MIFIDPRU 5.4 Calculation of exposure value (EV)

For the purposes of MIFIDPRU 5.5 to MIFIDPRU 5.10, a firm must calculate an exposure value (EV) for each client or group of connected clients by adding together the following items:

1. (1)

   the positive excess of the firm’s long positions over its short positions in all the trading book financial instruments issued by the client in question, using the approach specified for K-NPR in MIFIDPRU 4.12.2R to calculate the net position for each instrument; and

2. (2)

   the exposure value of contracts and transactions referred to in MIFIDPRU 4.14.3R with the client in question, calculated using the approach specified for K-TCD in MIFIDPRU 4.14.8R.

For the purposes of MIFIDPRU 5.4.1R(1), where a firm calculates a K-CMG requirement in relation to a portfolio, it must calculate its net position for the exposures in that portfolio using the approach specified for K-NPR in MIFIDPRU 4.12.2R.

The EV with regard to a group of connected clients must be calculated by adding together the exposures to the individual clients within the group, which must be treated as a single exposure.

When calculating EVs, a firm must take all reasonable steps to identify underlying assets in relevant transactions and the counterparty of the underlying exposures.