its position in an Other Managed Fund within 30 days, taking into account factors including the size of its position relative to the size of the fund, it must treat the position as an Excluded Asset and exclude the market value of that position from Liquid Capital; and
(e)        if a daily price cannot be obtained and/or if the number of units on issue cannot be determined on a daily basis, the position must be treated as an Excluded Asset on the basis that it would not be possible to value the investment in accordance with the requirements of Rule S1A.2.8.
A3.10.2C Treatment—Cash management trusts
For the purposes of the calculation of a position risk amount, an investment in a cash management trust, even if offered by an Approved Deposit Taking Institution or its subsidiary:
(a)        is not a deposit with the Approved Deposit Taking Institution where it is not capital guaranteed and is subject to investment risk; 
(b)       where the cash management trust meets the definition of a Hybrid ETF or Other Managed Fund, may be treated accordingly; and
(c)        where the cash management trust does not meet the definition of a Hybrid ETF or Other Managed Fund, must be treated as an Excluded Asset.
A3.10.2D Treatment—Securities subject to trading halt or suspension
Where a Market Participant holds a principal position in a listed debt security that is subject to:
(a)        a trading halt, the position does not have to be treated as an Excluded Asset (where the position otherwise meets the definition of Liquid) and a debt position risk amount must be calculated;
(b)       suspension, the position must be treated as an Excluded Asset on the basis that the security is not Liquid.
A3.10.2E Treatment—Underwriting
Where a Market Participant Underwrites an issue of debt securities, the Market Participant:
(a)        is not required to calculate a position risk amount on its exposure until the closing date for applications is reached; and
(b)       must treat any shortfall in applications as at the closing date as a principal position and calculate a position risk amount on its exposure will need to be calculated from this time;
(c)        for the purposes of calculating a position risk amount under paragraph (b), must use the “cost” or “subscription” price as the market value of the securities prior to their issue.
Part A3.11 Standard method—Debt position risk
A3.11.1 Application
Only physical Debt Instrument positions may be included in the standard method.
A3.11.2 Method
(1) Subject to subrule (3), the position risk amount for debt positions to which the standard method is applied is the absolute sum of the product of individual Debt Net Positions at the mark to market value and the applicable Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A.
(2) In determining the applicable Position Risk Factor for the purposes of subrule (1):
(a)        the coupon applicable to the Debt Net Position will determine the time band and Position Risk Factor;
(b)       the Position Risk Factors and time bands for any Debt Instrument that does not have a coupon (for example, zero coupon bonds and bank bills) will generally be the same as for bonds with a coupon of less than 3%;
(c)        fixed rate instruments should be allocated to a time band on the basis of the residual term to maturity; and
(d)       floating rate instruments should be allocated to a time band on the basis of the residual term to the next repricing date.
(3) Where a Market Participant:
(a)        is not an active trader in bank bills; and
(b)       holds bank bills as a passive investment, with the intention that the bank bills be held to maturity,
the Market Participant may calculate the position risk amount under this method as the face value of the bills multiplied by the applicable Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A. 
PartA3.12 Building block method—Debt position risk
A3.12.1 Application
(1) Physical Debt Instrument positions may be included in the building block method.
(2) Debt Derivative positions other than Options may be included in the building block method if the positions are converted to Debt Equivalents according to Part A3.16.
(3) Debt Derivative positions which are Options may be included in the building block method only if they are purchased positions or if they are written positions which are exchange traded and subject to daily margin requirements and the purchased or written positions are:
(a)        In the Money by at least the relevant standard method Position Risk Factor for the underlying position specified in Table A5.1.2 in Annexure 5 to Schedule 1A; and
(b)       converted to Debt Equivalents according to Part A3.16.
If the above criteria are not met, the Options must be treated under one of the option methods referred to in Parts A3.13, A3.14 and A3.15.
(4) In determining the applicable Position Risk Factor for the purposes of this method:
(a)        the coupon applicable to the Debt Net Position will determine the time band and Position Risk Factor;
(b)       the Position Risk Factors and time bands for any Debt Instrument that does not have a coupon (for example, zero coupon bonds and bank bills) will generally be the same as for bonds with a coupon of less than 3%;
(c)        fixed rate instruments should be allocated to a time band on the basis of the residual term to maturity; and
(d)       floating rate instruments should be allocated to a time band on the basis of the residual term to the next repricing date.
A3.12.2 Method
(1) The position risk amount for debt positions to which the building block method is applied is the aggregate of a specific risk and a general risk amount for the Debt Net Position at the mark to market value.
(2) The specific risk amount is calculated as the aggregate of each Debt Net Position, multiplied by the relevant specific risk Position Risk Factor specified in Table A5.1.3 in Annexure 5 to Schedule 1A. The aggregate is calculated by reference to the absolute value of each Debt Net Position.
(3) The general risk amount is calculated in accordance with:
(a)        the maturity method under Rule A3.12.3; or
(b)       the duration method under Rule A3.12.4.
The absolute value of this aggregate number is the general risk amount.
(4) For the purposes of subrule (2):
(a)        subject to paragraph (b), where Futures or forwards comprise a range of deliverable instruments with different issuers, a Market Participant is only required to calculate a specific risk amount under this method on long positions in the Futures or forward contract; and
(b)       a Market Participant is not required to calculate a specific risk amount under this method on its long positions in Futures on 90 day bank bills traded on Australian Securities Exchange Limited. 
A3.12.3 General risk amount—maturity method
(1) To calculate the general risk amount based on the maturity method:
(a)        allocate each Debt Net Position to the appropriate time band specified in Table A5.1.2 in Annexure 5 to Schedule 1A. Fixed rate instruments should be allocated according to the residual term to maturity and floating rate instruments according to the residual term to the next repricing date;
(b)       aggregate the total long and total short Debt Net Positions in each time band;
(c)        calculate a risk weighted long and short position by multiplying the gross long and gross short position in each time band by the relevant general risk Position Risk Factor for that band as specified in Table A5.1.2 in Annexure 5 to Schedule 1A. The sum of these, taking into account the sign, is the net position amount (NPA);
(d)       in each time band, multiply the lesser of the risk weighted long and short positions as calculated in paragraph (1)(c) by the relevant time band matching factor (TBMF) as specified in Table A5.1.4 in Annexure 5 to Schedule 1A. The absolute sum of these is the time band amount (TBA);
(e)        net the risk weighted long and short positions within each time band so that each time band has either a net long position or a net short position. Within each zone, as defined in Table A5.1.2 in Annexure 5 to Schedule 1A, aggregate the net long time band positions and the net short time band positions. Multiply the lesser of the resulting two totals in each of the zones by the relevant zone matching factor (ZMF) as specified in Table A5.1.4 in Annexure 5 to Schedule 1A. The absolute sum of these is the zone amount (ZA);
(f)        net the aggregate risk weighted long and short positions in each time zone as calculated in paragraph (e). To the extent that an offset can be made between adjacent zones, multiply the lesser of the values by the adjacent zone matching factor (AZMF) as specified in Table A5.1.4 in Annexure 5 to Schedule 1A. The absolute sum of these is the adjacent zone amount (AZA);
(g)       to the extent that an offset can be made between non-adjacent zones, multiply the lesser of the non-adjacent zone risk weighted Debt Net Positions by the non-adjacent zone matching factor (NAZMF) as specified in Table A5.1.4 in Annexure 5 to Schedule 1A. This is the non-adjacent zone amount (NAZA); and
(h)       any residual position remaining following the calculation in paragraph (f) can be used to reduce the non-adjacent zone Debt Net Positions in paragraph (g).
(2) The overall general risk amount under the maturity method is then the absolute sum of the individual steps as follows:
(a)        the net position amount (NPA);
(b)       the time band amount (TBA);
(c)        the zone amount (ZA);
(d)       the adjacent zone amount (AZA); and
(e)        the non-adjacent zone amount (NAZA).
A3.12.4 General risk amount—duration method
(1) The calculation of the general risk amount under the duration method is identical to that for the maturity method except that:
(a)        instead of calculating positions under paragraph A3.12.3(1)(c), calculate the duration weight of each position by multiplying the market value of each position by the modified duration of the position and by the assumed yield change for the appropriate time band specified in Table A5.1.2 in Annexure 5 to Schedule 1A (the duration method building block method general risk Position Risk Factor);
(b)       any reference in subrule A3.12.3(1) to Table A5.1.4 in Annexure 5 to Schedule 1A is to the relevant timeband matching factor (TBMF) for the duration method; and
(c)        ASIC must first approve a Market Participant’s use of this method.
(2) For the purposes of calculating the general risk amount under the duration method, where a particular Debt Instrument has a coupon that is identical to the discount rate, the Market Participant may use the annuity factor of the instrument as an accurate proxy for the full duration calculation.
Part A3.13 Contingent loss matrix method—Debt position risk
A3.13.1 Application
(1) Debt Derivative positions which are Options together with physical Debt Instruments and other Debt Derivatives may be included in the contingent loss matrix method but only if used in conjunction with an option pricing model approved by ASIC and only if the Market Participant is able to mark to market the physical Debt Instruments and Debt Derivative positions.
(2) A Market Participant that applies to ASIC to be authorised to use the contingent loss matrix method must provide ASIC with:
(a)        the technical specifications for its proposed pricing model;
(b)       details concerning the parameters used in the proposed pricing model;
(c)        details concerning the way in which the pricing model is integrated into the Market Participant’s overall risk management systems; and
(d)       details concerning the extent to which the Market Participant is able to automate the calculation of the contingent loss matrix.
(3) For the purposes of subrule (1), Physical Debt Instruments and other Debt Derivatives may only be included in the contingent loss matrix method if they are part of a portfolio that contains the Option position and are hedged by, or are hedging the Option position.
(4) For the purposes of subrule A3.13.3(5):
(a)        Physical positions should be included in a matrix based on the time to maturity for a fixed rate instrument or based on the time to the next repricing date for a floating rate instrument and the specific risk calculation will be based on the residual term to final maturity, regardless of whether it is a fixed or floating rate instrument;
(b)       Futures/forwards should be included in a matrix based on the time between the Futures/forward expiry and the maturity of the underlying instrument and the specific risk calculation will be based on the residual term of the Futures/forward contract plus the term of the underlying instrument;
(c)        Options on Futures should be included in a matrix based on the time between the Futures expiry and the maturity of the underlying instrument and the specific risk calculation will be based on the residual term of the Option plus the term of the Futures contract plus the term of the underlying instrument;
(d)       Options on an interest rate should be included in a matrix based on the term of the underlying interest rate and there is no specific risk charge on these instruments;
(e)        Bond Options should be included in a matrix based on the time between the Option expiry and the maturity of the underlying bond, regardless of whether the bond is already in existence before the Option expires or whether the bond comes into existence when the Option expires and the specific risk calculation will be based on the residual term of the Option plus the residual term of the underlying bond from the time the Option expires;
(f)        caps should be treated as a series of call Options (Caplets) on an interest rate (with the rate based on the Reset Period) where:
(i)         the number of Caplets depends on the term of the cap; and
(ii)       each Caplet should be included in a matrix based on the term of the interest rate (the Reset Period),
and there is no specific risk charge on these instruments;
(g)       floors should be treated as a series of put Options (Floorlets) on an interest rate (with the rate based on the Reset Period) where:
(i)         the number of Floorlets depends on the term of the floor; and
(ii)       each Floorlet should be included in a matrix based on the term of the interest rate (the Reset Period),
and there is no specific risk charge on these instruments;
(h)       Forward Rate Agreements should be included in a matrix based on the time between the settlement date and the maturity date of the Forward Rate Agreement or, in other words, the term of the agreed interest rate, and there is no specific risk charge on these instruments;
(i)         Interest rate Swaps should be included in a matrix based on the residual term to maturity of the Swap and there is no specific risk charge on these instruments;
(j)         Swaptions should be included in a matrix based on the time between the swaption expiry and the maturity of the Swap (that is, the term of the Swap) and there is no specific risk charge on these instruments.
(5) For the purposes of subrule A3.13.3(2):
(a)        subject to paragraph (b) where Futures or forwards comprise a range of deliverable instruments with different issuers, a Market Participant is only required to calculate a specific risk amount under this method on long positions in the Futures or forward contract; and
(b)       a Market Participant is not required to calculate a specific risk amount under this method on its long positions in Futures on 90 day bank bills traded on Australian Securities Exchange Limited. 
(6) A Market Participant applying the contingent loss matrix method must use method 2 as set out in Rule A3.13.3.
A3.13.3  Method 2—maturity method
(1) This method calculates the risk amount as the aggregate of a specific risk, a general risk and a volatility risk amount for each underlying in a manner similar to the building block method—maturity method.
(2) The specific risk amount is calculated as the aggregate of each Debt Net Position or the delta weighted value of the underlying instrument calculated by the option pricing model approved by ASIC, multiplied by the relevant specific risk Position Risk Factor specified in Table A5.1.3 in Annexure 5 to Schedule 1A.
(3) The general risk and volatility risk amounts are calculated as described below.
(4) The prescribed movements are the Position Risk Factors for the maturity building block method specified in Table A5.1.2 in Annexure 5 to Schedule 1A.
(5) A separate matrix must be constructed for each individual time band as specified in Table A5.1.2 in Annexure 5 to Schedule 1A.
(6) Changes in the value of the option portfolio must be analysed over a fixed range of changes above and below the current market rate or price of the underlying position and option implied volatility as follows:
(a)        the relevant Position Risk Factor is to be divided into seven equally spaced rate or price shift intervals (including the current market rate or price); and
(b)       the relevant implied volatility Position Risk Factor is to be divided into three equally spaced volatility shift intervals (including the current market implied volatility).
(7) Each option portfolio is to be re-priced using the adjusted underlying price and volatility as described in subrule (6). The value in each element of the contingent loss matrix will be the difference between the revalued option portfolio and the option portfolio calculated using the closing market prices.
(8) The general risk amount is calculated by:
(a)        identifying from each matrix the greatest loss along the directional axis;
(b)       creating an equivalent notional position for each greatest loss which is:
(i)         a long position, if the greatest loss occurs for a decrease in the value of the underlying; and
(ii)       a short position otherwise;
(c)        allocating each long and short position into the appropriate time band specified in Table A5.1.2 in Annexure 5 to Schedule 1A to form the risk weighted values;
(d)       aggregating these long and short positions in each time band, taking into account the sign, to form the net position amount (NPA) referred to in paragraph A3.12.3(1)(c); and
(e)        applying the principles referred to in paragraph A3.12.3(1)(d) to (h) and subrule A3.12.3(2).
(9) The volatility risk amount is calculated by:
(a)        identifying from each matrix the greatest loss along the volatility axis; and
(b)       taking the absolute value of the aggregate of the greatest loss for each matrix.
Part A3.14 Margin method—Debt position risk
A3.14.1 Application
Debt Derivative positions which are exchange traded and have a positive Primary Margin Requirement must be included in the margin method if the Market Participant:
(a)        has not been approved by ASIC to use the contingent loss matrix method; and
(b)       is not permitted to use any of the other methods referred to in Rule A3.10.2.
A3.14.2 Method
The position risk amount for Debt Derivative positions under the margin method is 100% of the Primary Margin Requirement for those Debt Derivative positions as determined by the relevant exchange or clearing house in respect of each position multiplied by 4.
Part A3.15 Basic method—Debt position risk
A3.15.1 Application
Debt Derivative positions which are purchased (long) or written (short) Options may be included in the basic method.
A3.15.2 Method
(1) The position risk amount for a purchased Option is the lesser of:
(a)        the mark to market value of the underlying debt position multiplied by the standard method Position Risk Factor for the underlying position specified in Table A5.1.2 in Annexure 5 to Schedule 1A; and
(b)       the mark to market value of the Option,
where:
(c)        subject to paragraph (d), the notional market value of the physical position underlying the Option is the price the Market Participant would have to pay for the Debt Instrument underlying the Option if it were to take a long position in that instrument at current interest rates;
(d)       where the Option is over a Futures contract over a physical Debt Instrument, the notional position should be in the physical Debt Instrument.
(2) The position risk amount for a written Option is the mark to market value of the underlying debt position multiplied by the standard method Position Risk Factor for the underlying position specified in Table A5.1.2 in Annexure 5 to Schedule 1A reduced by:
(a)        any excess of the exercise value over the current market value of the underlying position in the case of a call Option, but limited to nil if it would otherwise be negative; or
(b)       any excess of the current market value of the underlying position over the exercise value in the case of a put Option, but limited to nil if it would otherwise be negative.
Part A3.16 Calculation of Debt Equivalent positions—Debt position risk
A3.16.1 Swaps
The Debt Equivalent for a Swap is two notional positions, one for each leg of the Swap under which:
(a)        there is a notional long position in a Debt Instrument or Debt Derivative on the leg of the Swap on which interest is received with a maturity equal to either the next interest reset date for a floating rate payment or the maturity of the Swap for a fixed rate payment; and
(b)       there is a notional short position in a Debt Instrument or Debt Derivative on the leg of the Swap on which interest is paid with a maturity equal to either the next interest reset date for a floating rate payment or the maturity of the Swap for a fixed rate payment.
If one of the legs of the Swap provides for payment or receipt based on some reference to an Equity or Equity Derivative, the position risk amount for that leg of the Swap should be assessed in accordance with Parts A3.1 to A3.9.
A3.16.2 Options
(1) The Debt Equivalent for an Option is:
(a)        for purchased call Options or written put Options, a long notional position:
(i)         in the underlying Debt Instrument, in the case of an Option over a single Debt Instrument, and at the mark to market value of the Debt Instrument and its residual maturity; or
(ii)       in the Debt Instrument with the longest residual maturity, in the case of an Option over Debt Instruments or interest rate index, and at the mark to market value;
(b)       for purchased put Options or written call Options, a short notional position:
(i)         in the underlying Debt Instrument, in the case of an Option over a single Debt Instrument, and at the mark to market value of the Debt Instrument and its residual maturity; or
(ii)       in the case of an Option over a debt or interest rate index, in the Debt Instrument with the longest residual maturity in the index, at the mark to market value of the index; and
(c)        for purchased call Options or written put Options on a Future, a long notional position calculated under paragraph A3.16.3(1)(a) and for purchased put Options or written call Options on a Future, a short notional position calculated under paragraph A3.16.3(1)(b).
(2) For the purposes of subrule (1):
(a)        the notional debt position in the case of an Option over a Swap is:
(i)         long if exercise of the Option leads to the Market Participant receiving fixed rate payments under the Swap; and
(ii)       short if exercise of the Option leads to the Market Participant paying fixed rate payments under the Swap; and
(b)       the value of the notional position in the Debt Instrument will be: 
(i)         for an Option over a Debt Instrument, the current market value of that Debt Instrument and the maturity of the notional position in the Debt Instrument will be the term to maturity of the underlying Debt Instrument (and not the term to expiry of the Option);
(ii)       for an Option over an interest rate, the current market value of a zero coupon Government Debt Instrument yielding the interest rate underlying the Option and the maturity of the notional position in the Debt Instrument will be the combined period of the term to expiry of the Option plus the term of the interest rate underlying the Option; and
(iii)      for an Option over a Swap, the principal amount of the underlying Swap, the maturity of the notional position in the Debt Instrument will be the term to maturity of the underlying Swap and the notional position will have a coupon rate equal to the fixed rate of the underlying Swap.
A3.16.3  Futures, forwards and forward rate agreements and options on futures
(1) The Debt Equivalent for a Future, forward contract or Forward Rate Agreement is:
(a)        if purchased, a combination of a long position in a notional Debt Instrument with a maturity equal to the combined term of the contract plus the term of the underlying Debt Instrument, and a short position in the notional Debt Instrument with a maturity equal to the term of the contract;
(b)       if sold, a combination of a short position in a notional Debt Instrument with a maturity equal to the combined term of the contract plus the term of the underlying Debt Instrument, and a long position in the notional Debt Instrument with a maturity equal to the term of the contract;
(c)        if over an index, a combination of a notional position in the instrument with the longest term, with a maturity equal to the combined term of the contract plus the term of that Debt Instrument, and an opposite position in that Debt Instrument with a maturity equal to the term of the contract; and
(d)       if a range of deliverable instruments can be delivered to fulfil the contract the Market Participant may elect which Debt Instrument goes into the time band in Table A5.1.2 in Annexure 5 to Schedule 1A, but should take account of any conversion factor for the purposes of calculating the position risk.
(2) For the purposes of subrule (1):
(a)        a “purchased” position should be interpreted as meaning that the holder of the position is an investor and has bought a Futures or forward contract or has sold a Forward Rate Agreement; and
(b)       a “sold” position should be interpreted as meaning that the holder of the position is a borrower and has bought a Forward Rate Agreement or sold a Futures or forward contract.
A3.16.4 Convertible Notes
The Debt Equivalent for a convertible note which is not within paragraphs A3.8.4(1)(a) or (b), is a position in a Debt Instrument.
A3.16.5 Basket or index products
The Debt Equivalent for a basket or index product, where there is a known weight for each component Debt Instrument, is a position in a portfolio of Debt Instruments with corresponding weights and if the basket or index is based on:
(a)        Government Debt Instruments, then a zero specific risk Position Risk Factor should be used; and
(b)       Qualifying Debt Instruments or other Debt Instruments, then the appropriate specific risk Position Risk Factor should be used.
A3.16.6 Income securities
Income securities should be treated as debt positions, not Equity positions, based on their market value. The Position Risk Factors to be applied under the standard method or the building block method will be based on the time until the next repricing date. The second column of time bands in Table A5.1.2 in Annexure 5 to Schedule 1A should be used.
Part A3.17 Calculation of debt net positions—Debt position risk
A3.17.1 Debt net position
(1) The debt net position is either the long or short position resulting from offsetting positions in Debt Instruments and Debt Derivatives in the following way:
(a)        subject to paragraphs (c) and (d), short Debt Instrument and Debt Equivalent positions may be directly offset against long Debt Instrument and Debt Equivalent positions provided that the issuer, coupon, maturity are identical;
(b)       if the contingent loss matrix method is not used for Options, then an Option position can only be offset if it is In the Money by at least the standard method Position Risk Factor specified in Table A5.1.2 in Annexure 5 to Schedule 1A applicable to the underlying position;
(c)        a matched position in a Future or forward contract and its underlying may be offset provided that:
(i)         the term to maturity of the Future or forward contract is included in the relevant time band specified in Table A5.1.2 in Annexure 5 to Schedule 1A;
(ii)       where the Future or the forward contract comprises a range of deliverable instruments, offsetting of positions in the Future or forward contract and the underlying is only permissible when there is a readily identifiable underlying which is profitable for the short position holder to deliver; and
(iii)      for a Future or forward contract where a Market Participant has a right to substitute cash settlement for physical delivery and the price at settlement is calculated with reference to a general market price indicator then no offset is allowed against the underlying; and
(d)       to qualify for offsets across product groups, the positions must relate to the same underlying instrument type, be of the same nominal value, and:
(i)         in relation to Futures, the offsetting positions and the notional or underlying instruments to which the Futures relate must be identical products and mature within 7 days of each other;
(ii)       in relation to Swaps and Forward Rate Agreements the reference rate (for floating rate positions) must be identical and the coupon closely matched (within 15 basis points); and
(iii)      in relation to Swaps, Forward Rate Agreements and forward contracts, the next interest fixing date, or, for fixed coupon positions or forward contracts, the residual maturity (or, where there is a call or put option in the relevant instrument, the effective maturity of the instrument) must correspond within the following limits:
(A)       less than 1 month hence, same day;
(B)       between one month and one year hence, within 7 days; and
(C)       over one year hence, within 30 days.
(2) For the purposes of subrule (1), a Market Participant:
(a)        must not offset Securities Lending and Borrowing transactions against underlying long and short Debt net positions; and
(b)       must treat any securities that have been lent out under a Securities Lending and Borrowing arrangement or that have been sold under a repurchase agreement as a principal position of the Market Participant and calculate a position risk amount on that position, notwithstanding that counterparty risk amount must also be calculated under the Securities Lending and Borrowing method in Rule A1.2.4.
A3.18 Foreign exchange position risk amount
A3.18.1  Nature of foreign exchange position risk amount
The foreign exchange position risk amount in relation to a Market Participant’s foreign exchange positions is the absolute sum of the individual position risk amounts for foreign exchange positions calculated using the methods of calculation set out in this Annexure 3.
A3.18.2 Overview of Methods
(1) The standard method is the main method for measuring the foreign exchange position risk amount. The method is supplemented by other methods, the use of which largely depends on the Financial Instruments in which principal positions are taken.
(2) In calculating foreign exchange position risk amounts, the following methods must be used:
Table A3.1:    Overview of Methods
Nature of Positions
Standard Method
Contingent Loss Matrix Method

Physical* (not foreign exchange derivatives)
Yes
Yes. In conjunction with positions in options

Non-option foreign exchange derivatives
Yes, if converted to foreign exchange equivalent positions
Yes. In conjunction with positions in options

Foreign Exchange Options
Yes, if satisfy relevant criteria and not permitted to use contingent loss matrix method
Yes, must be used for all written options.
Pricing model must be approved by ASIC

*        A physical position in Parts A3.18 to A3.22 includes foreign currency assets and liabilities and Equity and Debt Instruments denominated in a foreign currency.
Part A3.19 Standard method—Foreign exchange position risk
A3.19.1 Application
(1) Foreign currency physical positions may be included in standard method.
(2) Foreign Exchange Derivative positions other than Options may be included in the standard method if the positions are converted to Foreign Exchange Equivalents according to Part A3.21.
(3) Foreign Exchange Derivative positions which are Options may be included in the standard method only if they are purchased positions and the purchased positions are converted to a Foreign Exchange Equivalent according to Part A3.21.
(4) If the above criteria are not met, the Options must be treated under the contingent loss matrix method set out in Part A3.20.
A3.19.2 Method
(1) The position risk amount for foreign exchange positions to which the standard method is applied is the greater of the absolute value of the aggregate of the converted:
(a)        net open long position in foreign currencies; and
(b)       net open short position in foreign currencies,
multiplied by the Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A.
(2) Foreign Exchange Derivative positions which are purchased Options and are In the Money by at least the standard method Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A, are to be converted to a Foreign Exchange Equivalent in accordance with Part A3.21 and included in the net open position in accordance with Part A3.22.
(3) Foreign Exchange Derivative positions which are purchased Options and are not In the Money by at least the standard method Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A, are to be converted to a Foreign Exchange Equivalent in accordance with Part A3.21 and:
(a)        where the resulting currency positions from the option increases the net open position in the currency if included, the position must be included in the net open position; and
(b)       where the resulting currency positions from the option decreases the net open position in the currency if included, the position must be excluded in the net open position.
Part A3.20 Contingent loss matrix method—Foreign exchange position risk
A3.20.1 Application
(1) Foreign Exchange Derivative positions which are Options together with physical foreign exchange and other Foreign Exchange Derivative positions may be included in the contingent loss matrix method but only if used in conjunction with an option pricing model approved by ASIC and only if the Market Participant is able to mark to market the foreign exchange and Foreign Exchange Derivative positions. 
(2) A Market Participant that applies to ASIC to be authorised to use the contingent loss matrix method must provide ASIC with:
(a)        the technical specifications for its proposed pricing model;
(b)       details concerning the parameters used in the proposed pricing model;
(c)        details concerning the way in which the pricing model is integrated into the Market Participant’s overall risk management systems; and
(d)       details concerning the extent to which the Market Participant is able to automate the calculation of the contingent loss matrix.
(3) Foreign Exchange Derivative positions which are written Options must be included in the contingent loss matrix method.
(4) Physical foreign exchange contracts and other Foreign Exchange Derivatives may only be included in the contingent loss matrix method where they are part of the portfolio that contains the Option position (that is, are either a hedge of the Options or where the Options are hedging the underlying physical position).
A3.20.2 Method
(1) The position risk amount for foreign exchange positions to which the contingent loss matrix method is applied is the greatest loss arising from simultaneous prescribed movements in the closing market rate of the underlying currency pairing and the option implied volatility.
(2) The prescribed movements are the Position Risk Factors for the standard method that are specified in Table A5.1.7 in Annexure 5 to Schedule 1A.
(3) A separate matrix must be constructed for each option portfolio and associated hedges in an individual currency pairing.
(4) Changes in the value of the option portfolio must be analysed over a fixed range of changes above and below the current market exchange rate and option implied volatility as follows:
(a)        the relevant Position Risk Factor is to be divided into seven equally spaced rate shift intervals (including the current market rate); and
(b)       the implied volatility Position Risk Factor is to be divided into three equally spaced volatility shift intervals (including the current market implied volatility).
(5) Each option portfolio is to be re-priced using the adjusted underlying and volatility price as described in subrule (4). The value in each element of the contingent loss matrix will be the difference between the revalued option portfolio and the option portfolio measured using the closing market rates.
Part A3.21 Calculation of Foreign Exchange Equivalent positions— Foreign exchange position risk
A3.21.1 Options
The Foreign Exchange Equivalent for an Option is:
(a)        for purchased call Options and written put Options, a long position at the notional face value of the underlying contract; and
(b)       for purchased put Options and written call Options, a short position at the notional face value of the underlying contract.
A3.21.2 Futures
The Foreign Exchange Equivalent for a currency Future is the notional face value of the underlying contract.
A3.21.3 Forward contracts
The Foreign Exchange Equivalent for a forward contract including a future exchange associated with a cross currency Swap is at the discretion of the Market Participant either the:
(a)        face value of the contract; or
(b)       net present value of the contract.
A3.21.4 Other positions—Exchange traded CFDs
The Foreign Exchange Equivalent for an exchange traded CFD over an exchange rate or foreign currency is the notional face value of the underlying contract.
Part A3.22 Calculation of a converted net open position—Foreign exchange position risk
A3.22.1 Calculation of a converted net open position
(1) To calculate a net open position in a foreign currency, a Market Participant must aggregate in each currency all:
(a)        Financial Instruments; and
(b)       other assets and liabilities, other than Excluded Assets and foreign exchange contracts hedging Excluded Assets.
(2) To convert a net open position to an equivalent Australian dollar amount a Market Participant must use:
(a)        the Market Spot Exchange Rate; or
(b)       in the case where a foreign currency asset or liability is specifically matched or hedged by a forward currency contract, the rate of exchange stated in the forward currency contract.
Annexure 4 to Schedule 1A: Underwriting Risk Requirement
The Underwriting Risk Requirement is zero.
Annexure 5 to Schedule 1A: Tables
Part A5.1 Position Risk
Table A5.1.1: Equity Position Risk Factors—Recognised Market Index and Non Recognised Market Index
Position In:
Underlying
Option

 
Recognised Market Index
(see Table 1.6)
Non Recognised Market Index
Implied Volatility
 

Standard Method
Building Block Method
Standard Method
Building Block Method

 
 
General Risk
Specific Risk
 
General Risk
Specific Risk
 

Single Equity
12%
8%
4% 1
16%
8%
8%
25%

Index
8% 2
8%
0% 2
16% 2
8%
8%
25%

Notes:
1   The specific risk Position Risk Factor for a single Equity may be reduced to 2% if the variables in Rule A5.1.1A apply, where:
Π = gross value of each country portfolio
αi= Net Position in equity i
α5%-10% = Positions in individual equities that represent more than 5% and up to 10% of the gross value of the portfolio
Both of the “tests” noted in Rule A5.1.1A must be satisfied in order for the Position Risk Factors to be reduced to 2% for any equity position held.  Hence if any one net position is greater than 10% of the gross value of each country portfolio then NO net position can have a position risk factor of 2%.
2   For positions not broken down into constituent Equities, otherwise the single Equity percentages apply.
A5.1.1A Reduction of specific risk Position Risk Factor
The specific risk Position Risk Factor for a single Equity in a Recognised Market Index can be reduced from 4% to 2% if: 
(a)        all Equity Net Positions in that country are less than or equal to 10% of the aggregate of the absolute values of all Equity Net Positions in that country portfolio, and
(b)       the aggregate of the absolute values of all Equity Net Positions in that country that are individually more than 5% and up to and including 10% of the aggregate of the absolute values of all Equity Net Positions in that country portfolio is less than or equal to 50% of that aggregate.
Table A5.1.2: Debt Position Risk Factors (see also Table A5.1.3 below)
Time Band
Position Risk Factors—%

Coupons
Standard Method
Building Block Method
(General Risk)

³ 3%
10 Business Days: Excess of market value over contract value in case of a sale / Excess of contract value over market value in case of a purchase
 
 
 
 
 
 

100% of Contract value/100% of Market value
 
 
 
 
 
 

Sub Total - Unweighted Amounts
 
 
 
 
 
 

Total Risk Amounts - Weighted by CRW
 
 
 
 
 
 

Amount Of Collateral Utilised To Reduce The
Above Amounts.
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
Return Date:
Free Delivery Method
Risk Amounts By Counterparty Risk Weighting (CRW) Category
 
Transaction Type
0%
10%
20%
50%
100%
Total

< 2 Business Days @8%
 
 
 
 
 
 

≥ 2 Business Days @100%
 
 
 
 
 
 

Sub Total - Unweighted Amounts
 
 
 
 
 
 

Total Risk Amounts - Weighted by CRW
 
 
 
 
 
 

Amount of Collateral Utilised to Reduce the
Above Amounts
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Securities Lending and Borrowing Method
Risk Amounts By Counterparty Risk Weighting (CRW) Category
 
Transaction Type
0%
10%
20%
50%
100%
Total

Option 1: > $10,000 and counterparty exposure ≤ 15% of value received: 8% of counterparty exposure
 
 
 
 
 
 

> $10,000 and counterparty exposure >
15% of value received : 8% of 15% of value received
 
 
 
 
 
 

> $10,000 and counterparty exposure >
15% of value received : 100% of counterparty exposure over 15% of value received
 
 
 
 
 
 

Option 2: > $10,000 : 100% of counterparty exposure
 
 
 
 
 
 

Sub Total - Unweighted Amounts
 
 
 
 
 
 

Total Risk Amounts - Weighted by CRW
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Margined Financial Instruments Method
Risk Amounts By Counterparty Risk Weighting (CRW) Category
 
Transaction Type
0%
10%
20%
50%
100%
Total

Settlement Amount, Premium, Deposit or Margin owed by Counterparty @ 100%
 
 
 
 
 
 

Total Risk Amounts Weighted by CRW
 
 
 
 
 
 

Amount of Collateral Utilised To Reduce The
Above Amounts
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
OTC Derivatives and Warrants Executed as Principal Method
Risk Amounts By Counterparty Risk Weighting (CRW) Category
 
Transaction Type
0%
10%
20%
50%
100%
Total

Written Premium Not Received @ 100%
 
 
 
 
 
 

Current Credit Exposure : Equity @ 8%
 
 
 
 
 
 

Potential Credit Exposure : Equity @ 8%
 
 
 
 
 
 

Current Credit Exposure : Debt @ 8%
 
 
 
 
 
 

Potential Credit Exposure : Debt @ 8%
 
 
 
 
 
 

Current Credit Exposure : Fx @ 8%
 
 
 
 
 
 

Potential Credit Exposure : Fx @ 8%
 
 
 
 
 
 

Sub Total - Unweighted Amounts
 
 
 
 
 
 

Total Risk Amounts - Weighted by CRW
 
 
 
 
 
 

Amount Of Collateral Utilised To Reduce The
Above Amounts.
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Sub-Underwritten Positions Method
Risk Amounts By Counterparty Risk Weighting (CRW) Category
 
Transaction Type
0%
10%
20%
50%
100%
Total

Unweighted Amount
 
 
 
 
 
 

Total Risk Amounts - Weighted by CRW
 
 
 
 
 
 

Amount of Collateral Utilised To Reduce The
Above Amounts
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Currency Exposure
 
Currency
% of Total

 
 

TOTAL
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Counterparty Concentration
 
 
 
 
Counterparty Name
 
Counterparty Type
 
Gross 'Unweighted
Value'
 
Counterparty Risk
Weighting %
Counterparty Risk Amount (Risk Weighted)

1
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Position Risk Requirement
 
Summary
Total

Part 1 - Equity Position Risk
 

Part 2 - Debt Position Risk
 

Part 3 - Foreign Exchange Position Risk
 

Part 4 - VaR
 

TOTAL POSITION RISK REQUIREMENT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Equity Position Risk
 
 
Summary
Total AUD

Standard Method
 

Building Block Method
 

Contingent Loss Matrix Method - Method 1
 

Contingent Loss Matrix Method - Method 2
 

Margin Method
 

Basic Method
 

Arbitrage Method - Similar Indexes
 

Arbitrage Method - Matching Basket - 2nd Method
 

EQUITY POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Standard Method
 
 
Country
Equity Net Positions @
8%
Equity Net Positions @
12%
Equity Net Positions @
16%
Total Position Risk
Amount $

 
 
 
 
 

TOTAL
 
 
 
 

TOTAL STANDARD METHOD POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Building Block Method
 
 
 
Number of Positions
Specific Risk
General Risk
 

 
Country
 
Long
 
Short
Equity Net
Position 2%
Equity Net
Position 4%
Equity Net
Position 8%
Specific Risk
Total $
Aggregate
Equity Net 8%
Total Position

Risk Amount $

 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 
 

TOTAL BUILDING BLOCK METHOD POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix Method 1
 
                                                                                                                                                                                                                                
 
Country
Total Position Risk Amount (Aggregate Of Greatest Losses)

 
 

Total
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix – Method 2
 

 
Number of Positions
Specific Risk
General Risk
 

 
 
Country
 
 
Long
 
 
Short
 
Equity Net
Positions
 
Equity Net
Positions
 
Equity Net
Positions
 
Total Specific
Risk Amount
Amount Aggregate Of Greatest Losses
 
Total Position
Risk Amount

 
 
 
@ 2 %
@ 4 %
@ 8 %
$
$
$
 

 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 
 

TOTAL METHOD 2 POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Margin Method
 
 
 
Country
 
Primary Margin Requirement
Position Risk Amount $
(4 x Primary Margin Requirement)

 
 
 

TOTAL
 
 

TOTAL POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Basic Method
 
 
 
Purchased Options
Written Options

Country
Aggregate Mark To Market
Value of Underlying
Mark To Market Value of
Options
Position Risk Amount
Position Risk Amount

 
 
 
 
 

TOTAL
 
 
 
 

TOTAL POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Arbitrage Method
 
 
 
 
Similar Indexes
Broadly based Index and a matching basket

 
 
Mark To Market Value of Futures
 
 
Position Risk
Amount @ 2%
No. of Separately Managed Arbitrage Positions
 
 
Beta
 
 
Min Index
Weight
 
Mark To Market Value of Futures
 
 
Position Risk
Amount @ 2%

Country
$
$
 
Min %
Max %
%
$
$

 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 

TOTAL POSITION RISK
 
TOTAL POSITION RISK
 


 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Equity Principal Concentration
 
 
Security Code (or description if code not applicable)
 
Country
Equity Net Position
(Liquid)
Equity Net Position
(Illiquid)
 
Total Position

 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Debt Position Risk
 
 
Summary
Position Risk Amounts Total

Standard Method
 

Building Block Method                     - Maturity Method
 

- Duration Method
 

- Specific Risk
 

Contingent Loss Matrix Method 2 - Maturity Method                           - General risk
 

- Specific risk
 

- Volatility risk
 

Margin Method
 

Basic Method
 

DEBT POSITION RISK AMOUNT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Standard Method
 
 
 
Total Position Risk Amount
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Building Block Method
 
 
Building Block Method - Specific Risk
 
 
Aggregate Debt Net Positions Absolute Value
(input GROSS numbers)

 
 
Government
Qualifying 0-6
Months Residual
Maturity
Qualifying 6-24
Months Residual
Maturity
Qualifying >24
Months Residual
Maturity
 
Other
Specific Risk Position Risk Amount

Underlying Currency
@ 0%
@ 0.25%
@ 1.00%
@ 1.60%%
@ 8%
$

 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 

TOTAL SPECIFIC RISK POSITION RISK AMOUNT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Duration Method
 
 
 
Weighted Debt Net Positions
 
 
 
 
 
 

 
Zone 1
Zone 2
Zone 3
Net
Time
Zone
Amount
Adjacent
Zone
Non
Adjacent
General Risk

Underlying
Currency
 
Long
 
Short
 
Long
 
Short
 
Long
 
Short
Position
Amount
Band
Amount
 
 
Amount
Zone
Amount
 
Amount

 
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL GENERAL RISK POSITION RISK AMOUNT
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Maturity Method
 
 
 
 
Weighted Debt Net Positions
 
 
 
 
 
 

 
Zone 1
Zone 2
Zone 3
Net
Time
Zone  Amount
Adjacent Zone
Non Adjacent
General Risk

 
Underlying
Currency
 
Long
 
Short
 
Long
 
Short
 
Long
 
Short
 
Position
Amount
 
Band Amount
 
 
Amount
 
Zone Amount
 
Amount

 
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL GENERAL RISK POSITION RISK AMOUNT
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix Method 2 – General Risk
 
 
 
 
 
Underlying
Notional Weighted Debt Net Positions
Net
 
Position
Time
 
Band
Zone
 
Amount
Adjacent
 
Zone
Non
Adjacent
Zone
General
 
Risk

Zone 1
Zone 2
Zone 3

Currency
Long
Short
Long
Short
Long
Short
Amount
Amount
 
Amount
Amount
Amount

 
$
$
$
$
$
$
$
$
$
$
$
$

 
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 
 
 
 
 
 

TOTAL GENERAL RISK POSITION RISK AMOUNT
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix Method 2 – Specific Risk
 
 
 
Aggregate Delta weighted value of Underlying Instrument (input GROSS numbers)

 
 
Government
Qualifying 0-6
 
Residual Maturity
Qualifying 6-24
 
Residual Maturity
Qualifying > 24
 
Residual Maturity
 
 
Other
Specific Risk
 
Position Risk Amount

Underlying Currency
@ 0%
@ 0.25%
@ 1.00%
@ 1.6%
@ 8%
$

 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 

TOTAL SPECIFIC RISK POSITION RISK AMOUNT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix Method 2 – Volatility Risk
 
 
 
Underlying Currency
Absolute Value of the aggregate of the greatest loss for each currency

 
 

TOTAL
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Margin Method
 
 
 
Underlying Currency
Primary Margin Requirement
Position Risk Amount $ (4 x Primary Margin
Requirement)

 
 
 

TOTAL
 
 

TOTAL POSITION RISK AMOUNT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Basic Method
 
 
 
 
Purchased Options
 
Written Options

 
Underlying Currency
Aggregate Mark To Market
Value of Underlying
Mark To Market Value of
Options
 
Position Risk Amount
 
Position Risk Amount

 
 
 
 
 

TOTAL
 
 
 
 

TOTAL POSITION RISK AMOUNT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Debt Principal Concentration
 
 
Security Code (or description if code not applicable)
Underlying Currency
Debt Net Position
(Liquid)
Debt Net Position
(Illiquid)
Total Position

 
 
 
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Foreign Exchange Position Risk
 
 
Summary
Position Risk Amounts Total

Standard Method
 

Contingent Loss Matrix Method
 

FOREIGN EXCHANGE POSITION RISK AMOUNT
 

 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Standard Method
 
 
Underlying Currency
Net Open Long Position
Net Open Short Position

 
 
 

TOTAL
 
 

POSITION RISK AMOUNT – 8% OF MAX OF LONG OR SHORT
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Contingent Loss Matrix Method
 
 
Commodity Currency

Terms Currency
 
 
 
 
 
Other
Total

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Other
 
 
 
 
 
 
 

Total
 
 
 
 
 
 
 

TOTAL POSITION RISK AMOUNT
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Largest Daily Losses
 
 
Loss                                                                                                                Date
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Equity Stress Testing
 
 
National Market
Change in Implied Volatility
 
Change in Price (%)

 
(%)
-50
-25
0
+10
+20

 
+200
 
 
 
 
 

0
 
 
 
 
 

- 75
 
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Debt Stress Testing
 
 
 
Change in Yield (%)

 
Cash
90 days
180 days
1 year
3 years
5 years
10 years
15 years

Yield curve scenario 1
+20
+20
+20
+20
+20
+20
+20
+20

Yield curve scenario 2
-20
-20
-20
-20
-20
-20
-20
-20

 
Yield curve scenarios
 
 
Yield curve scenario 1
Yield curve scenario 2

 
 
 

 
 
Interest rate volatility scenarios
 
 
Volatility scenario 1
Volatility scenario 2

Change in Implied Volatility (%)
+250
-75

 
 
 

 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Foreign Exchange Stress Testing
 
 
Exchange Rate Scenarios
 
Change in Price (%)

Change in Implied Volatility (%)
-20
-10
0
+10
+20

+100
 
 
 
 
 

0
 
 
 
 
 

-50
 
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Large Exposure Risk Requirement
 
 
 
 
Summary
Total

Part 1 - Counterparty Large Exposure Amount
 

Part 2 - Issuer Large Exposure - Equity Method
 

Part 3 - Issuer Large Exposure - Debt Method
 

Part 4 - Issuer Large Exposure - Equity & Debt Method
 

Total Large Exposure Risk Requirement
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Counterparty Large Exposure Amount
 
 
Counterparty Large Exposure
 
Summary
Total

Total Counterparty Large Exposure Risk Requirement
 

Total number of counterparties
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Non Margined Financial Instruments Method
 
 
Transaction Type
Risk Amounts

> 10 Business Days : Transactions @ 3% of contract value or excess, whichever is greater
 

> 10 Business Days : 100% of contract value / 100% of market value
 

Sub TOTAL RISK AMOUNT
 

Total Number of Counterparties
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Securities Lending and Borrowing Method
 
 
Transaction Type
Risk Amounts

Option 1

> $10,000 and counterparty exposure ≤15% of value received : 8% of counterparty exposure
 

> $10,000 and counterparty exposure > 15% of value received : 8% of 15% of value received
 

> $10,000 and counterparty exposure > 15% of value received : 100% of counterparty exposure over
15% of the value received
 

Option 2

> $10,000 : 100% of counterparty exposure
 

Sub TOTAL RISK AMOUNT
 

Total Number of Counterparties
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Margined Financial Instruments Method
 
 
Transaction Type
Risk Amounts

Settlement Amount, Premium, Deposit or Margin owed by Counterparty @ 100%
 

Sub TOTAL RISK AMOUNT
 

Total Number of Counterparties
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
OTC Derivatives and Warrants Executed as Principal Method
 
 
Transaction Type
Risk Amount

Written Premium Not Received @ 100%
 

Current Credit Exposure : Equity @ 8%
 

Potential Credit Exposure : Equity @ 8%
 

Current Credit Exposure : Debt @ 8%
 

Potential Credit Exposure : Debt @ 8%
 

Current Credit Exposure : Fx @ 8%
 

Potential Credit Exposure : Fx @ 8%
 

Sub TOTAL RISK AMOUNT
 

Total Number of Counterparties
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Issuer Large Exposure – Equity Method
 
 
Country
Number of
Equity Issuers
Equity Net
Position
> 25% Of
Liquid Capital
@ 12%
> 25% Of
Liquid Capital
@ 16%
> 5% Of Issue
@ 12%
> 5% Of Issue
@ 16%
Total Risk

Amount $
 

 

 
 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Issuer Large Exposure – Debt Method
 
 
 
Underlying Currency
Number of Debt
Issuers
Debt Net Position
> 25% Of Liquid
Capital
> 10% Of Issue
Total Risk Amount $

 

 
 
 
 
 
 

TOTAL
 
 
 
 
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Issuer Large Exposure – Equity & Debt Method
 
 
 
 
Underlying
Currency
 
Number of
Equity/Debt Issuers
 
Equity Net Position Plus Debt Net Position
 
> 25% Of Liquid
Capital @ 12%
 
> 25% Of Liquid
Capital @ 16%
> 25% Of Liquid Capital @ applicable debt position risk factor
 
 
Total Risk Amount $

 
 
 
 
 
 
 

TOTAL
 
 
 
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Underwriting Risk Requirement
 
 
 
 
Equity
Debt Instrument
Total

Underwriting Risk Amount
 
 
 

 
 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Non Standard Risk Requirement
 
 
Detail the nature of the exposure
 
 
 
 
 
Other
Amount - Total

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 

Total
 
 
 
 
 
 
 

 
Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Operational Risk Requirement
 
 
 
Minimum Amount
$100,000

add                                       Variable amount
 

Counterparty risk requirement
(a)
 
 

Position Risk Requirement
(b)
 
 

Underwriting Risk Requirement
(c)
 
 

Sum (a) + (b) + (c)
 
* 8% =
 

add                             Secondary Requirement

 

Total Operational Risk
 
 

 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Income Statement
 
Revenue
 
Current
Prior

Profits (Losses) from trading in securities /
derivatives: Realised
 
 
 
 

Unrealised
 
 
 
 

Brokerage: Equities
 
 
 
 

Warrants
 
 

Futures / Exchange Traded Options
 
 

Debt
 
 

Other
 
 
 
 

Underwriting commission (less sub-underwriting commission paid)
 
 
 
 

Sub-underwriting commission
 
 

Dividends
 
 

Interest
 
 

Bad debts recovered and provision for doubtful debts no longer required
 
 

Directors' fees
 
 

Handling fees
 
 

Corporate Advisory Fees
 
 

Financial planning / Portfolio Management Fees
 
 

Management fees
 
 

Other fee received from associated entities
 
 

Other Revenue

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
 
Additional Total
 
 
 

TOTAL REVENUE
 
 
 

 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Expenses                                                                                                                                            
 
Current
Prior

Salaries (excluding partners, directors and research salaries)
 
 
 
 

Directors' / Partners' salaries
 
 

Commissions paid to Traders / Consultants
 
 

Other salary costs
 
 

Occupancy costs
 
 

Interest paid
 
 

Travel, Public Relations and Advertising
 
 

Research (including research salaries)
 
 

Bad and doubtful debts written off / provided for
 
 

Audit fees
 
 

Admin costs (postage, fax, phone etc)
 
 

Professional indemnity insurance
 
 

Other insurance costs
 
 

All management / service fees paid to associated entities
 
 

Depreciation / Amortisation of fixed and intangible assets
 
 

Finance lease payments
 
 

Operating lease payments (other than occupancy)
 
 
 
 

Other Expenses

 
TOTAL EXPENSES
 
 
 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Net Profit / (loss)
 
 
Current
Prior

PROFIT before income TAX
 
 

Income Tax - Expense
 
 

If a profit has been made but no tax provision raised, the reason for NOT providing for tax must be recorded in this comment field
 
 

 
 

 

Profit / (loss) after TAX from discontinued operations (detail below)
 
 

 
 
 
 
 

 
 
 
 
 

NET PROFIT / (LOSS) for the period
 
 

 
 
 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Retained Earnings
 
 
 
Current
Prior

Opening Retained Earnings
 
 

Adjustments TO retained earnings (detail) - increases
 

 
 
 
 

TOTAL
 
 

Dividends
 
 

Adjustments from retained earnings (detail) - decreases
 

TOTAL
 
 
 

Other adjustments to / (from) retained earnings (detail)
 

 
 
 
 

TOTAL
 
 

Closing Retained Earnings
 
 

 
 
Capital Liquidity Return
                                                                                                                                                                                           Return Date:
Balance Sheet
Assets

 
Current Assets (current)
Current Assets (prior)

Trade Receivables
 
 
 
 

Less Provision for doubtful debts
 
 
 
 

 
Securities Borrowings
 
 
 

Financial Assets
 
 

Cash and Cash Equivalents
 
 

Related/ Associated Persons
 
 

Client segregated/ Trust Accounts
 
 

Deposits at Clearing Houses
 
 

Other Current Assets
 
 

TOTAL CURRENT ASSETS
 
 

Non Current Assets (current)
Non Current Assets (prior)

Trade Receivables
 
 
 

Financial Assets
 
 

Loans and Deposits
 
 

Related/ Associated Persons
 
 

Property, Plant & Equipment
 
 

Intangible Assets
 
 

Deferred Tax Assets
 
 

Other Non Current Assets
 
 

TOTAL NON CURRENT ASSETS
 
 

Total Assets
 
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
 
Liabilities

 
Current Liabilities (current)
Current Liabilities (prior)

Trade Payables
 
 

Securities Lending
 
 

Financial Liabilities
 
 

Short Term Borrowings
 
 

Income Tax Payable
 
 

Approved Subordinated Debt
 
 

Other Current Liabilities
 
 

TOTAL CURRENT LIABILITIES
 
 

 
Non Current Liabilities (current)
Non Current Liabilities (prior)

Long Term Borrowings
 
 

Deferred Income Tax
 
 

Approved Subordinated Debt
 
 

Other Non Current Liabilities
 
 

TOTAL NON CURRENT LIABILITIES
 
 

Total Liabilities
 
 

Net Assets
 
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
 
Equity

 
Equity (current)
Equity (prior)

Ordinary Issued and Paid Up
Shares
 
 
 
 

Non Cumulative Preference
Shares
 
 

Cumulative Preference Shares
 
 

Other
 
 

Total Equity
 
 
 

 
Reserves (current)
Reserves (prior)

Revaluation reserves
 
 
 
 

Other reserves
 
 

TOTAL RESERVES
 
 
 

Retained Earnings / (Accumulated Losses)
 
 

Total Equity
 
 

 
 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Balance Sheet Details
 
 
Total Contingent Liabilities
 
 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Cash & Cash Equivalents
 
 
Detail FUNDS lodged with:
CURRENT
NON CURRENT

Approved Deposit Taking Institution
(ADTI)
 
SECURED
 
UNSECURED
 
SECURED
 
UNSECURED

Total ADTI
 
 
 
 

Petty Cash
 
 
 

 

Non ADTI and Other

Total NON ADTI and Other
 
 
 
 

Total Secured / Unsecured
 
 
 
 

Total Current / Non Current:
 
 
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Related/ Associated Persons
 
 
Cash & Cash Equivalents - Detail
CURRENT
NON CURRENT

-Approved Deposit Taking
Institution (ADTI)
 
SECURED
 
UNSECURED
 
SECURED
 
UNSECURED

ADTI Total
 
 
 
 

 

Cash & Cash Equivalents - Detail
 
 
 
 

- Non ADTI and Other
 
 
 
 

Non ADTI Total
 
 
 
 

Total Secured/ Unsecured
 
 
 
 

Total Current/ Non Current
 
 
 
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Underwriting/ Guarantees
 
 
Underwriting and Sub Underwriting:

Gross Underwriting Commitments
 
 
 

Gross Sub Underwriting Commitments
 

Gross Underwriting and Sub Underwriting Commitments
 

Reduce underwriting and sub underwriting commitments by sub underwritten amounts and/or amounts received from client placement
 

NET UNDERWRITING COMMITMENTS
 

Guarantees:

For the purpose of the Rules
 
 

Ordinary course of business
 

To settle legal proceedings
 

SUB TOTAL
 

Related/Associated persons
 
 

Other
 

Other Guarantee Sub Total
 

TOTAL UNDERWRITING / GUARANTEES
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Legal / Insurance / Encumbrances
 
 
Contingent Liabilities
 
Are there any actual / potential legal proceedings and Insurance Claims?
 

Is there any charge, pledge, or other encumbrance over any of the assets of the Participant?
 

Has the Participant granted any Credit Facilities to other persons or entities?
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Other Contingent Liabilities and Lease Commitments
 
 
 
Lease Commitments: (including property commitments)

Detail Operating Leases
 

Other Leases:
 
 

TOTAL LEASE COMMITMENTS:
 

Other Contingent Liabilities:

TOTAL OTHER:
 

Total Lease Commitments / Other Contingent Liabilities:
 


 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Other Assets
 
 
Current Asset Description
Current Asset Amount

Current Asset Amount Total
 

NON Current Asset Description
NON Current Asset Amount

NON Current Asset Amount Total
 

Other Assets Total
 

Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Core Capital
 
 
 
Current Return                                               Prior Return

Ordinary Issued and Paid-Up Shares
 
 

Non-Cumulative Preference Shares
 
 

All Reserves Excluding Revaluation Reserves other than Financial
Asset Revaluation Reserves
 
 

Opening Retained Earnings/Accumulated Losses Adjusted for all
Current Year Movements
 
 

Core Capital
 
 

 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Liquid Capital Calculation
 
 
Current Return
Prior Return

Core Capital
 
 
 
 

Cumulative Preference Shares
 
 

Approved Subordinated Debt
 
 

Revaluation Reserves other than Financial
Asset Revaluation Reserves
 
 
 
 

less Excluded Assets

Property, Plant and Equipment
 
 
 
 

Intangible Assets
 
 

Deferred Tax Assets
 
 

Other Non-Current Assets
 
 

Unsecured deposits/loans with non approved deposit taking instit's
 
 

Unsecured non ADTI related / associated person balances
 
 

Other trade receivables realisable after 30 days
 
 

Prepayments realisable after 30 days
 
 

Other Illiquid Assets
 
 

Other charged assets
 
 

Other prescribed assets
 
 
 
 

less Excluded Liabilities

Guarantees and Indemnities
 
 
 
 

Other prescribed liabilities
 
 
 
 

Liquid Capital
 
 
 
 

 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Liquid Margin Calculation
 
 
Current Return
Prior Return

Liquid Capital
 
 
 
 

Operational Risk Requirement
 
 
 
 

Counterparty Risk Requirement
 
 
 
 

Large Exposure Risk Requirement
 
 
 
 

Position Risk Requirement
 
 
 
 

Underwriting Risk Requirement
 
 
 
 

Non Standard Risk Requirement
 
 
 
 

Liquid Margin
 
 
 
 

 
.Ratio of Liquid Capital to Total Risk Requirement
 
 
Current Return
Prior Return

Ratio of Liquid Capital to
 
 
=
Liquid Capital
 
 
=
 
 
 
=
 
 

Total Risk Requirement
Total Risk Requirement
 

Capital Liquidity Return
 
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Additional Comments
 
 
Capital Liquidity Return
                                                                                                                                                                                                                                                                                                                                                                                      Return Date:
Credit Facilities & Overdraft
 
STANDBY CREDIT facilities granted in favour of the Participant

Type
Full  Name of Provider
Terms And Availability
Amount of Limit

 
 
 
 

TOTAL STANDBY CREDIT FACILITIES
 

 
Schedule 1C Form 5: Risk Based Capital Requirements – Auditor’s Report
 
 
 
PRO FORMA AUDITOR’S REPORT ON FINANCIAL INFORMATION
 
Pro Forma Auditor’s Report on Financial Information
 
KEY
The following key applies throughout this document.
* Where the Participant is a body corporate incorporated or resident outside Australia operating a branch in Australia, the following words may be inserted – “Australian
branch”.
** Delete as applicable.
 
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS/PARTNERS** OF
[PARTICIPANT_NAME]
 
To: The Directors/Partners**, [Participant_name];
 
AUDITOR’S REPORT ON THE RETURN
 
We have audited the financial information set out in the attached.
 
Annual Audited Return, excluding the Directors’ / Partners’ ** Statement Relating to Accounts of a Participant and “Prior Period” balances as shown in the Audited Return, (the “Return”) of [Participant_name]* (“the Participant”) for the [period] ended [date].
 
The Responsibility of the Directors/Partners ** for the Return
 
The directors/partners ** of the Participant are responsible for the preparation and fair presentation of the financial information set out in the Return in accordance with the requirements of the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014. This responsibility includes: establishing and maintaining internal controls relevant to the preparation and fair presentation of the  financial information set out in the Return to ensure that the Return is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
 
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial information set out in the Return based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial information set out in the attached Return is free from material misstatement.
 
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial information set out in the Return. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial information set out in the Return whether due to fraud or error.
 
In making those risk assessments, the auditor considers internal controls relevant to the Participant’s preparation and fair presentation of the financial information set out in the Return in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Participant’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors/partners**of the Participant, as well as evaluating the overall presentation of the financial information set out in the Return.
 
The Return has been prepared in accordance with Rule 9.2.4 of the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014 as the Participant is complying with the Risk Based Capital Requirements.
 
The Return may not be suitable for another purpose. Our report is intended solely for the Participant and ASIC and should not be distributed to or used by parties other than the Participant and ASIC.
 
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 
INDEPENDENCE
In conducting our audit, we have complied with the independence requirements of APES
110: Code of Ethics for Professional Accountants.
 
[QUALIFIED] AUDITOR’S OPINION
 
In our opinion, [except for the matters referred to in the qualification below], the Return of [Participant_name] for the [period] ended [date] presents fairly, in all material respects, the financial information of the Participant for the [period] ended [date] as required by ASIC in accordance with the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014 that are relevant to the preparation and presentation of the Return.
 
QUALIFICATION (IF APPLICABLE)
 
Dated this .................................................. day of .............................................................
Audit Firm “Signature” .....................................................................................................
 Name of Audit Firm ............................................................................................................. Address of Audit Firm .......................................................................................................... Partner’s Signature ..............................................................................................................
Name of Partner ..................................................................................................................
 
 
If an auditor is not satisfied as to any matter a qualified audit opinion should be expressed.
Schedule 1C Form 6: Risk Based Capital Requirements – Key
Risks and Internal Systems Statement
 
ATTESTATION BY DIRECTORS/PARTNERS TO ASIC
KEY RISKS AND INTERNAL SYSTEMS
 
 
 
Participant:.......................................................................................................................
Year Ended:......................................................................................................................
 
PARTICIPANTS KEY RISKS AND INTERNAL SYSTEMS STATEMENT
We hereby certify and represent that:
The Participant has developed and implemented adequate systems, procedures and controls reasonably designed to achieve compliance, at all times, with the requirements of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 and the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014, and which are appropriate for the nature and extent of the trading activities being conducted.
 
This includes review of the obligations under the ASIC Market Integrity Rules (Chi-X Australia Market) 2011 and the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014, the  identification of the key risks facing the Participant and the establishment of systems, procedures and controls to monitor and manage those risks including the establishment of policies and procedures to ensure the accurate calculation of the capital requirements.
 
The systems, procedures and controls are operating effectively and are adequate having regard to the nature and extent of the Participant’s trading activities to ensure compliance with ASIC Market Integrity Rules (Chi-X Australia Market) 2011 and the ASIC Market Integrity Rules (Chi-X Australia Market-Capital) 2014.
 
We have retained copies of the relevant documentation on which this representation is based and this is available for inspection by ASIC.
 
Name .........................................................Name........................................................... Director / Partner ......................................Director / Partner..........................................
 
 
Dated this ......................................................... day of...................................................
 
 
Date of Board Resolution (if applicable)........................................................................
 
 
Note: If a Participant considers it necessary to qualify this standard statement, the reasons should be explained in full in an accompanying statement
Schedule 1C Form 7: Risk Based Capital Requirements – Partnership Statutory Declaration
 
 Market Participants – Partner Statutory Declaration
 
Basis of preparation
 
In completing this statutory declaration ALL liabilities, actual or contingent must be declared.  Sufficient assets should be declared to demonstrate an excess of assets over liabilities of not less than $50,000.  If net assets are less than $50,000 then (i) all assets must be declared as well as all liabilities (actual or contingent) and (ii) a statement must be provided explaining the source of funds required to meet liabilities. 
 
The declaration is required to be made in accordance with the law of the place where the declaration is executed.    The table below sets out the persons who may witness a declaration.
 
State
Persons who may witness declaration

Victoria
Among others, any justice of the peace, notary public, barrister or solicitor of the Supreme Court, a member of the police force or Parliament, a legally qualified medical practitioner, a bank manager, a dentist or pharmacist, or a public service officer authorised to do so.

New South Wales
Among others, any justice of the peace, notary public, commissioner of the court for taking affidavits, other person authorised by law to administer an oath, or a solicitor holding a current practising certificate.

Queensland
Among others, any commissioner for declarations, justice of the peace, notary public or other officer authorised by law to administer an oath, barrister, solicitor or conveyancer.

Western Australia
Among others, any justice of the peace or other person authorised by law to administer an oath.

South Australia
Among others, any justice, notary public or any officer authorised by law to administer an oath or affirmation.

Tasmania
Among others, any justice, person authorised by law to administer an oath or a commissioner for declarations.

 
Each page of the notes attached to the statutory declaration must be signed and dated by the partner for identification purposes.
 
Treatment of property and mortgages
 
It is intended that the following guidelines be observed in the treatment of property and mortgages:
 
·      only the partner's proportion of the property value may be included as an asset in note 5;
·      the partner's proportion of the mortgage debt to be shown as a liability in note 8;
·      the proportion of the mortgage debt relating to other owners to be shown as contingent liability in note 9; and
·      no proportion of the property owned by the other parties may be included as an asset, contingent or otherwise.
 
Summary (note 1)
 
As note 1 is a summary of the totals of other notes, this note must be completed in full.
 
Treatment of assets (notes 2 to 7)
 
Accounts as at 30 June last should be attached to this Statutory Declaration in respect of any borrower who is not a recognised borrowing institution.
 
Assets are to be separately listed in these notes.  Where such assets are not registered in the sole name of the partner, particulars must be given.  Where assets included in these notes have been offered as security, full particulars must be given.
 
Treatment of assets pledged for liability of a Participant (note 10)
 
If any personal assets are pledged as security for a liability of a Participant, those assets should be listed in note 10.  They must not be listed in any other notes.
 
Treatment of assets pledged for other debts not included in note 10 (note 11)
 
If any of the assets listed are pledged as security for any debt of either the person making this declaration, or a third party, details should be listed in note 11.
 
Statutory Declaration*
 
I,
[insert full name]

of
[insert address]

,
[insert occupation]

do solemnly and sincerely declare that:

 
1.    My actual and contingent liabilities of any nature did not exceed the sum of $              and are detailed on notes 8 and 9;
 
2.    The information stated in notes 1 to 11 inclusive is true and correct;
 
3.    The realisable value of my assets (excluding my interest in the Participant of                ) exceeded the liabilities referred to in clause 1 by at least $           ; and
 
4.    All insurable assets described in the notes are, at all times, held insured to a value not less than that shown in the attached notes.
 
 

Victoria* - Declaration complying with the Evidence Act 1958

 
 
 
 
 
 
 

And I acknowledge that this declaration is true and correct, and I make it in the belief that a person making a false declaration is liable to the penalties for perjury.

 
 
 
 
 
 
 

Declared at
 
)
 
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
[Title of person before whom the declaration is made]
 
 


 
_______________________
* Each partner is required to execute the statutory declaration in accordance with the law of the jurisdiction where the declaration is made.  Accordingly, please select the appropriate format and delete or cross out those formats which are not relevant.
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 
 

New South Wales*   - Declaration under the Oaths Act 1990

 
 
 
 
 
 
 

And I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Oaths Act 1990.

 
 
 
 
 
 
 

Declared at
 
)
 
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
[Title of person before whom the declaration is made]
 
 


 
 

Queensland*    - Declaration under The Oaths Acts, 1867 to 1988 -

 
 
 
 
 
 
 

And I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of The Oaths Act of 1867.

 
 
 
 
 
 
 

Signed and declared by the above-named declarant
 
 
 

 
 
 
 
 

at
 
in the State of
 
)
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
A Justice of the Peace [or as the case may be].
 
 


 
_______________________
 
* Each partner is required to execute the statutory declaration in accordance with the law of the jurisdiction where the declaration is made.  Accordingly, please select the appropriate format and delete or cross out those formats which are not relevant.
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 

Western Australia* - Declaration under the Evidence Act 1906

 
 
 
 
 
 
 

And I make this solemn declaration by virtue of section 106 of the Evidence Act 1906.

 
 
 
 
 
 
 

Declared at
 
)
 
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
[Title of person before whom the declaration is made]
 
 


 
 

South Australia*- Declaration under the Oaths Act 1936

 
 
 
 
 
 
 

And I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Oaths Act 1936.

 
 
 
 
 
 
 

Declared at
 
)
 
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
[Title of person before whom the declaration is made]
 
 


 
 
 
_______________________
 
* Each partner is required to execute the statutory declaration in accordance with the law of the jurisdiction where the declaration is made.  Accordingly, please select the appropriate format and delete or cross out those formats which are not relevant.
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 

Tasmania* - Declaration under the Evidence Act 1910

 
 
 
 
 
 
 

And I make this solemn declaration by virtue of section 132 of the Evidence Act 1910.

 
 
 
 
 
 
 

Declared at
 
)
 
 

 
 
 
 
)
 
 

this
 
day of
 
20
 
)
 

 
 
 
 
 
[Signature of declarant]

 
 
 
 
 

Before me:
 
 
 
 

 
[Signature of person before whom the declaration is made]
 
 

 
 
 
 
 

 
 
 
 
 

 
[Title of person before whom the declaration is made]
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________________
 
* Each Partner is required to execute the statutory declaration in accordance with the law of the jurisdiction where the declaration is made.  Accordingly, please select the appropriate format and delete or cross out those formats which are not relevant.
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
Note 1   Summary as at ___/___/20___
 
 
Note
Due not later than 1 year
Due later than 1 year but not later than 3 years
Due later than 3 years

 
 
 
 
 

Assets
 
 
 
 

 
 
 
 
 

Cash in Bank
2
 
 
 
 

 
 
 
 
 

Marketable Securities
3
 
 
 
 

 
 
 
 
 

Other Debtors
4
 
 
 
 

 
 
 
 
 

Property
5
 
 
 
 

 
 
 
 
 

Investments
6
 
 
 
 

 
 
 
 
 

Other Assets
7
 
 
 
 

 
 
 
 
 

Total Assets
 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

Liabilities
 
 
 
 

 
 
 
 
 

Actual Liabilities
8
 
 
 
 

 
 
 
 
 

Contingent Liabilities
9
 
 
 
 

 
 
 
 
 

Total Liabilities
 
 
 
 
 

 
 
 
 
 

Net Assets (Total Assets less Total Liabilities)
 
 
 
 

 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
Note 2       Cash in bank or on deposit
 
ASSETS AS AT ___/___/20___
 
Financial institution
Nature of account
Amount
($)

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
 
 

 
Total cash in bank or on deposit
 

 
Note 3       Marketable/liquid securities
 
Company
Number of securities
Type of security
Market value at
___/___/20___
Total Value

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
Total market value of liquid securities
 

 
 
 
 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 
Note 4       Other debtors
 
Borrower
Interest rate
Term of deposit
Secured/unsecured (if secured, provide details)
Amount
($)

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
Total other debtors
 

 
 
Note 5  Property                                                                                                                                                                                       
 
Address & description
Unimproved capital value as set by valuing authority
Method of valuation
Estimated realisable value
Proportion owned
(%)
Value

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
Total property value
 

 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 
Note 6  Investments                                                                                                                                                                                  
 
Name of business owned
Total net assets
Proportion owned
(%)
Value

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

Total investment value
 
 

 
 
Note 7  Other assets
 
Description of Assets
Method of valuation
Estimated realisable value
Proportion owned
(%)
Value

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
 
 
 
 

 
Total other assets
 

 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 
Note 8   Existing liabilities
 
 
Due within 1 year
Due between 1 year and 3 years
Due after 3 years
Total

 
 
 
 
 

Description
 
 
 
 

 
 
 
 
 

Outstanding tax assessments
 
 
 
 

 
 
 
 
 

Excess of estimated tax payable over provisional tax paid*
 
 
 
 

 
 
 
 
 

Estimate of tax applicable to income for financial year to date
 
 
 
 
 

 
 
 
 
 

Bank Overdrafts
 
 
 
 

 
 
 
 
 

Property Mortgages (show address and partner’s share of mortgage)
 
 
 
 
 

 
 
 
 
 

Other Loans
 
 
 
 

 
 
 
 
 

*Other Liabilities (details required)
 
 
 
 
 

 
 
 
 
 

Total existing liabilities
 
 
 
 

 
*  Calculate excess of estimated tax payable over provisional tax paid as per below:
 
Estimated tax payable for the year to 30th June
$ x

less Provisional tax paid
$ y

 
 

Amount to be declared
$

 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
Note 9   Contingent liabilities*
 
 
Due within 1 year
Due between 1 year and 3 years
Due after 3 years
Total

 
 
 
 
 

Description
 
 
 
 

 
 
 
 
 

Debt on residence (show address)
 
 
 
 

 
 
 
 
 

Debt on all jointly owned properties (show address)
 
 
 
 

 
 
 
 
 

Debt on other properties
 
 
 
 

 
 
 
 
 

Other contingent liabilities
 
 
 
 

 
 
 
 
 

Total contingent liabilities
 
 
 
 

 
*  Show that part of contingent liabilities which relates to debt of parties other than the partner.
 
Note 10  Assets pledged for liability of a Participant
 
Description of assets
Pledged to
Maximum liability
Value of assets pledged

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
Total assets pledged
 
$

 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

Note 11  Assets pledged for other debts not included in note 10
 
Description of assets
Pledged to
Maximum liability
Value of assets pledged

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
 
 
 

 
Total assets pledged
 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This page forms part of Statutory Declaration dated:
 
___/___/20___

 
Signed by partner:
 

 
 
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