Entire Section

  • Trading Intent

    • PIB A2.1.5

      (1) An Authorised Firm must, subject to PIB Rule A2.1.3, only include in its Trading Book:
      (a) a position in a Financial Instrument, commodity or commodity derivative held with trading intent; or
      (b) a position hedging other positions in the Trading Book.
      (2) For the purpose of (1), such positions included in the Trading Book must be free of any restrictive covenants which limit their tradability or ability to be hedged.
      (3) For the purpose of (1), a position in a Financial Instrument, commodity or commodity derivative is held with trading intent if:
      (a) it is held with the intention of:
      (i) benefiting in the short term from actual or expected differences between buying and selling prices or from other price or interest-rate variations;
      (ii) selling it over the short term;
      (iii) locking in arbitrage profits; or
      (iv) market making;
      (b) it is marked to market or marked to model regularly on a prudent and consistent basis, as part of the Authorised Firm's internal risk management processes;
      (c) position-takers at the Authorised Firm have autonomy in entering into or changing transactions within pre-determined limits, or the position satisfies other criteria which the Authorised Firm applies to the composition of its Trading Book;
      (d) there is an appropriate documented trading strategy for the position, approved by senior management which includes the expected holding horizon; and
      (e) active monitoring of the position is undertaken using market information sources.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A2.1.6

      Positions held with trading intent must comply with the following requirements:

      (a) trading intent must be evidenced in the strategies, policies and procedures established by the Authorised Firm to manage the position or its portfolio;
      (b) there must be clearly defined policies and procedures for active management of the position to ensure the following:
      (i) the position is entered and/or managed on a trading desk;
      (ii) position limits are set and monitored for appropriateness;
      (iii) position-takers at the Authorised Firm have autonomy in entering into or changing transactions within pre-determined limits, or the position satisfies other criteria which the Authorised Firm applies to the composition of its Trading Book;
      (iv) the position is marked-to-market or marked-to-model at least daily on a prudent and consistent basis as part of the Authorised Firm's internal risk management processes;
      (v) where the position is marked-to-model, the parameters for the model are assessed on a daily basis;
      (vi) the position is monitored against the documented trading strategy including the monitoring of turnover and stale positions in the Authorised Firm's Trading Book;
      (vii) active monitoring of the position is undertaken using market information sources and an assessment made of the marketability or hedge-ability of the position or its component risks, including the assessment of the quality and availability of market inputs to the valuation process, level of markets turnover and sizes of positions traded in the market; and
      (viii) positions and exceptions are reported to senior management as an integral part of the risk management process of the Authorised Firm.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]