Article 2
Prevention of arbitrage
1. The requirement laid down in Article 23(1), point (e), of Regulation (EU) 2019/2033 shall be fulfilled where all the following conditions are satisfied:
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(a) |
where the investment firm calculates K-CMG capital requirements on a portfolio of cleared positions assigned to one trading desk, it applies the same methodology to all the positions of that trading desk for a continuous period of at least 24 months or the business strategy or operations of the group of dealers of that trading desk has changed to the extent that they can be considered a different trading desk; |
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(b) |
the investment firm uses K-CMG consistently across trading desks that are similar in terms of business strategy and trading book positions; |
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(c) |
the investment firm has policies and procedures in place showing that the choice of portfolio(s) subject to K-CMG would reflect the risks of an investment firm’s trading book positions, including the expected holding periods, the trading strategies applied and the time it could take to hedge out or manage risks of its trading book positions; |
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(d) |
the investment firm has policies and procedures in place enabling it to compare the capital requirements calculated on the basis of K-CMG with the capital requirements calculated on the basis of K-NPR and to adequately reasoning any difference between them taking into account the factors set out in paragraph 2 in each of the following cases:
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(e) |
the investment firm makes use of the outcome of the K-CMG calculation in its risk management framework and regularly compares the results of its own risk assessment with the margins required by clearing members; |
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(f) |
the investment firm has compared the capital requirements calculated by K-CMG with the capital requirements calculated by K-NPR for each trading desk at the point of the assessment by the competent authority, and has provided the competent authority with adequate justification of any difference between them taking into account the factors set out in paragraph 2. |
2. For the purposes of paragraph 1, points (d) and (f),the competent authority shall take into account the following factors in order to assess whether the difference in capital requirements calculated in application of K-CMG and K-NPR is justified:
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(a) |
the reference to the relevant trading strategies; |
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(b) |
the investment firm’s own risk management framework; |
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(c) |
the level of the investment firm’s overall own funds requirements calculated in accordance with Article 11 of Regulation (EU) 2019/2033; |
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(d) |
the results of the supervisory review and evaluation process, if available. |