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PIB A4.6.22

Where the conditions in in PIB section 4.13 are met, an Authorised Firm may calculate its net PFCE on OTC derivative contracts using the following formula:

PFCE reduced = 0.4 x PFCE gross + 0.6 x NGR x PFCE gross

where:

(a) "PFCE reduced" is the reduced figure for PFCE for all contracts with a given Counterparty included in the Netting agreement;
(b) "PFCE gross" is the sum of the figures for PFCE for all contracts with a given Counterparty which are included in the Netting agreement; and
(c) "NGR" is the net-to-gross ratio, being the quotient of the net replacement cost for all contracts included in the Netting agreement with a given Counterparty (numerator) and the gross replacement cost for all contracts included in the Netting agreement with that Counterparty (denominator).
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]