New Capital Rules

1st May 2020

No more BIPRU50K and IFPRU125K for matched principal dealers! All hold €750K under the new capital rules

The new prudential rules for investment firms ‘IFD/IFR’ is effectively putting an end to the matched principal exemption currently awarded and made use by several broker/dealers to drop their initial capital requirement (ICR) to either €50K (not holding client money or assets) or €125K (holding client money or assets) that otherwise would have been €730K.

Matched principal trading will be considered as 'dealing as principal' for prudential purposes under the IFD/IFR and be treated no different to current full scope IFPRU730K firms. The new rules bring in several new k-factor variable capital requirements and our internal models suggest that matched principal traders will see a significant rise in these requirements due to the detailed provisions contained in the IFR on calculation of K-TCD counterparty default and K-CON concentration risk requirements.

The new rules are set to go live in the EU 26th June 2021 onwards! See our two-page summary on the salient points from the recent FCA discussions as applicable to matched principal dealers. Our consultants have extensive experience working with matched principal dealers trading on both cash and derivative asset classes. We recommend taking early action to assess your likely capital impact stemming form the IFD/IFR. Transitional provisions to meet the new rules are available. We are here to help!

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