The rule in plain words
Total K-factor requirement cannot be less than these three added up:
- Risk to client
- Risk to market
- Risk to firm
How the Line4 Check report words itShowHide
Word for word as the report shows it when the rule fails.
K-factor requirement: Total K-Factor requirement >= Risk to client + Risk to market + Risk to firm
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Compare the values in your file. If the first is smaller than it may be, one of them is wrong: check both before you change either.
- 03EBA allows a small rounding difference, worked out from the decimals each value is reported with.
- 04It runs only when your filing indicators mark I 04.00 as reported.
- 05This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
K-factor requirement calculations (I 04.00)
Rows
- 0010Total K-Factor requirement
- 0020Risk to client
- 0090Risk to market
- 0120Risk to firm
Column
- 0020K-factor requirement
A worked example
The first of its checks, with simple numbers.
Total K-factor requirement must then be at least 2,450.
A file that reports 2,450 passes. One that reports 2,350 fails, by 100.
The numbers are illustrative, reported to the unit, so the rounding tolerance does not change the result.
Show the rule as writtenShowHide
EBA's formula. Cells are written as {template, row, column, sheet}.
{I_04.00,r0010,c0020,} >= {I_04.00,r0020,c0020,} + {I_04.00,r0090,c0020,} + {I_04.00,r0120,c0020,}Other rules on I 04.00
- Risk to firm must equal the sum of its four parts (v11139_m)Warning
- Daily trading flow, cash trades and derivative trades must equal the sum of its two parts (v11121_m)Warning
- Client money held must equal the sum of its two parts (v11120_m)Warning
- Daily trading flow, derivative trades must equal total DTF, derivative trades (average amounts) (v11119_m)Warning
- Daily trading flow, cash trades must equal total DTF, cash trades (average amounts) (v11118_m)Warning
- Client orders handled, derivatives trades must equal COH, derivative (average amounts) (v11117_m)Warning
- Client orders handled, cash trades must equal COH, cash trades (average amounts) (v11116_m)Warning
- Assets safeguarded and administered must equal total ASA (average amounts) (v11115_m)Warning
Every IFR class 2 rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.