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Response to consultation Paper on Draft Regulatory Technical Standards related to implementation of a new prudential regime for investment firms
Go backIs the proposed articulation of the K-factors calculation methods, in particular between AUM and CMH and ASA, exhaustive or should any other element be considered?
Non-ApplicableAre the requirements for notion of segregated accounts sufficient? Are there issues on segregated accounts which need to be elaborated further?
Non-ApplicableIs there any example of situations of market stress which would not been taken into account applying the proposed approach but would be relevant for the measurement of the K-DTF?
The level of capital requirements linked to K-DTF is expected to be limited. We understand that a period of high volatility would require more trading volumes in order to actively manage the price risk linked to this period. Therefore we welcome the idea of adjustment to the K-DTF factor during these periods. We understand from Article 4 of Regulation 2017/578 that the trading venues will determine the start and end of the extreme volatility period. Article 3 of the same regulation mentions several other exceptional events that in our view should not be considered for an K-DTF adjustment as they most likely will decrease trading flow. Consequently, we do not see other situations of market stress that should be taken into account for this K-factor.What would be appropriate thresholds or events that should trigger the comparison between the calculation under the K-CMG compared to the one under the K-NPR?
For investment firms which are part of a large industrial group, which are being used as a window to the market, it is rather uncommon to have trading desks with a portfolio solely performing cleared or margined positions. Using a mix of K-NPR and K-CMG approach would also most likely be inconsistent with the way market risk is managed. This being said, it could be interesting to consider extreme volatility periods as well (see Q3) as an event to compare K-CMG and K-NPR.Which other conditions should be considered to avoid double counting or to prevent regulatory arbitrage in the use of the K-CMG approach?
The initial margin of the respective K-CMG portfolio needs to be clearly identifiable and not to be mixed with K-NPR portfolios. It seems very uncommon to have this set-up.Do you have any comment on the elements included in this Consultation Paper for the application of the aggregation method?
Not-Applicable Do you currently use the method of proportional consolidation for the consolidation of subsidiaries in accordance with Article 18(4) of Regulation (EU) No 575/2013? If proportional consolidation is used, please explain if the conditions included in this Consultation Paper are met.
Not-Applicable Do you have any comments on the conditions established in this Consultation Paper to apply proportional consolidation to investment firms groups under Regulation (EU) No 2019/2033?
Not-Applicable The methods for calculating the K-factors in a consolidated situation may allow for further specifications. Is there any K-factor for which the calculation in the context of the consolidated basis would require further specifications? What aspects should be considered?
Not-Applicable Name of the organization
EFET - European Federation of Energy Traders
