(b) prudent and appropriate market risk limits that are consistent with the risk tolerance, risk profile and capital, and with the firm’s ability to manage; management’s (c) who is responsible for identifying, measuring and reporting market risk; (d) procedures for tracking and reporting exceptions to, and deviations from, limits or policies; and (e) procedures for including positions and exposures in the trading book. (2) The policy must ensure that all of the transactions are identified firm’s and recorded in a timely way and that their valuations are consistent and prudent. The firm must use reliable market data that have been verified by a function that is independent of the function that assumed or incurred the risk. Guidance In the absence of market prices, the firm may use industry-accepted models to value transactions. 6.1.7 Policies—trading book (1) The firm must have clearly defined policies for keeping the book and the positions and exposures accurate. (1A) In particular, the firm must have policies on: (a) what to include, or not to include, in the trading book; (b) managing and reporting trading positions; (c) valuing positions, including: (i) clearly defined responsibilities of staff involved in the valuation; (ii) sources of market information, and review of their reliability; (iii) frequency of independent valuations; (iv) timing of closing prices; (v) procedures for adjusting valuations between periods; (vi) ad-hoc verification procedures; and (vii) reporting lines for the valuation function that are independent of that function that gave rise to the position.
(b) prudent and appropriate market risk limits that are consistent with the firm’s risk tolerance, risk profile and capital, and with the management’s ability to manage; (c) who is responsible for identifying, measuring and reporting market risk; (d) procedures for tracking and reporting exceptions to, and deviations from, limits or policies; and (e) procedures for including positions and exposures in the trading book. (2) The policy must ensure that all of the firm’s transactions are identified and recorded in a timely way and that their valuations are consistent and prudent. The firm must use reliable market data that have been verified by a function that is independent of the function that assumed or incurred the risk. Guidance In the absence of market prices, the firm may use industry-accepted models to value transactions. 6.1.7 Policies—trading book (1) The firm must have clearly defined policies for keeping the book and the positions and exposures accurate. (1A) In particular, the firm must have policies on: (a) what to include, or not to include, in the trading book; (b) managing and reporting trading positions; (c) valuing positions, including: (i) clearly defined responsibilities of staff involved in the valuation; (ii) sources of market information, and review of their reliability; (iii) frequency of independent valuations; (iv) timing of closing prices; (v) procedures for adjusting valuations between periods; (vi) ad-hoc verification procedures; and (vii) reporting lines for the valuation function that are independent of that function that gave rise to the position.
QFCRA_9582_VER5.docx