1. An Authorised Person which is exposed to the risk of the underlying Securities in an OTC Derivative transaction, long settlement transaction or SFT which is in substance similar to a forward purchase or credit substitute should calculate E, for such an Exposure, in accordance with Rule 4.9.4(1).
2. Investors' interest is defined as the sum of:
a. investors' drawn balances related to the securitised Exposures; and
b. E associated with investors' undrawn balances related to the SE Exposures. E is determined by allocating the undrawn balances of securitised Exposures on a pro-rata basis based on the proportions of the Originator's and investor Shares of the securitised drawn balances.
3. For avoidance of doubt, where an Authorised Person has provided unfunded credit protection via a total rate of return swap, E should be equal to the notional amount of the underlying reference credit for which the Authorised Person is providing protection adjusted for any payments received from or made to the protection buyer and recognised in the profit and loss account of the Authorised Person. Where an Authorised Person has provided unfunded credit protection via a credit default swap, E should be equal to the notional amount of the underlying reference credit for which the Authorised Person is providing protection.
4. The notional amount of an off-balance sheet item refers to the amount which has been committed but is as yet undrawn. The amount to which the CCF is applied is the lower of the value of the unused committed credit line, and the value which reflects any possible constraining availability of the facility, such as the existence of a ceiling on the potential lending amount which is related to an obligor's reported cash flow. If the facility is constrained in this way, the Authorised Person must have sufficient line monitoring and management procedures to support this contention.
5. Any foreign exchange transaction or translation gain or loss from a foreign currency-denominated off-balance sheet item should be allocated to the Exposure to which it accrues.