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  • CA-10.2 CA-10.2 Calculation of Equity Positions

    • CA-10.2.1

      A bank may net long and short positions in the same equity instrument, arising either directly or through derivatives, to generate the individual net position in that instrument. For example, a future in a given equity may be offset against an opposite cash position in the same equity, albeit the interest rate risk arising out of the future should be calculated separately in accordance with the rules set out in chapter CA-9.

      Apr 08

    • CA-10.2.2

      A bank may net long and short positions in one tranche of an equity instrument against another tranche only where the relevant tranches:

      (a) Rank pari passu in all respects; and
      (b) Become fungible within 180 days, and thereafter the equity instruments of one tranche can be delivered in settlement of the other tranche.
      Amended: April 2011
      Apr 08

    • CA-10.2.3

      Positions in depository receipts may only be netted against positions in the underlying stock if the stock is freely deliverable against the depository receipt. If a bank takes a position in depository receipts against an opposite position in the underlying equity in different markets (i.e. arbitrage), it may offset the position provided that any costs on conversion are fully taken into account. Furthermore, the foreign exchange risk arising out of these positions should be included in the measurement framework as set out in chapter CA-11.

      Apr 08

    • CA-10.2.4

      More detailed guidance on the treatment of equity derivatives is set out in Section CA-10.5.

      Amended: January 2012
      Apr 08

    • CA-10.2.5

      Equity positions, arising either directly or through derivatives, should be allocated to the country in which each equity is listed. Where an equity is listed in more than one country, the bank must discuss the appropriate country allocation with the CBB.

      Apr 08