Methods for measuring the Risk-to-Client K-factors in the case of investment services and activities conducted using tied agents
For the purposes of measuring its Risk-to-Clients (RtC) K-factors in accordance with Article 16 of Regulation (EU) 2019/2033, an investment firm shall include within each of AUM, CMH, ASA and COH referred to in Articles 17, 18, 19 and 20 of that Regulation, respectively, any amounts that relate to the investment services and activities of the investment firm, carried out by any tied agents registered to act on its behalf.
Methods for measuring the AUM in case of non-discretionary advisory arrangements of an ongoing nature
1. For the purpose of measuring its RtC K-factors in accordance with Article 16 of Regulation (EU) 2019/2033, an investment firm shall not include within its AUM, referred to in Article 17 of that Regulation, any amounts of assets that relate to ancillary services referred to in Annex I, Section B, point 3, to Directive 2014/65/EU.
2. Where an investment firm provides non-discretionary advisory arrangements of an ongoing nature to another financial sector entity that undertakes discretionary portfolio management, it shall include within its AUM referred to in Article 17 of Regulation (EU) 2019/2033 any amounts of assets that relate to those non-discretionary advisory arrangements.
Methods for measuring the AUM in case of discretionary portfolio management
For the purposes of Article 17 of Regulation (EU) 2019/2033, the measurement of total monthly AUM shall be made in accordance with all of the following:
(a)
the calculation shall include the value of financial instruments calculated at fair value in accordance with the applicable accounting standards;
(b)
financial instruments with a negative fair value shall be included in absolute value;
(c)
the calculation shall include cash except any amounts covered under CMH in accordance with Article 4 of this Regulation.
Methods for measuring CMH
For the purposes of Article 18 of Regulation (EU) 2019/2033, the measurement of CMH shall be based on the following:
(a)
balances that the investment firm uses for its internal reconciliations;
(b)
the values contained in the investment firm’s accounting records.
Methods for measuring ASA
For the purposes of Article 19 of Regulation (EU) 2019/2033, the measurement of total daily ASA shall include the value of all client financial instruments safeguarded and administered, calculated at fair value in accordance with the applicable accounting standards. It shall exclude CMH referred to in Article 4 of this Regulation.
Methods for measuring the execution of orders in COH
1. For the purposes of calculating K-COH in accordance with Article 20 of Regulation (EU) 2019/2033, an investment firm shall include in the calculation of COH such client’s order at the point in time at which it has confirmation that the execution has taken place and the price is known.
2. Where an investment firm executes on behalf of a client an order that is received from another investment firm, the calculation of COH by the executing investment firm shall include that order within its total of orders measured for the purposes of execution of client orders and shall exclude it from its total of orders measured for the purposes of reception and transmission of orders.
Methods for measuring the reception and transmission of orders in COH
1. For the purposes of calculating K-COH in accordance with Article 20 of Regulation (EU) 2019/2033, where an investment firm receives and transmits a client order, that order shall be included at the point in time at which the investment firm transmits the order to another investment firm or executing broker.
2. An investment firm shall not include orders received and transmitted in the measurement of COH where it brings together two or more investors to bring about a transaction between those investors, such as in the case of corporate finance or private equity transactions.
3. Where an investment firm includes in the measurement of COH orders received and transmitted, it shall use the price contained in the orders. Where no price is contained in the orders, including where these are limit orders, the investment firm shall use the market price of the financial instrument at the day of transmission.
4. Buying and selling interests brought together by an investment firm for the purposes of operating a Multilateral or an Organised Trading Facility as set out in Article 4(1), points 22 and 23, of Directive 2014/65/EU shall not be included in the measurement of COH.
Methods for measuring cash trades for the purposes of COH
1. For the purposes of measuring COH in accordance with Article 20 of Regulation (EU) 2019/2033, an investment firm shall include as cash trades any transactions where a counterparty undertakes to trade any of the following:
(a)
transferable securities;
(b)
money-market instruments;
(c)
units in collective investment undertakings;
(d)
exchange traded options.
2. For the purposes of measuring COH of an exchange traded option, the investment firm shall use the options premium used for the execution of that option.
Methods for measuring derivatives for the purpose of COH
For the purposes of measuring COH in accordance with Article 20 of Regulation (EU) 2019/2033 regarding derivatives, the notional amount of a derivative contract shall be determined pursuant to Article 29(3) of that Regulation.
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
