IBANK 6.6.13 Criteria for Matching Shari'a-Compliant Hedging Instrument Positions

(1) An Islamic banking business firm may offset a matched position in Shari'a-compliant hedging instruments if the positions relate to the same underlying instruments, have the same nominal value and are denominated in the same currency.
(2) For swaps and binding unilateral promises:
(a) the reference rate (for floating-rate positions) must be identical and the profit rate must differ by no more than 15 basis points; and
(b) the next profit-fixing date (or, for fixed-profit-rate positions or binding unilateral promises, the residual maturity) must comply with the following requirements:
(i) if either instrument has a profit-fixing date or residual maturity up to and including 1 month in the future, the dates or residual maturities must be the same for both instruments;
(ii) if either instrument has a profit-fixing date or residual maturity more than 1 month, but no more than 1 year, in the future, the dates or residual maturities must be within 7 days of each other;
(iii) if either instrument has a profit-fixing date or residual maturity more than 1 year in the future, the dates or residual maturities must be within 30 days of each other.

Note 1 For paragraph (a), the separate legs of different swaps may be 'matched' subject to these same conditions.

Note 2 For paragraph (b), spot or cash positions in the same currency may be offset subject to these same conditions.
(3) An Islamic banking business firm that writes options may offset the delta-equivalent values of options (including the delta-equivalent value of legs arising out of the treatment of caps and floors in accordance with rule 6.3.6).
(4) However, for offsetting between a matched position in a binding unilateral promise and its underlying, rule 6.6.14 applies.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).