COLL 7.5.1 Cover for Transactions in Derivatives and Forward Transactions—QFC Retail Schemes

(1) A transaction in a derivative or a forward transaction may be entered into by the operator of a QFC retail scheme only if the maximum exposure, in terms of the principal or notional principal created by the transaction to which the scheme is or may be committed by another person, is covered globally under subrule (2).

Note Derivative, principal and notional principal are defined in the glossary.
(2) Exposure is covered globally if adequate cover from within the scheme property is available to meet the scheme's total exposure, taking into account the value of the underlying assets, any reasonably foreseeable market movement, counterparty risk, and the time available to liquidate any positions.
(3) Cash not yet received into the scheme property but due to be received within 1 month is available as cover for subrule (2).

Note Month is defined in the glossary.
(4) Property that is the subject of a transaction under part 7.6 (Stock lending and repos—QFC retail schemes) is only available for cover if the operator has taken reasonable care to decide that it is obtainable (by return or re-acquisition) in time to meet the obligation for which cover is required.
(5) The total exposure relating to derivatives held in the scheme property must not at any time exceed the scheme's net asset value.

Note Net asset value is defined in the glossary.
Derived from QFCRA RM/2010-05 (as from 1st January 2011)