CHAPTER III
Trading book
Article
11
1. The trading book of an
institution shall consist of all positions in financial instruments
and commodities held either with trading intent or in order to hedge
other elements of the trading book and which are either free of any
restrictive covenants on their tradability or able to be
hedged.
2. Positions held with trading
intent are those held intentionally for short-term resale and/or
with the intention of benefiting from actual or expected short-term
price differences between buying and selling prices or from other
price or interest rate variations. The term ‘positions’ shall
include proprietary positions and positions arising from client
servicing and market making.
3. Trading intent shall be
evidenced on the basis of the strategies, policies and procedures
set up by the institution to manage the position or portfolio in
accordance with Part A of Annex VII.
4. Institutions shall establish
and maintain systems and controls to manage their trading book in
accordance with Parts B and D of Annex VII.
5. Internal hedges may be
included in the trading book, in which case Part C of Annex VII
shall apply.
