IBANK 6.6.14 Criteria for Offsetting Shari'a-Compliant Hedging Instrument Positions

(1) An Islamic banking business firm may offset long and short positions (whether actual or notional) in identical instruments with exactly the same issuer, profit rate, currency and maturity.
(2) The firm may offset a matched position in a binding unilateral promise and its corresponding underlying. The net position must be reported.
(3) The firm may offset positions in a binding unilateral promise with a range of deliverable instruments and the corresponding underlying only if:
(a) there is a readily identifiable underlying security; and
(b) the price of that security and the price of the binding unilateral promise move in close alignment.
(4) The firm must treat each leg of a cross-currency swap or binding unilateral promise in foreign exchange transaction as a notional position in the relevant instrument, and must include the position in the calculation for each currency.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).