Question ID: 1553
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Status: Final
Date of submission: 05 Jun 2018
Question
We have a question regarding the answer on logfile 1470. In case when the undertaking owns 5% of an investment pool. For instance 5% of an investment pool with 5 contracts (5% of 5 contract = 0,25 contract). ‘Number of contracts’ can only be an integer. Should we round the value of "Number of contract" to 1? In the LOG states the following for the calculation of the nominal amount of the derivatives (C0130): Notional = Contract size * Number of contracts * Trigger value. But in your answer to log 1470: "In the case of an investment pool the adjustment should be done in the notional amount."
For example contract size is 10 and trigger value is 1.25. That means when we adjust the "notional amount" to the actual number of contract (0.25) the "notional amount" should be reported with 3.13 (=10 * 0.25 * 1,25) instead of 12.5 (10 * 1 (rounding the number of contract) * 1.25). So the notional amount of the derivative is no more "contract size" * "number of contract" * " trigger value". Do you agree with me?
EIOPA answer
In the described case, in which it is owned 5% of an investment pool with 5 contracts (5% of 5 contract = 0,25 contract), 0,25 contracts are owned but it is the "contracts size" that has to be adjusted when reporting the notional amount of the derivative.
Notional amount of derivative= Contract size *Number of (derivative) contracts *Trigger Value=3.125
Where:
Contract size is 10*0,25=2,5 (Where contracts size is the number of underlying assets in the contract (e.g. for equity futures it is the number of equities to be delivered per derivative contract at maturity, for bond futures it is the reference amount underlying each contract).
Number of derivative contracts is 1. Hence it remains true that the 'Number of contracts' can only be an integer.
Trigger value is 1,25.
Contract size has to be adjusted. For equity futures it is the number of equities to be delivered per derivative contract at maturity, for bond futures it is the reference amount underlying each contract. Therefore, for bond futures contracts size is the reference amount of the derivative contract (which is different than the Notional amount of the derivative position).