Related provisions for BIPRU 7.9.27

BIPRU 7.6.1R01/01/2007

A firm must calculate its optionPRR by:(1) identifying which optionpositions must be included within the scope of the optionPRR calculation under BIPRU 7.6.3R - BIPRU 7.6.5R;(2) calculating the derived position in each option in accordance with BIPRU 7.6.9R - BIPRU 7.6.15R;(3) calculating the PRR for each derived position in accordance with BIPRU 7.6.16R - BIPRU 7.6.31R;(4) summing all of the PRRs calculated in accordance with (3).

BIPRU 7.6.2G01/01/2007

Firms are reminded that the table in BIPRU 7.2.4R (Instruments which result in notional positions for the purposes of the interest rate PRR) and the table in BIPRU 7.3.3R (Instruments which result in notional positions for the purposes of the equity PRR) also require an interest rate PRR to be calculated for options on equities, baskets of equities or equities indices. The interaction between BIPRU 7.6 and the rest of Chapter 7 is illustrated in BIPRU 7.6.33G.

BIPRU 7.6.3R01/01/2007

Except as permitted under BIPRU 7.6.5R, a firm'soption PRR calculation must include:(1) each trading bookposition in an option on an equity, interest rate or debt security;(2) each trading bookposition in a warrant on an equity or debt security;(3) each trading bookposition in a CIU; and(4) each trading book and non-trading bookposition in an option on a commodity, currency or gold.

BIPRU 7.6.5R01/01/2007

Table: Appropriate PRR calculation for an option or warrant

This table belongs to BIPRU 7.6.3R

Option type (see BIPRU 7.6.18R) or warrant	PRR calculation
American option, European option, Bermudan option, Asian option or warrant for which the in the money percentage (see BIPRU 7.6.6R) is equal to or greater than the appropriate PRA (see BIPRU 7.6.7R and BIPRU 7.6.8R)	Calculate either an option PRR, or the most appropriate to the underlying position of: an equity PRR; or an interest rate PRR; or a commodity PRR; or a foreign currency PRR; or a collective investment undertaking PRR.
American option, European option, Bermudan option, Asian option or warrant: for which the in the money percentage (see BIPRU 7.6.6R) is less than the appropriate PRA (see BIPRU 7.6.7R and BIPRU 7.6.8R); or that is at the money; or that is out of the money.	Calculate an option PRR
All other types of option listed in BIPRU 7.6.18R (regardless of whether in the money, at the money or out of the money).	Calculate an option PRR

BIPRU 7.6.6R01/01/2007

(1) The in the money percentage is calculated in accordance with this rule.(2) For a call option:Current market price of underlying - Strike price of the option * 100Strike price of the option(3) For a put option:Strike price of option - Current market price of underlying * 100Strike price of the option(4) In the case of an option on a basket of securities a firm may not treat the option as being in the money by the relevant percentage so as to enable the firm not to apply an

BIPRU 7.6.7R01/01/2007

(1) The appropriate PRA for a position is that listed in the table in BIPRU 7.6.8R against the relevant underlying position.(2) If the firm uses the commodity extended maturity ladder approach or the commodity maturity ladder approach for a particular commodity under BIPRU 7.4 (Commodity PRR) the appropriate PRA for an option on that commodity is the outright rate applicable to the underlying position (see BIPRU 7.4.26R (Calculating the PRR for each commodity: Maturity ladder

BIPRU 7.6.10R01/01/2007

A firm may calculate a derived position for its net position in an option or a warrant, if the relevant options or warrants are identical or may be treated as identical under BIPRU 7.6.11R or BIPRU 7.6.12R.

BIPRU 7.6.11R01/01/2007

A firm may treat options or warrants as identical if they have the same strike price, maturity (except for an interest rate cap or floor - see BIPRU 7.6.12R) and underlying.

BIPRU 7.6.13R01/01/2007

Table: Derived positions

This table belongs to BIPRU 7.6.9R

Underlying	Option (or warrant)	Derived position
Equity	Option (warrant) on a single equity or option on a future/forward on a single equity	A notional position in the actual equity underlying the contract valued at the current market price of the equity.
	Option (warrant) on a basket of equities or option on a future/forward on a basket of equities	A notional position in the actual equities underlying the contract valued at the current market price of the equities.
	Option (warrant) on an equity index or option on a future/forward on an equity index	A notional position in the index underlying the contract valued at the current market price of the index.
Interest rate	Option on an interest rate or an interest rate future/FRA	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the sum of the time to expiry of the contract and the length of the period on which the settlement amount of the contract is calculated valued at the notional amount of the contract.
	Option on an interest rate swap	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the length of the swap valued at the notional principal amount.
	Interest rate cap or floor	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the remaining period of the cap or floor valued at the notional amount of the contract.
Debt securities	Option (warrant) on a debt security or option on a future/forward on a debt security	The underlying debt security with a maturity equal to the time to expiry of the option valued as the nominal amount underlying the contract at the current market price of the debt security.
	Option (warrant) on a basket of debt securities or option on a future/forward on a basket of debt securities	A notional position in the actual debt securities underlying the contract valued at the current market price of the debt securities.
	Option (warrant) on an index of debt securities or option on a future/forward on an index of debt securities	A notional position in the index underlying the contract valued at the current market price of the index.
Commodity	Option on a commodity or option on a future/forward on a commodity	An amount equal to the tonnage, barrels or kilos underlying the option with (in the case of a future/forward on a commodity) a maturity equal to the expiry date of the forward or Futures contract underlying the option. In the case of an option on a commodity the maturity of the position falls into Band 1 in the table in BIPRU 7.4.28R (Table: Maturity bands for the maturity ladder approach).
Commodity	Option on a commodity swap	An amount equal to the tonnage, barrels or kilos underlying the option with a maturity equal to the length of the swap valued at the notional principal amount.
CIU (These provisions about CIUs are subject to BIPRU 7.6.35R)	Option (warrant) on a single CIU or option on a future/forward on a single CIU	A notional position in the actual CIU underlying the contract valued at the current market price of the CIU.
	Option (warrant) on a basket of CIUs or option on a future/forward on a basket of CIUs	A notional position in the actual CIUs underlying the contract valued at the current market price of the CIUs.
Gold	Option on gold or option on a future/forward on gold	An amount equal to the troy ounces underlying the option with (in the case of a future/forward on gold) a maturity equal to the expiry date of the forward or futures contract underlying the option.
Currency	Currency option	The amount of the underlying currency that the firm will receive if the option is exercised converted at the spot rate into the currency that the firm will sell if the option is exercised.

BIPRU 7.6.14R01/01/2007

A firm may treat (for the purpose of calculating an option PRR under BIPRU 7.6) an option strategy listed in the table in BIPRU 7.6.15R as the single position in a notional option specified against that strategy in the table in BIPRU 7.6.15R, if:(1) each element of the strategy is transacted with the same counterparty;(2) the strategy is documented as a single structure;(3) the underlying for each part of the composite position (including any actual holding of the underlying)

BIPRU 7.6.15R01/01/2007

Table: Option strategies

This table belongs to BIPRU 7.6.14R

Option strategy (and an example)	Notional option (and rule it must be treated under)
Bull Spread (e.g. buy 100 call and sell 101 call)	One purchased option (treat under BIPRU 7.6.20R)
Bear Spread (e.g. sell 100 put and buy 101 put)	One written option (treat under BIPRU 7.6.21R)
Synthetic Long Call (e.g. long underlying and buy 100 put)	One purchased option (treat under BIPRU 7.6.20R or BIPRU 7.6.24R)
Synthetic Short Call (e.g. short underlying and sell 100 put)	One written option (treat under BIPRU 7.6.21R or BIPRU 7.6.24R)
Synthetic Long Put (e.g. short underlying and buy 100 call)	One purchased option (treat under BIPRU 7.6.20R or BIPRU 7.6.24R)
Synthetic Short Put (e.g. buy underlying and sell 100 call)	One written option (treat under BIPRU 7.6.21R or BIPRU 7.6.24R)
Long Straddle (e.g. buy 100 call and buy 100 put)	One purchased option (treat under BIPRU 7.6.20R)
Short Straddle (e.g. sell 100 call and sell 100 put)	One written option (treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)
Long Strangle (e.g. buy 101 call and buy 99 put)	One purchased option (treat under BIPRU 7.6.20R)
Short Strangle (e.g. sell 99 call and sell 101 put)	One written option (treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)
Long Butterfly (e.g. buy one 100 call, sell two 101 calls, and buy one 102 call)	One purchased option (treat under BIPRU 7.6.20R)
Short Butterfly (e.g. sell one 100 put, buy two 101 puts, and sell one 102 put)	One written option (treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)

Option strategy (and an example)

Notional option (and rule it must be treated under)

Bull Spread

(e.g. buy 100 call and sell 101 call)

One purchased option

(treat under BIPRU 7.6.20R)

Bear Spread

(e.g. sell 100 put and buy 101 put)

One written option

(treat under BIPRU 7.6.21R)

Synthetic Long Call

(e.g. long underlying and buy 100 put)

One purchased option

(treat under BIPRU 7.6.20R or BIPRU 7.6.24R)

Synthetic Short Call

(e.g. short underlying and sell 100 put)

One written option

(treat under BIPRU 7.6.21R or BIPRU 7.6.24R)

Synthetic Long Put

(e.g. short underlying and buy 100 call)

One purchased option

(treat under BIPRU 7.6.20R or BIPRU 7.6.24R)

Synthetic Short Put

(e.g. buy underlying and sell 100 call)

One written option

(treat under BIPRU 7.6.21R or BIPRU 7.6.24R)

Long Straddle

(e.g. buy 100 call and buy 100 put)

One purchased option

(treat under BIPRU 7.6.20R)

Short Straddle

(e.g. sell 100 call and sell 100 put)

One written option

(treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)

Long Strangle

(e.g. buy 101 call and buy 99 put)

One purchased option

(treat under BIPRU 7.6.20R)

Short Strangle

(e.g. sell 99 call and sell 101 put)

One written option

(treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)

Long Butterfly

(e.g. buy one 100 call, sell two 101 calls, and buy one 102 call)

One purchased option

(treat under BIPRU 7.6.20R)

Short Butterfly

(e.g. sell one 100 put, buy two 101 puts, and sell one 102 put)

One written option

(treat under BIPRU 7.6.21R but with no reduction for the amount the option is out of the money)

BIPRU 7.6.16R01/01/2007

A firm must calculate the option PRR for each individual derived optionposition using the method specified in the table in BIPRU 7.6.18R, or, if more than one method is permitted, using one of those methods.

BIPRU 7.6.18R01/01/2007

Table: Option PRR: methods for different types of option

This table belongs to BIPRU 7.6.16R

Option	Description	Method
American option	An option that may be exercised at any time over an extended period up to its expiry date.	Option standard method or option hedging method if appropriate
European option	An option that can only be exercised at expiry.
Bermudan option	A cross between an American option and European option. The Bermudan option can only be exercised at specific dates during its life.
Asian option	The buyer has the right to exercise at the average rate or price of the underlying over the period (or part of the period) of the option. One variant is where the payout is based on the average of the underlying against a fixed strike price; another variant is where the payout gives at expiry the price of the underlying against the average price over the option period.	Option standard method or option hedging method if appropriate
Barrier option	An option which is either cancelled or activated if the price of the underlying reaches a pre-set level regardless of the price at which the underlying may be trading at the expiry of the option. The knock-out type is cancelled if the underlying price or rate trades through the trigger; while the knock-in becomes activated if the price moves through the trigger.
Corridor option	Provides the holder with a pay-out for each day that the underlying stays within a defined range chosen by the investor.
Ladder option	Provides the holder with guaranteed pay-outs if the underlying trades through a pre-agreed price(s) or rate(s) at a certain point(s) in time, regardless of future performance.
Lock-in option	An option where the pay-out to the holder is locked in at the maximum (or minimum) value of the underlying that occurred during the life of the option.
Look-back option	A European style option where the strike price is fixed in retrospect, that is at the most favourable price (i.e. the lowest (highest) price of the underlying in the case of a call (put)) during the life of the option.
Forward starting option	An option that starts at a future date.
Compound option	An option where the underlying is itself an option (i.e. an option on an option).	Option standard method or option hedging method if appropriate
Interest rate cap	An interest rate option or series of options under which a counterparty contracts to pay any interest costs arising as a result of an increase in rates above an agreed rate: the effect being to provide protection to the holder against a rise above that agreed interest rate.	Option standard method, but no reduction for the amount the option is out of the money is permitted
Interest rate floor	An interest rate option or series of options under which a counterparty contracts to pay any lost income arising as a result of a fall in rates below an agreed rate: the effect being to provide protection to the holder against a fall below that agreed interest rate.
Performance option	An option based on a reference basket comprising any number of assets, where the pay-out to the holder could be one of the following: the maximum of the worst performing asset, or 0; the maximum of the best performing asset, or 0; the maximum of the spreads between several pairs of the assets, or 0.	Option standard method or option hedging method - using the highest PRA of the individual assets in the basket
Quanto	Quanto stands for "Quantity Adjusted Option". A quanto is an instrument where two currencies are involved. The payoff is dependent on a variable that is measured in one of the currencies and the payoff is made in the other currency.	Subject to BIPRU 7.6.31R, the option standard method
Cliquet option	A cliquet option consists of a series of forward starting options where the strike price for the next exercise date is set equal to a positive constant times the underlying price as of the previous exercise date. It initially acts like a vanilla option with a fixed price but as time moves on, the strike is reset and the intrinsic value automatically locked in at pre-set dates. If the underlying price is below the previous level at the reset date no intrinsic value is locked in but the strike price will be reset to the current price attained by the underlying. If the underlying price exceeds the current level at the next reset the intrinsic value will again be locked in.	Option standard method for a purchased cliquet, or the method specified in BIPRU 7.6.30R for a written cliquet
Digital option	A type of option where the pay-out to the holder is fixed. The most common types are all-or-nothing and one-touch options. All-or-nothing will pay out the fixed amount if the underlying is above (call) or below (put) a set value at expiry. The one-touch will pay the fixed amount if the underlying reaches a fixed point any time before expiry.	The method specified in BIPRU 7.6.29 R
Any other option or warrant		The method specified for the type of instrument whose description it most closely resembles.

BIPRU 7.6.20R01/01/2007

Under the option standard method, the PRR for a purchased option or warrant is the lesser of:(1) the market value of the derived position (see BIPRU 7.6.9R) multiplied by the appropriate PRA (see BIPRU 7.6.8R); and(2) the market value of the option or warrant.

BIPRU 7.6.21R01/01/2007

Under the option standard method, the PRR for a written option or warrant is the market value of the derived position (see BIPRU 7.6.9R) multiplied by the appropriate PRA (see BIPRU 7.6.8R). This result may be reduced by the amount the option or warrant is out of the money (subject to a maximum reduction to zero).

BIPRU 7.6.22R01/01/2007

Under the option standard method, the PRR for underwriting or sub-underwriting an issue of warrants is the net underwriting position (or reduced net underwriting position) multiplied by the current market price of the underlying securities multiplied by the appropriate PRA, but the result can be limited to the value of the net underwriting position (or reduced net underwriting position) calculated using the issue price of the warrant.

BIPRU 7.6.23G01/01/2007

The option hedging method involves the option PRR being calculated on a combination of the option and its hedge.

BIPRU 7.6.24R01/01/2007

Under the option hedging method a firm must calculate the option PRR for individual positions as follows:(1) for an option or warrant on an equity, basket of equities or equity index and its equity hedge(s), the firm must, to the extent specified or permitted in the table in BIPRU 7.6.26R, use the calculation in the table in BIPRU 7.6.27R;(2) for an option or warrant on a debt security, basket of debt securities or debt security index and its debt security hedge(s), the firm must,

BIPRU 7.6.25R01/01/2007

(1) A firm may not use the option hedging method for:(a) an interest rate option and its hedge; or(b) a commodity option and its hedge; or(c) a CIUoption and its hedge.(2) A firm may only use the option hedging method if the item underlying the option or warrant is the same as the hedge of the option or warrant under the PRR identical product netting rules.

BIPRU 7.6.26R01/01/2007

Table: Appropriate treatment for equities, debt securities or currencies hedging options

This table belongs to BIPRU 7.6.24R

Hedge	PRR calculation for the hedge	Limits (if hedging method is used)	Naked position
An equity (hedging an option or warrant)	The equity must be treated in either BIPRU 7.3 (equity PRR) or the option hedging method (see the table in BIPRU 7.6.27R)	The option hedging method must only be used up to the amount of the hedge that matches the notional amount underlying the option or warrant	To the extent that the amount of the hedge (or option or warrant) exceeds the notional amount underlying the option or warrant (or hedge), a firm must apply an equity PRR, interest rate PRR or foreign currency PRR (or the option standard method)
A debt security (hedging an option or warrant)	The debt security must be treated in BIPRU 7.2 (interest rate PRR) or the option hedging method (see the table in BIPRU 7.6.27R)	As for the first row	As for the first row
Gold (hedging a gold option)	The gold must be treated in either BIPRU 7.5 (Foreign currency PRR) or the option hedging method (see the table in BIPRU 7.6.27R)	As for the first row	As for the first row
A currency or currencies (hedging a currency option)	The currency must be treated in either BIPRU 7.5 (Foreign currency PRR) or the option hedging method (see the table in BIPRU 7.6.28R)	As for the first row	As for the first row

BIPRU 7.6.27R01/01/2007

Table: The hedging method of calculating the PRR (equities, debt securities and gold)

This table belongs to BIPRU 7.6.24R(1) - (3)

	PRR
	Option or warrant position	In the money by more than the PRA	In the money by less than the PRA	Out of the money or at the money
Long in security or gold	Long put	Zero	Wp	X
Long in security or gold	Short call	Y	Y	Z
Short in security or gold	Long call	Zero	Wc	X
Short in security or gold	Short put	Y	Y	Z
Where:
Wp means	{(PRA-100%) x The underlying position valued at strike price}		+	The market value of the underlying position
Wc means	{(100% +PRA x The underlying position valued at strike price}		-	The market value of the underlying position
X means	The market value of the underlying position multiplied by the appropriate PRA
Y means	The market value of the underlying position multiplied by the appropriate PRA. This result may be reduced by the market value of the option or warrant, subject to a maximum reduction to zero.
Z means	The option hedging method is not permitted; the option standard method must be used.

BIPRU 7.6.28R01/01/2007

Table: The hedging method of calculating the PRR (currencies)

This table belongs to BIPRU 7.6.24R(4)

PRR
Option position	In the money by more than 8%	In the money by less than 8%	Out of the money or at the money
Long calls & long puts	Zero	W_L	X
Short calls & short puts	Zero	Y	X
Where:
W_L means	(1.08% x U)	-	The market value of the underlying position
U means	The amount of the underlying currency that the firm will receive if the option is exercised, converted at the strike price into the currency that the firm will sell if the option is exercised
X means	The market value of the underlying position multiplied by 8%.
Y means	The market value of the underlying position multiplied by 8%. This result may be reduced by the market value of the option, subject to a maximum reduction to zero.

BIPRU 7.6.29R01/01/2007

The option PRR for a digital option is the maximum loss of the option.

BIPRU 7.6.30R01/01/2007

The option PRR for a written cliquet option is the market value of the derived position (see BIPRU 7.6.9R) multiplied by the appropriate PRA (see BIPRU 7.6.8R) multiplied by F+1 (see the following provisions of this paragraph). This result may be reduced by the amount the option is out of the money (subject to a maximum reduction to zero). The option PRR for a written cliquet option is therefore defined by the following formula:[PRA * underlying * (F + 1)] - OTMwhere:(1) (2) FR=

BIPRU 7.6.31R01/01/2007

If the pay-out to the holder of a quanto option is fixed at the inception of the transaction a firm must add 8% to the PRA when applying the option standard method.

BIPRU 7.6.33G01/01/2007

The following diagram illustrates the relationship between BIPRU 7.6 and the rest of BIPRU 7.

BIPRU 7.6.35R01/01/2007

For the purpose of identifying the appropriate treatment for the purpose of BIPRU 7.6.5R, the underlying position for the purpose of BIPRU 7.6.8R and the derived position under BIPRU 7.6.13R a firm may choose between treating an option on a CIU as being:(1) a position in the CIU itself; or(2) (if the conditions in BIPRU 7.7 (Position risk requirements for collective investment undertakings) for the use of the method in question are satisfied) positions in the underlying investments

BIPRU 7.6.36G01/01/2007

(1) This paragraph gives an example of how the appropriate PRA should be calculated for the purpose of deciding whether or not an option on a CIU is sufficiently in the money for the firm to have a choice whether or not to apply an option PRR. This example assumes that there is no leveraging (see BIPRU 7.7.11R (CIU modified look through method)).(2) Say that the CIU contains underlying equityposition and the firm is using one of the CIU look through methods. The appropriate PRA

BIPRU 7.9.7G01/01/2007

Table: Types of CAD 1 model

This table belongs to BIPRU 7.9.6G

	Options risk aggregation models	Interest rate pre-processing models
Brief description and eligible instruments	Analyse and aggregate options risks for: interest rate options; equity options; foreign currency options; commodity options; and CIU options.	May be used to calculate duration weighted positions for: interest rate futures; forward rate agreements (FRAs); forward commitments to buy or sell debt securities; options, swaps or warrants on interest rates or debt securities and options on such swaps; amortising bonds; equity futures, forwards, warrants and options (but only in relation to the interest rate risk inherent in these products); and foreign currency futures, forwards, swaps and options, but only in relation to the interest rate risk inherent in these products.
The output and how it is used in the PRR calculation	Depending on the type of model and the requirements in the CAD 1 model waiver granted, the outputs from an options risk aggregation model are used as an input to the market risk capital requirement calculation.	Depending on the type of model and the requirements in the CAD 1 model waiver granted, the individual sensitivity figures produced by this type of CAD 1 model are either input into the calculation of interest rate PRR under the interest rate duration method (see BIPRU 7.2.63R) or are converted into notional position and input into the calculation of interest rate PRR under the interest rate maturity method (see BIPRU 7.2.59R).

Options risk aggregation models

Interest rate pre-processing models

Brief description and eligible instruments

Analyse and aggregate options risks for:

May be used to calculate duration weighted positions for:

interest rate futures;
forward rate agreements (FRAs);
forward commitments to buy or sell debt securities;
options, swaps or warrants on interest rates or debt securities and options on such swaps;
amortising bonds;
equity futures, forwards, warrants and options (but only in relation to the interest rate risk inherent in these products); and
foreign currency futures, forwards, swaps and options, but only in relation to the interest rate risk inherent in these products.

The output and how it is used in the PRR calculation

Depending on the type of model and the requirements in the CAD 1 model waiver granted, the outputs from an options risk aggregation model are used as an input to the market risk capital requirement calculation.

Depending on the type of model and the requirements in the CAD 1 model waiver granted, the individual sensitivity figures produced by this type of CAD 1 model are either input into the calculation of interest rate PRR under the interest rate duration method (see BIPRU 7.2.63R) or are converted into notional position and input into the calculation of interest rate PRR under the interest rate maturity method (see BIPRU 7.2.59R).

BIPRU 7.9.8G01/01/2007

Currently the FSA only envisages allowing recognition for options on CIUs if the CIU satisfies one of the following conditions:(1) it is a regulated collective investment scheme; or(2) the firm can demonstrate that it has characteristics that are similar to or better than an undertaking in (1) from the point of view of transparency and liquidity.

BIPRU 7.9.15G01/01/2007

If the FSA grants a CAD 1 model waiver, the waiver direction will specify the particular rule which has been modified, and set out the requirements subject to which the waiver has been granted. These requirements may include:(1) the details of the calculation of PRR;(2) the CAD 1 model waiver methodology to be employed;(3) the products covered by the model (e.g. option type, maturity, currency); and(4) any notification requirements relating to the CAD 1 model waiver.

BIPRU 7.9.25G01/01/2007

For a firm to obtain a CAD 1 model waiver for its options risk aggregation model, it should have in place an appropriate options valuation model.

BIPRU 7.9.26G01/01/2007

The FSA does not specify the methodology that a firm should employ in order to produce the appropriate outputs from its options risk aggregation CAD 1 model. However, BIPRU 7.9.27G - BIPRU 7.9.43G provide details of how a firm could meet the requirement to capture gamma, vega and rho risks using a scenario matrix approach. Where a firm adopts the scenario matrix approach then the standards set out in BIPRU 7.9.27G - BIPRU 7.9.43G should be followed. The firm should also take into

BIPRU 7.9.28G01/01/2007

The scenario matrix approach may be employed for all types of options on all types of underlying asset.

BIPRU 7.9.29G01/01/2007

(1) This paragraph provides an outline of the initial steps to be taken when using the scenario matrix approach.(2) A value for an option should be obtained using the firm'soptions valuation model.(3) The inputs into the options valuation model for implied volatility of the underlying asset and the price of the underlying asset should then be altered so that a new value for the option is obtained (details of the amount by which the implied volatility and the price of the underlying

BIPRU 7.9.30G01/01/2007

The alteration to the implied volatility (known as the implied volatility shift) referred to in BIPRU 7.9.29G (3) may be a proportional shift. The size of the shift depends on the remaining life of the option and the asset class of the underlying. The table in BIPRU 7.9.32G sets out the shifts that should be applied where a proportional shift is used. Alternatively, a firm may use a single shift across all maturities or use an absolute rather than a proportional implied volatility

BIPRU 7.9.32G01/01/2007

Table: proportional implied volatility shifts

This table belongs to BIPRU 7.9.30G

Remaining life of option	Proportional shift
Remaining life of option	Equities, foreign currency and commodities	Interest rates and CIUs
≤ 1 month	30%	30%
> 1 ≤ 3 months	20%	20%
> 3 ≤ 6 months	15%	15%
> 6 ≤ 9 months	12%	12%
> 9 ≤ 12 months	9%	9%
> 1 ≤ 2 years	6%	9%
> 2 ≤ 4 years	4.5%	9%
> 4 years	3%	9%

BIPRU 7.9.36G01/01/2007

The minimum size of the scenario matrix should be 3x7, that is, three observations for implied volatility (including the actual implied volatility) and seven observations for the price of the underlying (including the actual price of the underlying). A firm should be able to justify its choice of granularity. Greater granularity may be required where the portfolio contains, for example, a large proportion of barrier options.

BIPRU 7.9.37G01/01/2007

(1) A different scenario matrix should be set up for each underlying asset type in accordance with this paragraph.(2) For equities (including single equities, baskets and indices) there should be a separate matrix for each national market or non-decomposed basket or non-decomposed multi-national index.(3) For foreign currency products there should be a separate matrix for each currency pair where appropriate.(4) For commodity products there should be a separate matrix for each

BIPRU 7.9.38G01/01/2007

A firm may offset gamma and vega exposures arising from the products listed in BIPRU 7.9.37G (5) where it can demonstrate that it trades different types of interest rate-related options as a portfolio and takes steps to control the basis risk between different types of implied volatility. To the extent that this is the case an individual matrix is not required for each of the products listed in BIPRU 7.9.37G (5) and a combined scenario matrix may be used.

BIPRU 7.9.39G01/01/2007

Where it is imprudent fully to offset long-dated and short-dated vega exposure owing to the risk of non-parallel shifts in the yield curve, a firm should use an appropriate number of scenario matrices to take account of non-parallel shifts in the yield curve according to the maturity of the option or underlying.

BIPRU 7.9.40G01/01/2007

Following the steps outlined in BIPRU 7.9.29G, a firm then removes the portion of the values in the matrix that can be attributed to the effect that delta has had on the change in the value of the option (a process known as delta-stripping).

BIPRU 7.9.41G01/01/2007

Once the effect of delta has been removed from the matrix, the values left in the matrix relate to gamma and vega risk. A firm'sPRR in relation to gamma and vega risk on the individual option is the absolute of the most negative cell in the scenario matrix produced. Where all cells are positive the PRR is zero. The total PRR for the gamma and vega risk on the portfolio of options is a simple sum of the individual requirements. This amount should then be fed into a firm'sPRR c

BIPRU 7.9.43G01/01/2007

In using the scenario matrix approach, none of the steps followed will take specific account of a firm's exposure to rho risk. Where a firm can demonstrate that for interest rate-related options the rho sensitivity is effectively included in the delta sensitivities produced, there is no separate capital requirement relating to rho. For all other options except commodity options, a firm should calculate a rho sensitivity ladder by currency using its CAD 1 model and either feed

COBS 19.4.1R01/11/2007

In this section:(1) ‘intended retirement date’ means:(a) the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme into payment, whichever is the earlier; or(b) if there is no such date, the scheme member's state pension age;(2) ‘open market option’ means the option to use the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity

COBS 19.4.3R01/11/2007

The firm must:(1) remind the retail client about the open market option statement; and(2) tell the client what sum of money will be available to purchase an annuity on the open market;at least six weeks before the client’s intended retirement date.

PERG 2.6.14G01/07/2005

To keep clear distinctions between the different specified investment categories, instruments giving entitlements to investments are not to be regarded as options, futures or contracts for differences.

PERG 2.6.20G01/11/2007

The specified investment category of options comprises:444(1) 4options to acquire or dispose of securities or contractually based investments, currency and certain precious metals and options to acquire or dispose of such options. Options to buy or sell other types of commodity will only fall within this specified investment category if they are options to buy or sellfutures, or options to buy or sellcontracts for differences, which are based on other commodities. But options

PERG 2.6.20AG01/11/2007

4It follows therefore that options not falling within PERG 2.6.20G (1), for example physically settled options on non-precious metals, such as copper options, will not be options unless they meet the conditions in PERG 2.6.20G (2). Moreover, where the option in question is one to which PERG 2.6.20G (2) applies, it will be an option only in relation to the investment services and activities, or ancillary services where relevant, provided by that person. The same applies in the

PERG 2.6.22AG01/11/2007

4As with options, there is an additional category of instruments which are futures only when they are the object of investment services or activities provided or performed by certain persons. These are contracts as described in PERG 2.6.21 G:(1) that would not be regarded as having been entered into for investment purposes because they fail one of the tests mentioned in PERG 2.6.22 G;(2) that fall within paragraphs 5, 6, 7 or 10 of Annex 1 to MiFID (see PERG 13, Q32 to Q34 for

PERG 2.6.24G01/07/2005

There are a number of exclusions. These include a case where the parties intend that the profit is to be secured or the loss to be avoided by taking delivery of property. This avoids overlap with the specified investment categories of options and futures. Also excluded are index-linked deposits and rights under certain contracts connected with the National Savings Bank or National Savings products. There is also provision to ensure that the specified investment category of contracts

INSPRU 1.2.62R31/12/2006

When a firm establishes its mathematical reserves in respect of a long-term insurance contract, the firm must include an amount to cover any increase in liabilities which might be the direct result of its policyholder exercising an option under, or by virtue of, that contract of insurance. Where the surrender value of a contract is guaranteed, the amount of the mathematical reserves for that contract at any time must be at least as great as the value guaranteed at that time.

INSPRU 1.2.63G31/12/2006

An option exists where a policyholder is given a choice between alternative forms of benefit, for example, a choice between receiving a cash benefit upon maturity or an annuity at a guaranteed rate. In some cases, the contract may designate one or other of these alternatives as the principal benefit and any other as an option. This designation, in itself, is not one of substance in the context of reserving since it does not affect the policyholder's choices. Other forms of option

INSPRU 1.2.64G31/12/2006

The firm should provide for the benefit which the firm anticipates the policyholder is most likely to choose. P2ast experience may be used as a guide, but only if this is likely to give a reasonable estimate of future experience. For example, past experience of the take-up of a cash payment option instead of an annuity would not be a reliable guide, if, in the past, market rates exceeded those guaranteed in the annuity but no longer do so. Similarly, past experience on the take-up

INSPRU 1.2.65G31/12/2006

Many options are long-term and need careful consideration. Improving longevity, for example, can increase the value of guaranteed annuity options vesting further in the future. firms also need to have regard to the fact that policyholder behaviour can change in the future as policyholders become more aware of the value of their options. The impact on policyholder behaviour of possible changes in taxation should also be considered.

INSPRU 1.2.66G31/12/2006

In accordance with INSPRU 1.2.7 R and INSPRU 1.2.13 R, take-up rates for guaranteed annuity options should be assessed on a prudent basis with assumptions that include margins for adverse deviation (see INSPRU 1.2.13 R to INSPRU 1.2.19 G) that take account of current experience and the potential for future change. The firm should reserve for option take-up at least at a prudent margin over current experience for options shortly to vest. For longer term options where the option

INSPRU 1.2.67G31/12/2006

Where there is considerable variation in the cost of the option depending on conditions at the time the option is exercised, and where that variation constitutes a material risk for the firm, it will generally be appropriate to use stochastic modelling. In this case prices from the asset model used in the stochastic approach should be benchmarked to relevant market asset prices before determining the value of the option. Where stochastic modelling is not undertaken, market option

INSPRU 1.2.68G31/12/2006

Where the option offers a choice between two non-discretionary financial benefits (such as between a guaranteed cash sum or a guaranteed annuity value, or between a unit value and a maturity guarantee) and where there is a wide range of possible outcomes, the firm should normally model such liabilities stochastically. In carrying out such modelling firms should take into account the likely choices to be made by policyholders in each scenario. Firms should make and retain a record

INSPRU 1.2.69G31/12/2006

The value of a contract with an option is greater than the value of a similar contract without the option, that is, the option has value whether it is expected to be exercised or not. Although in theory a firm can rebalance its investments to match the expected cost of the option to the firm (including the time value of the option), this takes time to achieve and the market may move more quickly than the firm is able to respond. Also, there are likely to be transaction costs.

BIPRU 7.2.3R01/01/2007

A firm's interest rate PRR calculation must:(1) include all trading bookpositions in debt securities, preference shares and convertibles, except:(a) positions in convertibles which have been included in the firm'sequity PRR calculation;(b) positions fully deducted as a material holding under the calculations under the capital resources table, in which case the firm may exclude them; or(c) positions hedging an option which is being treated under BIPRU 7.6.26R (Table: Appropriate

BIPRU 7.2.4R01/01/2007

Table: Instruments which result in notional positions

This table belongs to BIPRU 7.2.3R(2)

Instrument	See
Futures, forwards or synthetic futures on debt securities	BIPRU 7.2.13 R
Futures, forwards or synthetic futures on debt indices or baskets	BIPRU 7.2.14R
Interest rate futures or forward rate agreements (FRAs)	BIPRU 7.2.18 R
Interest rate swaps or foreign currency swaps	BIPRU 7.2.21R
Deferred start interest rate swaps or foreign currency swaps	BIPRU 7.2.24R
The interest rate leg of an equity swap (unless the firm calculates the interest rate PRR on the instrument using the basic interest rate PRR calculation in BIPRU 7.3 (Equity PRR and basic interest rate PRR for equity derivatives))	BIPRU 7.2.27R
The cash leg of a repurchase agreement or a reverse repurchase agreement	BIPRU 7.2.30R
Cash borrowings or deposits	BIPRU 7.2.31 R
Options on a debt security, a basket of debt securities, a debt security index, an interest rate or an interest rate future or swap (including an option on a future on a debt security) (unless the firm calculates a PRR on the option under BIPRU 7.6 (Option PRR))	BIPRU 7.2.32R
Dual currency bonds	BIPRU 7.2.33R
Foreign currency futures or forwards	BIPRU 7.2.34R
Gold futures or forwards	BIPRU 7.2.34R
Forwards, futures or options (except cliquets) on an equity, basket of equities or equity index (unless the firm calculates the interest rate PRR on the instrument using the basic interest rate PRR calculation in BIPRU 7.3)	BIPRU 7.2.34R
Credit derivatives	BIPRU 7.11
A warrant must be treated in the same way as an option

BIPRU 7.2.7G01/01/2007

Firms are reminded that the table in BIPRU 7.6.5R (Table: Appropriate PRR calculation for an option or warrant) divides options and warrants on interest rates, debt securities and interest rate futures and swaps into:(1) those which must be treated under BIPRU 7.6 (Option PRR); and(2) those which must be treated under either BIPRU 7.2 or BIPRU 7.6, the firm being able to choose whether BIPRU 7.2 or BIPRU 7.6 is used.

BIPRU 7.2.32R01/01/2007

(1) Where included in the PRR calculation in BIPRU 7.2 (see the table in BIPRU 7.2.4R), options and warrants must be treated in accordance with this rule.(2) An option or warrant on a debt security, a basket of debt securities or a debt security index must be treated as a position in that debt security, basket or index.(3) An option on an interest rate must be treated as a position in a zero coupon zero-specific-risk security with a maturity equal to the sum of the time to expiry

BIPRU 7.2.34R01/01/2007

Other futures, forwards, options and swaps treated under BIPRU 7.2 must be treated as positions in zero-specific-risk securities, each of which:(1) has a zero coupon;(2) has a maturity equal to that of the relevant contract; and(3) is long or short according to the table in BIPRU 7.2.35R.

BIPRU 7.2.35R01/01/2007

Table: Interest rate risk on other futures, forwards, options and swaps

This table belongs to BIPRU 7.2.34R.

Instrument	Notional positions
foreign currency forward or future	a long position denominated in the currency purchased	and	a short position denominated in the currency sold
Gold forward or future	a long position if the forward or future involves an actual (or notional) sale of gold	or	a short position if the forward or future involves an actual (or notional) purchase of gold
Equity forward or future, or option (unless the interest rate PRR is calculated under the basic interest rate PRR calculation in BIPRU 7.3)	A long position if the contract involves an actual (or notional) sale of the underlying equity	or	A short position if the contract involves an actual (or notional) purchase of the underlying equity

BIPRU 7.5.5R01/01/2007

Table: instruments which result in notional foreign currency positions

This table belongs to BIPRU 7.5.3R(6).

Instruments	See
Foreign currency futures, forwards, synthetic futures and CFDs	BIPRU 7.5.11R
Foreign currency swaps	BIPRU 7.5.13R
Foreign currency options or warrants (unless the firm calculates a PRR on the option or warrant under BIPRU 7.6 (Option PRR)).	BIPRU 7.5.15R
Gold futures, forwards, synthetic futures and CFDs	BIPRU 7.5.16R
Gold options (unless the firm calculates a PRR on the option under BIPRU 7.6).	BIPRU 7.5.17R
Positions in CIUs	BIPRU 7.5.18R

BIPRU 7.5.6G01/01/2007

Firms are reminded that the table in BIPRU 7.6.5R (Table: Appropriate PRR calculation for an option or warrant) divides foreign currencyoptions and warrants into:(1) those which must be treated under BIPRU 7.6 (Option PRR); and(2) those which must be treated under either BIPRU 7.5 or BIPRU 7.6, the firm being able to choose whether BIPRU 7.5 or BIPRU 7.6 is used.

BIPRU 7.5.15R01/01/2007

Where included in BIPRU 7.5's PRR calculation (see the table in BIPRU 7.5.5R), a foreign currencyoption or warrant must be treated as a foreign currencyforward.

BIPRU 7.5.17R01/01/2007

If included in the PRR calculation under BIPRU 7.5 (see the table in BIPRU 7.5.5R), a gold option must be treated as a gold forward.

BIPRU 7.3.2R01/01/2007

A firm'sequity PRR calculation must:(1) include all trading bookpositions in equities, unless:(a) the position is fully deducted as a material holding under the calculations under the capital resources table, in which case the firm may exclude it; or(b) the position is hedging an option or warrant which is being treated under BIPRU 7.6.26R (Table: Appropriate treatment for equities, debt securities or currencies hedging options);(2) include notional positions arising from trading

BIPRU 7.3.3R01/01/2007

Table: Instruments which result in notional positions

This table belongs to BIPRU 7.3.2R(2)

Instrument		See
Depository receipts		BIPRU 7.3.12R
Convertibles where:	(a) the convertible is trading at a market price of less than 110% of the underlying equity; and the first date at which conversion can take place is less than three months ahead, or the next such date (where the first has passed) is less than a year ahead; or	BIPRU 7.3.13R
Convertibles where:	(b) the conditions in (a) are not met but the firm includes the convertible in its equity PRR calculation rather than including it in its interest rate PRR calculation set out in BIPRU 7.2 (Interest rate PRR).	BIPRU 7.3.13R
Futures, forwards, CFDs and synthetic futures on a single equity		BIPRU 7.3.14R
Futures, forwards, CFDs and synthetic futures on a basket of equities or equity index		BIPRU 7.3.15R
equity legs of an equity swap		BIPRU 7.3.19R
Options or warrants on a single equity, an equity future, a basket of equities or an equity index (unless the firm calculates a PRR on the option or warrant under BIPRU 7.6).		BIPRU 7.3.21R

BIPRU 7.3.6G01/01/2007

Firms are reminded that the table in BIPRU 7.6.5R (Table: Appropriate PRR calculation for an option or warrant) divides equityoptions and warrants into:(1) those which must be treated under BIPRU 7.6 (Option PRR); and(2) those which must be treated under either BIPRU 7.3 or BIPRU 7.6, the firm being able to choose whether BIPRU 7.3 or BIPRU 7.6 is used.

BIPRU 7.3.21R01/01/2007

If included in BIPRU 7.3's PRR calculation (see the table in BIPRU 7.3.3R), options must be treated as follows:(1) an option on a single equity must be treated as a notional position in that equity;(2) an option on a basket of equities or equity index must be treated as a future on that basket or index; and(3) an option on an equityfuture must be treated as:(a) a long position in that future, for purchased call options and written put options; and(b) a short position in that future,

BIPRU 7.3.45R01/01/2007

This rule applies to a firm that does not include a forward, future, option or swap on an equity, basket of equities or equity index in the calculation of its interest rate PRR calculation under BIPRU 7.2 (Interest rate PRR). However it does not apply to cliquet as defined in BIPRU 7.6.18R (Table: Option PRR: methods for different types of option). A firm must calculate the interest rate PRR for a position being treated under this rule as follows:(1) multiply the market value

BIPRU 7.10.21G01/01/2007

The broad classes of position referred to in BIPRU 7.10.20G are as follows:(1) linear products, which comprise securities with linear pay-offs (e.g. bonds and equities) and derivative products which have linear pay-offs in the underlying risk factor (e.g. interest rate swaps, FRAs, total return swaps);(2) European, American and Bermudan put and call options (including caps, floors and swaptions) and investments with these features (see BIPRU 7.6.18R (Table: Option PRR: methods

BIPRU 7.10.25G01/01/2007

The FSA accepts that the scope and nature of VaR models varies across firms. This means that different firms are likely to calculate different estimates of market risk for the same portfolio. Systematic differences are due to length of data series, choice of methodology (historical or Monte Carlo simulation or variance-covariance method or a hybrid of these), differences in aggregating risks within and across broad risk factors, the treatment of options and other non-linear products

BIPRU 7.10.53R01/01/2007

A firm'sVaR model must capture accurately all material price risks for positions within the scope of its VaRpermission, including risks relating to options or option-like positions. The firm must ensure that, if its VaR model does not accurately capture any material risk, the firm has capital resources adequate to cover that risk. These capital resources must be additional to those required to meet its capital resources requirement.

BIPRU 7.10.55G01/01/2007

A firm is expected ultimately to move towards full revaluation of option positions. For portfolios containing path dependent options, an instantaneous price shock applied to a static portfolio will be acceptable provided that the risks not captured by such an approach are not material. Where a risk is immaterial and does not justify further capital resources, that immaterial risk should still be documented.

INSPRU 3.2.7R06/10/2007

The generation of additional capital or income falls within INSPRU 3.2.6R (1) where it arises from:(1) taking advantage of pricing imperfections in relation to the acquisition and disposal (or disposal and acquisition) of rights in relation to assets the same as, or equivalent to, admissible assets or permitted links1; or(2) receiving a premium for selling a covered call option or its equivalent, the underlying of which is an admissible asset or permitted link1, even if that additional

INSPRU 3.2.22G31/12/2006

The second purpose of cover is that it prevents excessive gearing in the investment portfolio by the use of options and their equivalent. A firm is required to cover all obligations under an admissible transaction including obligations that would arise only at the option of the firm, e.g. the liability to pay the exercise price under a bought option.

INSPRU 3.2.32G31/12/2006

Examples of cover by assets for the purposes of INSPRU 3.2.16 R:(1) a bought put option (or a sold call option) on 1000 1 shares (fully paid) of ABC plc is covered by an existing holding in the fund of 1000 1 shares (fully paid) of ABC plc;(2) a bought call option (or sold put option) on 1000 ordinary 1 shares (fully paid) of ABC plc is covered by cash (or its equivalent) which is sufficient in amount to meet the purchase price of the shares on exercise of the option;(3) a bought

INSPRU 3.2.33G31/12/2006

Examples of cover by offsetting transactions for the purpose of INSPRU 3.2.25 R would include a bought future which is guaranteed to deliver to the firm at the relevant time sufficient assets to cover liabilities under a sold call option.

BIPRU 7.7.2R01/01/2007

(1) A firm'sPRR calculation must include all trading bookpositions in CIUs.(2) A firm'sCIU PRR calculation must include all trading bookpositions in CIUs unless they are treated under one of the CIU look through methods and included in the PRR calculations for the relevant underlying investments or subject to an option PRR.(3) A firm'sPRR calculation for CIUs must include notional positions arising from trading bookpositions in options or warrants on collective investmentunde

BIPRU 7.7.14G01/01/2007

An option on a CIU should be treated in accordance with BIPRU 7.6.35R to BIPRU 7.6.37G (Options on a CIU).

REC 3.14.3R21/06/2001

Where a UK recognised body proposes to provide (or to cease to provide) clearing services in respect of:(1) a specified investment (other than a security or an option in relation to a security); or (2) a type of security or a type of option in relation to a security;it must, unless REC 3.14.4 R applies, give the FSA notice of that event and the information specified for the purposes of this rule in REC 3.14.6 R, at the same time as that proposal is first formally communicated

REC 3.14.5G21/06/2001

Securities falling within the same article in Part III of the Regulated Activities Order which may be given the same generic description (for example, shares admitted to the UKofficial list) will normally be regarded as being of the same type. Options in relation to the same type of security will normally be regarded as being options of the same type.

LR 20.1.2G06/04/2010

Miscellaneous securities include warrants and options and other similar securities.

LR 10.1.3R01/07/2005

In this chapter (except where specifically provided to the contrary) a reference to a transaction by a listed company:(1) (subject to paragraphs (3),(4) and (5)) includes all agreements (including amendments to agreements) entered into by the listed company or its subsidiary undertakings;(2) includes the grant or acquisition of an option as if the option had been exercised except that, if exercise is solely at the listed company's or subsidiary undertaking's discretion, the transaction

LR App 2.1.2G01/01/2006

[deleted]

BIPRU 13.5.6R01/01/2007

This table belongs to BIPRU 13.5.5 R.

Transaction or instrument	Calculation of size of risk position
Transaction with linear risk profile except for debt instruments.	The effective notional value (market price multiplied by quantity) of the underlying financial instruments (including commodities) converted to the firm's domestic currency.
Debt instruments and payment legs.	The effective notional value of the outstanding gross payments (including the notional amount) converted to the firm's base currency, multiplied by the modified duration of the debt instrument, or payment leg, respectively.
Credit default swap	The notional value of the reference debt instrument multiplied by the remaining maturity of the credit default swap.
Subject to BIPRU 13.5.9 R to BIPRU 13.5.10 R, financial derivative instrument with a non-linear risk profile, including options and swaptions except in the case of an underlying debt instrument.	Equal to the delta equivalent effective notional value of the financial instrument that underlies the transaction.
Subject to BIPRU 13.5.9 R to BIPRU 13.5.10 R, financial derivative instrument with a non-linear risk profile, including options and swaptions, of which the underlying is a debt instrument or a payment leg.	Equal to the delta equivalent effective notional value of the financial instrument or payment leg multiplied by the modified duration of the debt instrument, or payment leg, respectively.

[Note: BCD Annex III Part 5 points 5 to 9]

BIPRU 13.5.7R01/01/2007

A firm may use the following formulae to determine the size and sign of a risk position:(1) for all instruments other than debt instruments:effective notional value, or delta equivalentnotional value = pref((V)/(p))where:(a) Pref = price of the underlying instrument, expressed in the reference currency;(b) V = value of the financial instrument (in the case of an option this is the option price; in the case of a transaction with a linear risk profile this is the value of the underlying

BIPRU 7.4.4R01/01/2007

Table: Instruments which result in notional positions

This table belongs to BIPRU 7.4.2R(3)

Instrument	See
Forwards, futures, CFDs, synthetic futures and options on a single commodity (unless the firm calculates a PRR on the option under BIPRU 7.6 (Option PRR))	BIPRU 7.4.8R
A commitment to buy or sell a single commodity at an average of spot prices prevailing over some future period	BIPRU 7.4.10R
Forwards, futures, CFDs, synthetic futures and options on a commodity index (unless the firm calculates an PRR on the option under BIPRU 7.6)	BIPRU 7.4.13R - BIPRU 7.4.14R
Commodity swaps	BIPRU 7.4.16R - BIPRU 7.4.17R
A warrant relating to a commodity must be treated as an option on a commodity.

BIPRU 7.4.8R01/01/2007

Where a forward, future, CFD, synthetic future or option (unless already included in the firm'soption PRR calculation) settles according to:(1) the difference between the price set on trade date and that prevailing at contract expiry, the notional position:(a) equals the total quantity underlying the contract; and(b) has a maturity equal to the expiry date of the contract; and(2) the difference between the price set on trade date and the average of prices prevailing over a certain

PERG 8.12.26G01/07/2005

Provided the conditions in PERG 8.12.25 G are met, the exemption in article 20 applies to any non-real time financial promotion. However, there is an additional condition where the subject matter of the financial promotion is shares or options, futures or contracts for differences relating to shares and the financial promotion identifies directly a person who issues or provides such an investment. In such cases, the exemption is subject to a disclosure requirement which is itself

PERG 8.12.33G01/07/2005

The main purpose of the exemption appears to be to guard against the possibility that, during the course of a broadcast interview or a live website presentation, a financial promotion is made inadvertently by a director or employee of a company or other business undertaking when he is not acting in the capacity of a journalist (see PERG 8.12.25 G). The exemption applies if the financial promotion relates only to:(1) shares of the undertaking or of another undertaking in the same

PERG 8.14.21G26/02/2010

This exemption disapplies the restriction in section 21 of the Act from non-real time financial promotions or solicited real time financial promotions which are made to a person who the communicator believes on reasonable grounds to be a certified high net worth individual and which relate to certain investments. These investments must be either:7(1) shares in or debentures or alternative debentures7 of an unlisted company; or(2) warrants,certificates representing certain securities,

PERG 8.14.41G26/02/2010

Several exemptions, including article 43 of the Financial Promotion Order (Members and creditors of certain bodies corporate), apply only in relation to relevant investments being shares or debentures or alternative debentures7 in the body corporate or a member of its group, or warrants or certificates representing certain securities relating to such shares or debentures or alternative debentures.7 In the FSA's view, an exchangeable debt security which is partly a debenture or

Related provisions for BIPRU 7.9.27

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