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Financial Markets Act, 2012 (Act No. 19 of 2012)

Regulations

Financial Markets Act Regulations

Chapter VI : Central Counterparties

24. Specific capital requirements for business risk and for winding-up or restructuring

 

(1) A licensed central counterparty must submit to the Authority for approval its estimate of the capital necessary to cover losses resulting from business risk based on reasonably foreseeable adverse scenarios relevant to its business model.

 

(2) The capital requirement for business risk must be—
(a) equal to the approved estimate; and
(b) at a minimum, equal to six months of operating expenses, provided that the central counterparty considers whether resources are required beyond that amount, taking into account its general business risk profile.

 

(3)

(a) For the purposes of complying with this Regulation, operational expenses must be calculated in accordance with International Financial Reporting Standards or in accordance with generally accepted accounting principles of a country determined by the Authority to be equivalent to International Financial Reporting Standards.
(b) A central counterparty must use the most recent audited information from its annual financial statements.

 

(4) To calculate the capital required to ensure an orderly winding-up or restructuring of its activities, a central counterparty must divide its annual gross operational expenses by 12 in order to determine its monthly gross operational expenses, and multiply the resulting number by its time span for winding-up or restructuring its activities determined in accordance with subregulation (5).

 

(5) In order to determine the time span for winding-up or restructuring its activities referred to in subregulation (4), a central counterparty must submit to the Authority for approval, its estimate of the appropriate time span for winding-up or restructuring its activities, which estimated time span must—
(a) be sufficient to ensure, including in stressed market conditions, an orderly winding-up or restructuring of its activities, reorganising its operations, liquidating its clearing portfolio over an appropriate time period of at least six months under a range of stress scenarios or transferring its clearing activities to another central counterparty;
(b) take into account the liquidity, size, maturity structure and potential cross-border obstacles of the positions of the central counterparty and the type of products cleared.