Related provisions for LR 11.1.1D
Explanatory table: This table belongs to COLL 6.2.2 G (4) (Purpose).
Correction of box management errors |
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1 |
Controls by authorised fund managers |
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An authorised fund manager needs to be able to demonstrate that it has effective controls over: |
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(1) |
its calculations of what units are owned by it (its 'box'); and |
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(2) |
compliance with COLL 6.2.8 R which is intended to prevent a negative box. |
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2 |
Controls by depositaries |
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(1) |
Under COLL 6.6.4 (General duties of the depositary), a depositary should take reasonable care to ensure that a scheme2 is managed in accordance with COLL 6.2 (Dealing) and COLL 6.3 (Pricing and valuation). |
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(2) |
A depositary should therefore make a regular assessment of the authorised fund manager's box management procedures (including supporting systems) and controls. This should include reviewing the authorised fund manager's controls and procedures when the depositary assumes office, on any significant change and on a regular basis, to ensure that a series of otherwise minor changes do not have a cumulative and a significant effect on the accuracy of the controls and procedures. |
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3 |
Recording and reporting of box management errors |
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(1) |
An authorised fund manager should record all errors which result in a breach of COLL 6.2.8 R (Controls over the issue and cancellation of units) and as soon as an error is discovered, the authorised fund manager should report the fact to the depositary, together with details of the action taken, or to be taken, to avoid repetition of the error. |
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(2) |
A depositary should report material box management errors to the FCA immediately. Materiality should be determined by taking into account a number of factors including:
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(3) |
A depositary should also make a return to the FCA (in the manner prescribed by SUP 16.6.8 R) on a quarterly basis. |
1Paragraph 7BA – Position management |
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(1) |
A [UK RIE] operating a trading venue which trades commodity derivatives must apply position management controls on that venue, which must at least enable the [UK RIE] to - |
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(a) |
monitor the open interest positions of persons; |
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(b) |
access information, including all relevant documentation, from persons about- |
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(i) |
the size and purpose of a position or exposure entered into; |
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(ii) |
any beneficial or underlying owners; |
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(iii) |
any concert arrangements; and |
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(iv) |
any related assets or liabilities in the underlying market; |
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(c) |
require a person to terminate or reduce a position on a temporary or permanent basis as the specific case may require and to unilaterally take appropriate action to ensure the termination or reduction if the person does not comply; and |
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(d) |
where appropriate, require a person to provide liquidity back into the market at an agreed price and volume on a temporary basis with the express intent of mitigating the effects of a large or dominant position. |
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(2) |
The position management controls must take account of the nature and composition of market participants and of the use they make of the contracts submitted to trading and must- |
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(a) |
be transparent; |
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(b) |
be non-discriminatory; and |
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(c) |
specify how they apply to persons. |
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(3) |
A [UK RIE] must inform the FCA of the details of the position management controls in relation to each trading venue it operates. |
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Paragraph 7BB – Position reporting |
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(1) |
This paragraph applies to a [UK RIE] operating a trading venue which trades commodity derivatives, emission allowances, or emission allowance derivatives. |
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(2) |
The [UK RIE] must - |
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(a) |
where it meets the minimum threshold, as specified in a delegated act adopted by the European Commission pursuant to Article 58.6 of the markets in financial instruments directive, make public a weekly report with the aggregate positions held by the different categories of persons for the different commodity derivatives, emission allowances, or emission allowance derivatives traded on the trading venue specifying - |
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(i) |
the number of long and short positions by such categories; |
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(ii) |
changes of those positions since the previous report; |
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(iii) |
the percentage of the total open interest represented by each category; and |
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(iv) |
the number of persons holding a position in each category; and |
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(b) |
provide the FCA with a complete breakdown of the positions held by all persons, including the members and participants and their clients, on the trading venue on a daily basis, or more frequently if that is required by the FCA. |
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(3) |
For the weekly report mentioned in sub-paragraph (2)(a) the [UK RIE] must - |
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(a) |
categorise persons in accordance with the classifications required under sub-paragraph (4); and |
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(b) |
differentiate between positions identified as- |
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(i) |
positions which in an objectively measurable way reduce risks directly relating to commercial activities; or |
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(ii) |
other positions. |
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(4) |
The [UK RIE] must classify persons holding positions in commodity derivatives, emission allowances, or emission allowance derivatives according to the nature of their main business, taking account of any applicable authorisation or registration, as - |
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(a) |
an investment firm or credit institution; |
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(b) |
an investment fund, either as an undertaking for collective investments in transferrable securities as defined in the UCITS Directive, or an alternative investment fund or alternative investment fund manager as defined in the alternative investment fund managers directive; |
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(c) |
another financial institution, including an insurance undertaking and reinsurance undertaking as defined in the Solvency 2 Directive and an institution for occupational retirement provision as defined in Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement; |
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(d) |
a commercial undertaking; or |
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(e) |
in the case of emission allowances, or emission allowance derivatives, an operator with compliance obligations under Directive 2003/87/EC of the European Parliament and the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community. |
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(5) |
The [UK RIE] must communicate the weekly report mentioned in sub-paragraph (2)(a) to the FCA and ESMA. |