Section: 36 Heading: Computation basis Version Date: 01/04/2003
Division 4-Ranking liabilities
A licensed corporation shall, for the purpose of calculating its ranking liabilities under the provisions of this Division, apply the computation basis prescribed in Division 2.
Section: 37 Heading: Amounts payable to clients, etc. Version Date: 01/04/2003
A licensed corporation shall include in its ranking liabilities any amount payable to any of its clients or any counterparty or clearing house which arises from the carrying on of any regulated activity for which it is licensed, other than-
(a) an amount payable to any of its clients in respect of client money held by it in a segregated account maintained with an authorized financial institution, an approved bank incorporated outside Hong Kong or a recognized clearing house; and
(b) an amount payable to any of its clients which is set-off against an amount receivable from the client under section 21(3).
Section: 38 Heading: Amounts payable in respect of dealing in securities Version Date: 01/04/2003
A licensed corporation shall include in its ranking liabilities, in respect of a sale of securities-
(a) by it for a client who is in default of his obligation to deliver the securities for-
(i) more than 2 weeks after the settlement date; or
(ii) (A) more than 5 business days but not more than 2 weeks after the settlement date; and
(B) the market value of the securities is more than 200% of the consideration for which they were sold; and
(b) which it has not settled with securities purchased at its own expense,
the amount by which the market value of the securities exceeds the consideration for which they were sold.
Section: 39 Heading: Amounts payable in respect of dealing in securities by common clients Version Date: 01/04/2003
(1) A licensed corporation licensed for Type 1 regulated activity shall include in its ranking liabilities the net amount payable to each licensed corporation licensed for Type 8 regulated activity with which it has common clients, calculated as the amount by which the amount payable to each such second-mentioned licensed corporation exceeds the amount receivable by it from such second-mentioned licensed corporation, where such amounts arise from any dealing in securities by it for any of those clients.
(2) A licensed corporation licensed for Type 8 regulated activity shall include in its ranking liabilities the net amount payable to each securities dealer with which it has common clients, calculated as the amount by which the amount payable to each such securities dealer exceeds the amount receivable by it from such securities dealer, where such amounts arise from any dealing in securities by such securities dealer for any of those clients.
Section: 40 Heading: Futures contracts and options contracts dealing, etc. Version Date: 01/04/2003
(1) Subject to subsection (2), a licensed corporation shall include in its ranking liabilities, in respect of-
(a) any dealing by it in any futures contract;
(b) any options contract written by it; or
(c) any futures contract or options contract cleared by it,
for another person, the amount, when calculated on an account-by-account basis, by which the aggregate of the amount of margin required to be deposited with it by the person and the amount of any floating losses incurred by the person on the contract less the amount of any floating profits made by the person on the contract exceeds the aggregate of-
(d) the amount of cash deposited with it as security by the person;
(e) the market value of collateral deposited with it by the person, less the haircut amounts in relation to such collateral;
(f) the market value of specified investments deposited with it as security by the person, less the haircut amounts in relation to such investments; and
(g) the maximum amount that it can draw under a bank guarantee provided to it as security by the person and issued by an authorized financial institution or an approved bank incorporated outside Hong Kong.
(2) Subsection (1) does not apply to a licensed corporation on the day or days on which it is allowed, under the rules or conventions of the exchange on which the futures contract or options contract is traded, not to collect from the other person the margin required to be deposited by the other person in respect of the futures contract or options contract.
(3) Subject to subsections (5), (6) and (9) and sections 27(2) and 43(5), a licensed corporation shall include in its ranking liabilities the market value of any options contract written by it for its own account and traded on a specified exchange, to the extent that the market value of the options contract exceeds the amount of margin required to be deposited by it in respect of the options contract.
(4) Subject to subsections (5), (6), (7), (8) and (9) and sections 27(2) and (3), 31(2) and (3) and 43(4) and (5), a licensed corporation shall include in its ranking liabilities the amount of margin required to be deposited by it in respect of-
(a) any futures contract which is traded by it for its own account; and
(b) any options contract which is purchased or written by it for its own account and traded on a specified exchange.
(5) Subject to subsection (10), where a licensed corporation borrows any listed shares under a securities borrowing and lending agreement for the purpose of depositing them to cover a call stock options contract written by it, to the extent that the number of shares underlying the options contract is equal to the number of such shares, it may elect not to apply subsections (3) and (4) in respect of the options contract and not to apply section 45(1) in respect of the securities borrowing and lending agreement, whereupon it shall include in its ranking liabilities an amount in the aggregate of the in-the-money amount of the options contract and the higher of-
(a) the haircut amount in relation to such shares; and
(b) the amount that would, but for this subsection, be required to be included in its ranking liabilities under section 45(1).
(6) Subject to subsection (10), where a licensed corporation holds a long position in a stock futures contract and writes a call stock options contract in respect of the same underlying listed shares, to the extent that the number of shares underlying the futures contract is equal to the number of shares underlying the options contract, subsections (3) and (4) do not apply in respect of the futures contract and the options contract and it shall include in its ranking liabilities an amount which is the higher of-
(a) the amount of margin required to be deposited by it in respect of the futures contract; and
(b) the in-the-money amount of the options contract.
(7) Subject to subsection (10) and without prejudice to section 31(2), where a licensed corporation holds a long position in a stock futures contract and holds a put stock options contract, which is not subject to any margin requirement, in respect of the same underlying listed shares, to the extent that the number of shares underlying the futures contract is equal to the number of shares underlying the options contract, subsection (4) does not apply in respect of the futures contract and section 31(1)(b) does not apply in respect of the options contract and, if the options contract is out-of-the-money, it shall include in its ranking liabilities the lower of-
(a) the amount of margin required to be deposited by it in respect of the futures contract; and
(b) the out-of-the-money amount of the options contract.
(8) Subject to subsection (10) and without prejudice to section 31(3), where a licensed corporation holds a short position in a stock futures contract and holds a call stock options contract, which is not subject to any margin requirement, in respect of the same underlying listed shares, to the extent that the number of shares underlying the futures contract is equal to the number of shares underlying the options contract, subsection (4) does not apply in respect of the futures contract and section 31(1)(b) does not apply in respect of the options contract and, if the options contract is out-of-the-money, it shall include in its ranking liabilities the lower of-
(a) the amount of margin required to be deposited by it in respect of the futures contract; and
(b) the out-of-the-money amount of the options contract.
(9) Subject to subsection (10), where a licensed corporation holds a short position in a stock futures contract and writes a put stock options contract in respect of the same underlying listed shares, to the extent that the number of shares underlying the futures contract is equal to the number of shares underlying the options contract, subsections (3) and (4) do not apply in respect of the futures contract and the options contract and it shall include in its ranking liabilities an amount which is the higher of-
(a) the amount of margin required to be deposited by it in respect of the futures contract; and
(b) the in-the-money amount of the options contract.
(10) Subsections (5), (6), (7), (8) and (9) do not apply in respect of a stock futures contract or a stock options contract which has been grouped with other positions for the purpose of calculating a net amount of margin required to be deposited by the licensed corporation.
(11) A licensed corporation shall include in its ranking liabilities, in respect of any options contract (other than a put options contract) which is written by it for its own account and traded other than on a specified exchange or not exchange traded, an amount which is the highest of-
(a) 200% of the market value of the options contract;
(b) 200% of the in-the-money amount of the options contract; and
(c) 200% of the amount of margin required to be deposited by it.
(12) A licensed corporation shall include in its ranking liabilities, in respect of any put options contract which is written by it for its own account and traded other than on a specified exchange or not exchange traded, an amount, not exceeding the value of the assets underlying the options contract stated at the strike price of the options contract, which is the highest of-
(a) 200% of the market value of the options contract;
(b) 200% of the in-the-money amount of the options contract; and
(c) 200% of the amount of margin required to be deposited by it.
Section: 41 Heading: Leveraged foreign exchange trading Version Date: 01/04/2003
(1) A licensed corporation licensed for Type 3 regulated activity shall include in its ranking liabilities-
(a) in respect of all outstanding leveraged foreign exchange contracts which it has with any of its clients, the excess, when calculated on a client-by-client basis, of the amount by which the aggregate of-
(i) 3% of the aggregate of the amount of the gross principal values of the contracts;
(ii) the amount of any floating losses incurred by, and due from, the client on the contracts; and
(iii) the amount of any accrued interest, fees and commissions receivable from the client in respect of any such contracts,
exceeds the aggregate of-
(iv) 100% of the amount of cash in the Hong Kong currency (or any currency linked to the Hong Kong currency) deposited with it as security by the client;
(v) 95% of the amount of cash in such foreign currency as may be approved under section 58(5)(f) deposited with it as security by the client;
(vi) 95% of the amount of any time deposit in the Hong Kong currency (or currency linked to the Hong Kong currency) which-
(A) is placed with a local branch or the principal place of business in Hong Kong of an authorized financial institution;
(B) will become payable within 6 months; and
(C) has been assigned to it by the client;
(vii) the market value of collateral deposited with it by the client, less the haircut amounts in relation to such collateral;
(viii) the amount of any floating profits made by, and due to, the client on the contracts;
(ix) 90% of the maximum amount that it can draw under a letter of credit issued in favour of it as security by an authorized financial institution or an approved bank incorporated outside Hong Kong; and
(x) the amount of any accrued interest payable to the client in respect of any such contracts; and
(b) the amount of any floating losses incurred by it on any outstanding foreign exchange agreements and outstanding leveraged foreign exchange contracts to which it is a party.
(2) Where a licensed corporation holds with any of its clients (other than a client whose account with the licensed corporation is an omnibus account) any outstanding leveraged foreign exchange contracts, for the purpose of calculating the aggregate of the amount of the gross principal values of the outstanding contracts, it may elect not to include in such aggregate the gross principal values of any 2 outstanding contracts where-
(a) under one of the contracts it is obliged to purchase an amount of a currency ("A") and sell an amount ("X") of another currency ("B"); and
(b) under the other contract it is obliged to purchase the same amount ("X") of the other currency ("B") and sell an amount of the first-mentioned currency ("A"),
whereupon it shall include in the aggregate the highest of the equivalent amount of its reporting currency of-
(c) the amount "X" of currency "B";
(d) the amount of currency "A" which it is obliged to purchase under the contract referred to in paragraph (a); and
(e) the amount of currency "A" which it is obliged to sell under the contract referred to in paragraph (b).
(3) In this section, "gross principal value" (本金总额), in relation to an outstanding leveraged foreign exchange contract, means the higher of the equivalent amounts in the reporting currency of the licensed corporation of the 2 amounts of currencies that the contract is intended to exchange.
Section: 42 Heading: Provision of securities margin financing Version Date: 01/10/2006
(1) A licensed corporation licensed for Type 1 or Type 8 regulated activity shall include in its ranking liabilities the amount, when calculated on a client-by-client basis, by which-
(a) any amount receivable from any of its margin clients; or
(b) in the case of a group of related margin clients, the aggregate of amounts receivable from the group,
included in its liquid assets under section 22(1), exceeds 10% of the aggregate of amounts receivable from its margin clients included in its liquid assets in accordance with that section.
(2) Where a licensed corporation licensed for Type 1 or Type 8 regulated activity obtains any financial accommodation wholly or partly secured by collateral provided by any of its margin clients, it shall include in its ranking liabilities the amount by which such financial accommodation exceeds 80% of the aggregate of amounts receivable from its margin clients arising from the provision of securities margin financing. (L.N. 117 of 2006)
(3) In subsection (1), "group of related margin clients" (一组关连保证金客户) means any 2 or more margin clients of a licensed corporation licensed for Type 1 or Type 8 regulated activity and-
(a) where it is a group of 2 margin clients, one is the spouse of the other;
(b) where one or more of the margin clients are corporations, one is in control, either alone or with his spouse, of 35% or more of the voting rights of that other margin client or each of the other margin clients (as the case may be); or
(c) where the margin clients are corporations, they are members of the same group of companies.
Section: 43 Heading: Short positions in securities (other than options contracts) and specified investments Version Date: 01/04/2003
(1) Subject to subsections (2), (3), (6), (8) and (9) and section 27(6) and (7), a licensed corporation which holds for its own account a short position in securities (other than options contracts) or specified investments, whether by short selling or otherwise, shall include in its ranking liabilities the market value of those securities or specified investments.
(2) Subject to subsection (3), a licensed corporation which holds for its own account a short position, whether by short selling or otherwise, in-
(a) subject to subsections (4), (5) and (6) and section 45(5), listed shares;
(b) qualifying debt securities;
(c) special debt securities;
(d) subject to subsections (8) and (9) and section 27(6) and (7), specified securities; or
(e) specified investments,
shall increase the amount required to be included in its ranking liabilities under subsection (1) by the haircut amounts in relation thereto.
(3) Subject to subsections (4), (5), (6), (8) and (9) and sections 27(6) and (7) and 45(5), a licensed corporation which holds for its own account a short position in securities, whether by short selling or otherwise, which-
(a) are not of a type specified in Schedule 2;
(b) constitute more than 5% by market value of all securities of the same description issued by a particular corporation; or
(c) are listed shares or listed warrants which have been suspended from trading for at least 3 business days or ceased trading on any exchange on which the securities were listed, unless the securities can continue to be traded on any other exchange on which the securities are listed,
shall increase the amount required to be included in its ranking liabilities under subsection (1) by the market value of such securities.
(4) Subject to subsection (7), where a licensed corporation short sells any listed shares and holds a long position in a stock futures contract in respect of such shares, to the extent that the number of shares underlying the futures contract is equal to the number of shares short sold by it, subsections (2) and (3) do not apply in respect of the shares short sold and section 40(4) does not apply in respect of the futures contract.
(5) Subject to subsection (7), where a licensed corporation short sells any listed shares and writes a put stock options contract in respect of such shares, to the extent that the number of shares underlying the options contract is equal to the number of shares short sold by it, subsections (2) and (3) do not apply in respect of the shares short sold and section 40(3) and (4) does not apply in respect of the options contract and it shall include in its ranking liabilities the higher of-
(a) the increased amount that would, but for this subsection, arise under subsection (2) or (3); and
(b) the in-the-money amount of the options contract.
(6) Subject to subsection (7), where a licensed corporation short sells any listed shares and holds a call stock options contract, which is not subject to any margin requirement, in respect of such shares, to the extent that the number of shares underlying the options contract is equal to the number of shares short sold by it, it may elect not to apply subsections (1), (2) and (3) in respect of the shares short sold and not to apply section 31(1)(b) in respect of the options contract, whereupon it shall include in its ranking liabilities the lower of-
(a) the aggregate of the market value of such shares sold short and the increased amount that would, but for this subsection, arise under subsection (2) or (3); and
(b) the number of shares short sold multiplied by the strike price of the options contract.
(7) Subsections (4), (5) and (6) do not apply in respect of a stock futures contract or a stock options contract which has been grouped with other positions for the purpose of calculating a net amount of margin required to be deposited by the licensed corporation.
(8) A licensed corporation which is the issuer of any call non-collateralized warrants issued on listed shares shall increase the amount included in its ranking liabilities under subsection (1) in respect of any outstanding call non-collateralized warrants so issued which it does not cover by holding the underlying shares, by the amount by which the haircut amount in relation to the underlying shares which are not so held exceeds the aggregate of the out-of-the-money amounts of the warrants.
(9) A licensed corporation shall increase the amount included in its ranking liabilities under subsection (1) in respect of any outstanding non-collateralized warrants issued by it on any assets other than shares, by 30% of the market value of the assets underlying such warrants.
(10) A licensed corporation shall include in its ranking liabilities, in respect of the short selling of securities for any of its clients, save where such securities have been delivered to it by the client or are not yet due for settlement according to the settlement date, the amount by which the aggregate of-
(a) the market value of such securities; and
(b) the haircut amount in relation to such securities,
exceeds the aggregate of-
(c) the amount of cash deposited with it by the client and the amount of proceeds of sale of such securities withheld by it as security for delivery of securities by the client to the licensed corporation;
(d) the maximum amount that it can draw under a bank guarantee provided to it as security by the client and issued by an authorized financial institution or an approved bank incorporated outside Hong Kong; and
(e) the market value of collateral deposited with it by the client, less the haircut amount in relation to such collateral.
Section: 44 Heading: Concentrated proprietary positions Version Date: 01/04/2003
(1) Where a licensed corporation holds for its own account-
(a) listed shares;
(b) qualifying debt securities;
(c) special debt securities;
(d) specified securities; or
(e) specified investments,
and the net market value of any such securities or specified investments (as the case may be) which are of the same description equals 25% or more of its required liquid capital, it shall include in its ranking liabilities-
(f) where the net market value is 25% or more but less than 51% of its required liquid capital, 5% of such net market value; or
(g) where the net market value is 51% or more of its required liquid capital, 10% of such net market value.
(2) In subsection (1), "net market value" (净市值), in relation to any securities and any specified investments referred to in that subsection, means the market value that remains after netting each long and short position in securities and specified investments (as the case may be) of the same description.
Section: 45 Heading: Securities borrowing and lending agreements Version Date: 01/04/2003
(1) Subject to subsections (5) and (6) and section 40(5), a licensed corporation which is the borrower of securities under a securities borrowing and lending agreement shall include in its ranking liabilities the amount by which the aggregate of-
(a) the amount of cash deposited by it with the lender under the agreement as security; and
(b) the market value of collateral provided by it to the lender, less the haircut amount in relation to such collateral,
exceeds-
(c) in the case where the securities are-
(i) shares listed on a specified exchange;
(ii) qualifying debt securities; or
(iii) special debt securities,
110% of their market value; or
(d) in any other case, 50% of the market value of the securities.
(2) Subject to subsection (6), a licensed corporation which, under a securities borrowing and lending agreement, is the lender of securities which are included in its liquid assets under section 27, shall include in its ranking liabilities the amount by which the market value of the securities, less the haircut amount in relation to such securities, exceeds the aggregate of-
(a) the maximum amount that it can draw under a bank guarantee provided to it as security by the borrower under the agreement and issued by an authorized financial institution or an approved bank incorporated outside Hong Kong;
(b) the amount of cash deposited with it as security by the borrower;
(c) the market value of-
(i) any shares listed on a specified exchange;
(ii) any qualifying debt securities; and
(iii) any special debt securities,
deposited with it by the borrower as collateral, less the haircut amount in relation to such collateral; and
(d) 50% of the market value of any collateral, other than collateral referred to in paragraph (c), deposited with it by the borrower.
(3) Subject to subsection (6), a licensed corporation which, under a securities borrowing and lending agreement, is the lender of any securities as agent for another person, or where the securities are borrowed by it under another securities borrowing and lending agreement, shall include in its ranking liabilities the amount by which the market value of the securities exceeds the aggregate of-
(a) the maximum amount that it can draw under a bank guarantee provided to it as security by the borrower under the agreement and issued by an authorized financial institution or an approved bank incorporated outside Hong Kong;
(b) the amount of cash deposited with it as security by the borrower;
(c) the market value of-
(i) any shares listed on a specified exchange;
(ii) any qualifying debt securities; and
(iii) any special debt securities,
deposited with it by the borrower as collateral, less the haircut amount in relation to such collateral; and
(d) 50% of the market value of any collateral, other than collateral referred to in paragraph (c), deposited with it by the borrower.
(4) A licensed corporation which is the lender of securities under a securities borrowing and lending agreement shall include in its ranking liabilities the amount payable to the borrower under the agreement in respect of any cash deposited with it as security by the borrower, save where the cash-
(a) is held in a segregated account; and
(b) is not included in its liquid assets under section 20.
(5) Where a licensed corporation borrows listed shares under a securities borrowing and lending agreement for the purpose of short selling for its own account, to the extent that the number of shares borrowed is equal to the number of shares short sold by it, subsection (1) does not apply in respect of the agreement and section 43(2) and (3) does not apply in respect of the shares short sold and it shall include in its ranking liabilities the amount which is the higher of-
(a) the amount that would arise under subsection (1); and
(b) the increased amount that would arise under section 43(2) or (3),
but for this subsection.
(6) Subsections (1), (2) and (3) do not apply in respect of a securities borrowing and lending agreement to which a licensed corporation is a party, where the other party to the agreement is an approved securities borrowing and lending counterparty.
Section: 46 Heading: Repurchase transactions Version Date: 01/04/2003
(1) A licensed corporation which is the purchaser in the first instance of any securities in a repurchase transaction shall include in its ranking liabilities the amount by which the amount included in its liquid assets under section 33 exceeds-
(a) in the case where the securities are-
(i) shares listed on a specified exchange;
(ii) qualifying debt securities; or
(iii) special debt securities,
110% of their market value; or
(b) in any other case, 50% of the market value of the securities.
(2) A licensed corporation which is the seller in the first instance of any securities in a repurchase transaction shall include in its ranking liabilities the amount by which the market value of the securities, less the haircut amount in relation to such securities, exceeds the aggregate of-
(a) the maximum amount that it can draw under a bank guarantee provided to it as security by the purchaser of the securities and issued by an authorized financial institution or an approved bank incorporated outside Hong Kong;
(b) the amount of proceeds of sale of such securities received by it from the purchaser;
(c) the market value of-
(i) any shares listed on a specified exchange;
(ii) any qualifying debt securities; and
(iii) any special debt securities,
deposited with it by the purchaser as collateral, less the haircut amount in relation to such collateral; and
(d) 50% of the market value of any collateral, other than collateral referred to in paragraph (c), deposited with it by the purchaser.
(3) A licensed corporation which is the seller in the first instance of any securities in a repurchase transaction shall include in its ranking liabilities the amount of the consideration for which it sold the securities.
Section: 47 Heading: Net underwriting commitments Version Date: 01/04/2003
(1) Subject to subsection (2), a licensed corporation which underwrites or sub-underwrites an issue or a sale of securities shall include in its ranking liabilities-
(a) in the case of a rights issue-
(i) where the market price of the securities is less than or equal to their subscription price, the aggregate of-
(A) 50% of the haircut percentage in relation to the securities multiplied by the net underwriting commitment; and
(B) the amount by which the net underwriting commitment exceeds the market value of the securities; or
(ii) where the market price of the securities is greater than their subscription price, 5% of the haircut percentage in relation to the securities multiplied by the net underwriting commitment; or
(b) in any other case, 50% of the haircut percentage in relation to the securities multiplied by the net underwriting commitment.
(2) This section does not apply to a licensed corporation on the day on which it acquires an underwriting or a sub-underwriting commitment in respect of an issue or a sale of securities and the business day following that day.
(3) For the purposes of subsection (2), a licensed corporation acquires an underwriting or a sub-underwriting commitment in respect of an issue or a sale of securities at the later of-
(a) the time when it commits itself to underwrite or sub-underwrite the securities; and
(b) the time when the lead underwriter or co-lead underwriter signs the underwriting agreement with the issuer or the seller (as the case may be) of the securities.
(4) In subsection (1), "net underwriting commitment" (包销承担净额) means the total costs of subscribing for or purchasing securities underwritten or sub-underwritten by a licensed corporation other than-
(a) securities which are sub-underwritten; and
(b) securities which are the subject of a legally binding contract for the subscription for or purchase of such securities,
through or from that licensed corporation by another person.
Section: 48 Heading: Off-exchange traded derivative contracts Version Date: 01/04/2003
(1) Subject to subsection (2), a licensed corporation shall include in its ranking liabilities the amount of any floating losses incurred by it in respect of any position in any off-exchange traded derivative contract.
(2) Where a licensed corporation has entered into a bilateral netting agreement in respect of 2 or more off-exchange traded derivative contracts with the counterparty with whom it maintains the positions, it shall include in its ranking liabilities the amount by which the amount of any floating losses incurred by it exceeds the amount of any floating profits made by it in respect of the contracts.
(3) In subsection (2), "bilateral netting agreement" (双边净额结算协议) means an agreement between the licensed corporation and the counterparty with whom it maintains positions in off-exchange traded derivative contracts under which each party has a single obligation to the other in respect of all such contracts covered by the agreement and which provides that, in the event that the counterparty fails to comply with its obligation under the agreement, the licensed corporation will have-
(a) a single claim to receive only the net amount of the aggregate positive mark-to-market value of any contract covered by the agreement, calculated by deducting from the aggregate positive mark-to-market value of any contract covered by the agreement the aggregate negative mark-to-market value of any other contract covered by the agreement; or
(b) a single obligation to pay only the net amount of the aggregate negative mark-to-market value of any contract covered by the agreement, calculated by deducting from the aggregate negative mark-to-market value of any contract covered by the agreement the aggregate positive mark-to-market value of any other contract covered by the agreement.
Section: 49 Heading: Interest rate swap agreements Version Date: 01/04/2003
(1) A licensed corporation which is a party to an interest rate swap agreement shall include in its ranking liabilities the notional principal amount multiplied by the percentage specified in column 3 of Table 1 in Schedule 4 opposite the description of the remaining term to maturity in column 2 of the Table which is applicable to the agreement.
(2) In subsection (1), "notional principal amount" (名义本金额) means the theoretical amount agreed upon by the parties to an interest rate swap agreement on the basis of which any interest payment to be made under the agreement is calculated.
Section: 50 Heading: Foreign exchange agreements Version Date: 01/04/2003
A licensed corporation which is a party to a foreign exchange agreement shall include in its ranking liabilities the amount of currency to be delivered by it under the agreement multiplied by the percentage specified in column 3 of Table 2 in Schedule 4 opposite the description of the counterparty and the remaining term to maturity in column 2 of the Table which is applicable to the agreement.
Section: 51 Heading: Introduction of transactions Version Date: 01/04/2003
(1) Subject to subsection (2), where a licensed corporation introduces transactions which involve-
(a) a dealing in any securities;
(b) a dealing in a futures contract or an options contract; or
(c) a trading in a leveraged foreign exchange contract,
to another person for execution or clearing on behalf of any of its clients and-
(d) it does not include the amount receivable by it or payable to it in respect of any such transaction in the calculation of its liquid capital under this Part; and
(e) there is neither express agreement nor a clear market practice that exempts it from any liability to the client or the other person in relation to such transaction,
it shall include in its ranking liabilities the amount by which its required liquid capital would have been increased had one or more of the following amounts been included in the calculation of its variable required liquid capital (as if the transaction had been executed or cleared by it)-
(f) (where the transaction introduced is a dealing in securities and the transaction has not been fully settled by the client or the other person (as the case may be)) the total value of the transaction entered into as a result of the introduction;
(g) (where the transaction introduced is a dealing in a futures contract or an options contract) the total amount of margin required to be deposited in respect of the futures contract or the options contract entered into as a result of the introduction which remains outstanding;
(h) (where the transaction introduced is a trading in a leveraged foreign exchange contract) the aggregate gross foreign currency position arising from the leveraged foreign exchange contract entered into as a result of the introduction which remains outstanding.
(2) Subsection (1) does not apply where-
(a) the person to whom the transaction is introduced is a member of a group of companies of which the licensed corporation is a member;
(b) the person to whom the transaction is introduced has entered into an agreement with the client for providing the execution or clearing service to the client and is contractually liable to the client for any default in the execution or clearing of the transaction; and
(c) the licensed corporation is not liable to the client for execution or clearing of such transactions or default by the person to whom the transaction is introduced.
Section: 52 Heading: Miscellaneous Version Date: 01/04/2003
(1) A licensed corporation shall include in its ranking liabilities-
(a) 10% of the amount of any guarantee, indemnity or other similar financial commitment provided by it, directly or indirectly (including the pledging of assets for the purpose of obtaining a bank guarantee), other than a guarantee, an indemnity and other financial commitment provided by it in respect of its own liabilities and obligations;
(b) the amount by which the liabilities of any subsidiary of it (excluding any amounts due to it from the subsidiary) exceed the assets of the subsidiary;
(c) the consideration it is obliged to pay for the redemption of redeemable shares, other than approved redeemable shares, which have not yet been redeemed;
(d) subject to subsection (2), 5% of its net position in each foreign currency; and
(e) where it is the underwriter of a note issuance and revolving underwriting facility, the maximum amount that can be drawn down by the issuer under the facility by issuing notes less the amount that has been drawn down by the issuer by issuing and placing notes multiplied by the percentage specified in column 3 of Schedule 5 opposite the description of the remaining term to maturity in column 2 of the Schedule which is applicable to the facility.
(2) In calculating the net position in a foreign currency for the purposes of subsection (1)(d), a licensed corporation may elect to exclude from the calculation the value of any asset which is denominated in that foreign currency and not included in its liquid assets under any provision in Division 3.
(3) In this section, "net position" (净持仓量), in relation to a foreign currency, means the difference between-
(a) the aggregate of the value of assets, other than fixed assets, beneficially owned by a licensed corporation which are denominated in the foreign currency together with the amount of the foreign currency which it is obliged to purchase under any outstanding contract; and
(b) the aggregate of the amount of the on-balance sheet liabilities of the licensed corporation, other than excluded liabilities, which are denominated in such foreign currency together with the amount of such foreign currency which it is obliged to sell under any outstanding contract.
Section: 53 Heading: Other liabilities Version Date: 01/04/2003
(1) Subject to subsection (2), a licensed corporation shall include in its ranking liabilities all its liabilities not otherwise required to be included in its ranking liabilities under any other provision of this Division, including-
(a) any amount payable by it in relation to any overdraft obtained by it;
(b) any amount payable by it in relation to any loan obtained by it;
(c) any accrued interest payable by it to any other person;
(d) any accrued expenses incurred by it;
(e) any tax payable by it, less any tax prepaid by it, to the extent that the tax payable and the tax prepaid are of the same description and levied by the same taxation authority;
(f) any provision made by it for contingent liabilities;
(g) any provision made by it for floating losses in respect of open positions held for its own account; and
(h) any other liabilities provided for in accordance with generally accepted accounting principles.
(2) A licensed corporation shall not include in its ranking liabilities-
(a) any approved subordinated loan provided to it; or
(b) any liability that it is not required to settle within the next 12 months and is secured by a first legal charge on immovable property beneficially owned by it and used in carrying on the regulated activity for which it is licensed, to the extent that the net realizable value of that property equals such liability.
