1.   The method for conducting the valuation pursuant to Article 21, point (a), shall consist in determining the discounted amount of expected cash flows under normal insolvency proceedings.

2.   Expected cash flows shall be discounted at the rate or rates reflecting, as appropriate, the timing associated with such expected cash flows, prevailing circumstances as of the resolution decision date, risk-free interest rates, risk premiums for similar financial instruments issued by similar entities, market conditions or discount rates applied by potential purchasers and other relevant characteristics of the element or elements being valued.

3.   The methodology set out in paragraph 2 for the calculation of the discount rate shall not be used where particular discount rates relevant for the valuation are specified in applicable insolvency law or practice.

4.   The valuer shall take the following into account in the determination of the discounted amount of expected cash flows under normal insolvency proceedings:

(a)	applicable CCP operating rules, contractual arrangements, insolvency law and practice in the relevant jurisdiction which could influence the valuation;

(b)	reasonably foreseeable administration, transaction, maintenance, disposal and other costs which would have been incurred by an administrator or insolvency practitioner, as well as financing costs;

(c)	the information on recent insolvency cases of similar entities, where available and relevant;

(d)	an estimate of the direct replacement costs incurred by clearing members, calculated in accordance with Article 23.

5.   For assets traded on an active market, the valuer shall use the observed price, except where specific circumstances hamper the marketability of the assets of the CCP.

For assets not traded on an active market the valuer shall consider the following factors when determining the amount and timing of expected cash flows:

(a)	prices observed on active markets where similar assets are traded;

(b)	prices observed in normal insolvency proceedings or in otherwise distressed transactions involving assets of a similar nature and condition;

(c)	prices observed in transactions involving the sale of business or the transfer to a bridge CCP in a resolution context relating to similar entities;

(d)	the likelihood of an asset generating net cash inflows under normal insolvency proceedings;

(e)	expected market conditions within a given disposal period, including market depth and the ability of the market to exchange the relevant volume of assets within that period; and

(f)	the length of a given disposal period that reflects the implications of the applicable insolvency law.

6.   The valuer shall consider whether the financial condition of the CCP would have affected the expected cash flows, including through restrictions on the administrator’s ability to negotiate terms with potential purchasers.

7.   Where possible, and subject to any applicable provision of the relevant insolvency framework, the cash flows shall reflect the contractual, statutory, or other legal rights of creditors or normal insolvency practices.

8.   The hypothetical proceeds resulting from the valuation shall be allocated to shareholders and creditors in accordance with their order of priority under the applicable insolvency law, as identified in Article 20.