MORNBFI Vol. 1 - Planters Development Bank

§§ 4611Q - 4611Q.209.12.31to, the following: hedging proprietarytrading, managing capital or funding costs,obtaining indirect exposures to desiredmarket factors, investment, yieldenhancement,and/or altering the riskrewardprofile of a particular item or anentire balance sheet.An end-user may be classifiedaccording to its financial sophistication:(1) Market counterparty - refers to FI,only with respect to the instruments forwhich it is authorized to engage in as adealer;(2) Institutional counterparty - refers toan institution which is not a marketcounterparty and has the level of net worth,knowledge, expertise, and experience todeal with financial derivatives;(3) Sophisticated individual end-user -refers to an individual who hasdemonstrated to the FI as having the levelof net worth, knowledge and experience indealing with financial products, includingfinancial derivatives. An individual mayregister as a sophisticated individual enduserwith the Centralized Applications andLicensing Group of the BSP.(4) Other end-user - this refers to allother institutional or individual clients notcategorized as market counterparty,institutional counterparty or sophisticatedindividual end-user.b. A broker is a financial marketparticipant that facilitates a derivativestransaction between a dealer and its client,for a fee or commission. Thecounterparties to the derivatives contractare the client and an authorized dealer.c. A dealer is defined as a financialmarket participant that engages in aderivatives activity as an originator ofderivatives products or as market-maker inderivatives products. A dealer can distributeits own derivatives products, including thoseof others. A dealer can also act as brokerand/or end-user of derivatives instruments.(As amended by Circular No. 668 dated 02 October 2009)§ 4611Q.1 (2008 - 4603.Q.1) Generallyauthorized derivatives activities. A QB mayenter in any financial derivatives transactionwith BSP-authorized dealers and brokerswithout need of prior BSP approval solelyfor hedging purposes: Provided, That itobserves all the requirements for hedgingtransactions under Philippines AccountingStandards (“PAS”): Provided further, That itobserves the provisions of Appendix Q-15.A trust department of a QB may enter,as an institutional counterparty, into anyfinancial derivatives with the BSP-approvedauthorized dealers and brokers, on behalfof its trustor/principal/s as may beauthorized by such trustor/principals/swithout need of prior BSP approval, solelyfor hedging purposes: Provided, That thetrust department observes all therequirements for hedging transactions underPAS: Provided further, That it observes theprovisions of Appendix Q-15.(As amended by Circular No. 668 dated 02 October 2009)§ 4611Q.2 (2008 - 4603Q.2) Activitiesrequiring additional derivatives authorityQB may apply for prior BSP approval ofadditional derivatives authority to engagein all other financial derivatives activitiesnot expressly allowed in Subsec. 4611Q.1.A QB may apply for two (2) or moreadditional authorities. A QB applying foradditional derivatives authority/ies musthave and maintain a risk managementsystem commensurate to the additionalauthority/ies being applied for, inaccordance with the provisions of AppendixQ-15 and meet other conditions specifiedunder this Subsection.a. Classification of additionalderivatives authority(1) Type 2 - Limited Dealer AuthorityA QB that is also an investment housemay apply for a Type 2 Authority. A QBwith Type 2 Authority may operate as adealer in specific types of derivativesproducts with specific underlying reference,Q Regulations Manual of Regulations for Non-Bank Financial InstitutionsPart VI - Page 4