Many commenters on proposed rule 18f-4 suggested that the rule should measure a fund’s derivatives exposure using notional amounts adjusted to reflect the risks of the underlying reference assets.  These commenters suggested that the Commission adopt risk-based adjustments derived from standardized schedules used for other regulatory purposes.  Many commenters also suggested that a fund be permitted to maintain as qualifying coverage assets a range of assets in addition to cash and cash equivalents, subject to “haircuts” to the value of these additional assets identified in standardized schedules included in other regulatory requirements.  In light of these comments, DERA staff analyzed the regulatory requirements most frequently identified by commenters for illustrative purposes.

This memorandum sets out the methods by which DERA staff performed its analysis and the results thereof.  The Commission has expressed no view regarding our choice of specific risk-based adjustments to analyze, or our analysis or its results.

Click on the "Memorandum" link under "Related Materials" to view the full memo.