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]