Assumption for Credit Line Calculation in Cash Account

Assumptions for Credit Line Calculation

Based on Collateral in Cash Account

1. All customers pay for their securities purchases within T+3. Restoring of credit lines will be effective at the beginning of day T+3
2. Securities sold from the customers’ accounts will be withdrawn on a FIFO (First In, First Out) basis, which means that securities deposited first will be withdrawn first.
3. When customers sell securities, assume that members make payment to their customers [AP (T)] on T+1 regardless of whether they pay by cheque or via ATS – unless the customer has instructed that the payment be left with the brokerage firm as collateral. Calculations will be made at the back office at the end of day T and the credit line will be sent to the front office at the beginning of T+1.

There are three methods for customers’ declining to accept the proceeds from securities being sold, as follows:

3.1Inform on the day of opening account that they decline to receive the funds and would like to deposit them as collateral;

3.2Inform on the day that they sell securities;

3.3Inform members on T+1 or T+2, so that the clients will be able to buy securities on that same day. This is permissible only if members are certain that they can stop payment on their cheques in time, and depends upon each member’s internal procedures.

1. Each member already has risk control systems in place. For example, the brokers must receive payment for the purchases before paying clients for the sale on the day after they purchase.
2. The formula for calculating the credit line which will appear at the front office at the beginning of day T is as follows:

Definitions

5.1 Cash at the end of the day is comprised of:

• Cash;
• Cheques which customers received from selling their securities and instructed their brokers to deposit as collateral in which the cheques are due in the morning of the following day;
• Cheques which customers placed as collateral with the condition that members must deposit in their bank accounts and can be cleared within that day.

5.2 T-1means the day before trading day

Tmeans the trading day

APorAccount Payablemeans amount of money which customers received from members for selling their securities

ARorAccount Receivablemeans amount of money which customers pay for buying the securities

5.3 List of financial instruments to be defined as stocks in the portfolios are the same types as specified in the notification of the SEC governing procedures relating to securities borrowing and lending and securities lending to non-institutional customers for short sale mutatis mutandis such as

• Listed securities;

• Treasury bills, government bonds, corporate bonds, fixed income issued or secured by the FIDF without any conditions;
• Fixed income instruments rated at BBB or above;
• Promissory notes issued by finance or credit foncier companies;
• Certificate of deposits issued by commercial banks or financial companies;
• Letter of credits issued by commercial banks to brokers in order to guarantee clients’ debt in the margin account.
• Cumulative AR (T-1) means cumulative AR-AP which is > 0 and can be calculated as follows:

• If customers do not want to deposit cheques received from selling securities, those funds must be excluded from calculation. However, if clients have accrued receivables from buying securities previously, brokers must use the sales proceeds to offset the amounts owed, but must not exceed the total of the accrued receivables.
• If customers instruct members to deposit the amount of securities sold as collateral, members must include that money in calculations without checking whether cumulative AR is < 0 or not.