CA-12.2.1

Conventional bank licensees must first express each commodity position (spot plus forward) in terms of the standard unit of measurement (i.e., barrels, kilograms, grams etc.). Long and short positions in a commodity are reported on a net basis for the purpose of calculating the net open position in that commodity. For markets which have daily delivery dates, any contracts maturing within ten days of one another may be offset. The net position in each commodity is then converted, at spot rates, into the conventional bank licensee's reporting currency.

CA-12.2.2

Positions in different commodities cannot be offset for the purpose of calculating the open positions as described in Paragraph CA-12.2.1 above. However, where two or more sub-categories⁵⁰ of the same category are, in effect, deliverable against each other, netting between those sub-categories is permitted. Furthermore, if two or more sub-categories of the same category are considered as close substitutes for each other, and minimum correlation of 0.9 between their price movements is clearly established over a minimum period of one year, the conventional bank licensee may, with the prior written approval of the CBB, net positions in those sub-categories. Conventional bank licensees which wish to net positions based on correlations, in the manner discussed above, must satisfy the CBB of the accuracy of the method which it proposes to adopt.

⁵⁰ Commodities can be grouped into clans, families, sub-groups and individual commodities. For example, a clan might be Energy Commodities, within which Hydro-Carbons is a family with Crude Oil being a sub-group and West Texas Intermediate, Arabian Light and Brent being individual commodities.