1This chapter applies to a MIFIDPRU investment firm that is:

1. (1)

   a clearing member; or

2. (2)

   an indirect clearing firm.

1This chapter also applies to the UK parent entity of an investment firm group that contains a clearing member or an indirect clearing firm.

1. (1)

   1A MIFIDPRU investment firm that is a clearing member or an indirect clearing firm is a non-SNI MIFIDPRU investment firm.

2. (2)

   The classification in (1) applies irrespective of whether the firm satisfies the conditions in MIFIDPRU 1.2 (SNI MIFIDPRU investment firms) or not.

1. (1)

   1This rule applies where:

   1. (a)

      an investment firm group contains a clearing member or an indirect clearing firm; and

   2. (b)

      the UK parent entity of the investment firm group in (a) is subject to prudential consolidation in accordance with MIFIDPRU 2.5.

2. (2)

   Where this rule applies, the UK parent entity in (1) must comply with the relevant obligations in MIFIDPRU on a consolidated basis as if it were a non-SNI MIFIDPRU investment firm.

3. (3)

   The requirement in (2) applies irrespective of whether the UK parent entity satisfies the conditions in MIFIDPRU 2.5.21R or not.

1. (1)

   1This rule applies to transactions in financial instruments in relation to which a MIFIDPRU investment firm provides clearing services in its capacity as a clearing member or an indirect clearing firm.

2. (2)

   Except where MIFIDPRU 10.3.2R applies, a firm must include the transactions in (1) in its calculation of DTF for the purposes of the K-DTF requirement in accordance with the remainder of this rule.

3. (3)

   The transactions in (1) must be included in a firm’sDTF on the following basis:

   1. (a)

      where the order that gave rise to the clearing transaction was a cash trade, the clearing transaction must also be treated as if it were a cash trade (irrespective of whether it would otherwise meet that definition); and

   2. (b)

      where the order that gave rise to the clearing transaction was a derivatives trade, the clearing transaction must also be treated as if it were a derivatives trade (irrespective of whether it would otherwise meet that definition).

1. (1)

   1This rule applies where a firm:

   1. (a)

      executes an order:

      1. (i)

         in its own name (whether for its own account or on behalf of a client); or

      2. (ii)

         in the name of a client; and

   2. (b)

      also provides clearing services in its capacity as a clearing member or indirect clearing firm in relation to a transaction that results from the order in (a).

2. (2)

   1Where this rule applies, the value of the relevant order in (1)(a) is not included in the firm’s measurement of DTF attributable to clearing services under MIFIDPRU 10.3.1R, provided that the value of the order has already been included in one of the following in relation to the firm’s execution services:

   1. (a)

      the calculation of the firm’sCOH under MIFIDPRU 4.10 (K-COH requirement); or

   2. (b)

      the calculation of the firm’sDTF under MIFIDPRU 4.15 (K-DTF requirement).

1Where prudential consolidation applies to a UK parent entity under MIFIDPRU 2.5.7R, the UK parent entity must include within the calculation of its consolidated K-DTF requirement any transactions that are cleared by clearing members or indirect clearing firms that are included within its consolidated situation.

1This section applies to:

1. (1)

   a MIFIDPRU investment firm that is a clearing member; and

2. (2)

   a UK parent entity to which consolidation under MIFIDPRU 2.5.7R applies, where the relevant investment firm group includes one or more clearing members.

1. (1)

   1A MIFIDPRU investment firm must include its pre-funded contributions to the default fund of a CCP in the calculation of its K-TCD requirement in accordance with the remainder of this rule.

2. (2)

   The firm must apply the rules and guidance in MIFIDPRU 4.14 (K-TCD requirement) in relation to the relevant default contribution with the following modifications:

   1. (a)

      the transactions specified in MIFIDPRU 4.14.3R are deemed to include pre-funded contributions made by the firm to the default fund of a CCP;

   2. (b)

      for the purposes of MIFIDPRU 4.14.7R, the value of α shall be 1;

   3. (c)

      for the purposes of MIFIDPRU 4.14.9R, the replacement cost (RC) of the default fund contribution is the book value of that asset in accordance with the applicable accounting framework;

   4. (d)

      for the purposes of MIFIDPRU 4.14.29R, the applicable risk factor is:

      1. (i)

         the value of a C-factor calculated in accordance with the methodology in MIFIDPRU 10.4.3R where that C-factor has been published by an authorised central counterparty in relation to the default fund of the CCP;

      2. (ii)

         in the case of an authorised central counterparty that has not published a C-factor relating to its default fund, 1.6%; and

      3. (iii)

         where the CCP is not an authorised central counterparty, 8%; and

   5. (e)

      for the purposes of MIFIDPRU 4.14.30R, the credit valuation adjustment (CVA) is 1.

1. (1)

   1For the purposes of MIFIDPRU 10.4.2R(2)(d), a C-factor is:

   1. (a)

      in the case of an authorised central counterparty that is subject to national rules implementing the requirements in BCBS 282 (Capital requirements for bank exposures to central counterparties) published by the Basel Committee on Banking Supervision in April 2014, a value determined in accordance with the formula in (2); or

   2. (b)

      in the case of any other authorised central counterparty, a value determined in accordance with the formula in (3).

2. (2)

   The relevant formula under (1)(a) is:

   
3. (3)

   The relevant formula under (1)(b) is:

   

   (Capital requirements for bank exposures to central counterparties) published by the Basel Committee on Banking Supervision in July 2012.

1Where this section applies to a UK parent entity in accordance with MIFIDPRU 10.4.1R(2), the requirement in MIFIDPRU 10.4.2R and the modifications it makes to the rules and guidance in MIFIDPRU 4.14 apply to the UK parent entity in relation to any pre-funded contributions to the default fund of a CCP made by any entities included within the consolidated situation.