4132. Early warning designation, levels and tests

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    1. A Dealer Member is designated as being in early warning level 1 or level 2 if at any time it has violated any one of the following tests:
    2. Early warning tests

      Early warning
      level 1

      Early warning
      level 2

      Liquidity test

      Dealer Member’s early warning reserve is less than zero.

      Dealer Member’s early warning excess is less than zero.

      Capital test

      Dealer Member’s risk adjusted capital is less than five per cent of its total margin required.

      Dealer Member’s risk adjusted capital is less than two per cent of its total margin required.

      Profitability test #1

      Dealer Member’s current month risk adjusted capital is less than six times but greater than or equal to three times the absolute value of its average monthly loss, if any, for the six‑month period ending with the current month,

      and

      Dealer Member’s preceding month risk adjusted capital is less than six times the absolute value of its average monthly loss, if any, for the six‑month period ending with the preceding month.

      Dealer Member’s current month risk adjusted capital is less than three times the absolute value of its average monthly loss, if any, for the six‑month period ending with the current month,

      and

      Dealer Member’s preceding month risk adjusted capital is less than six times the absolute value of its average monthly loss, if any, for the six‑month period ending with the preceding month.

      Profitability test #2

      Dealer Member’s current month risk adjusted capital is less than six times the absolute value of its loss, if any, for the current month.

      Dealer Member’s current month risk adjusted capital is less than three times the absolute value of its loss, if any, for the current month.

      Profitability test #3

      Not applicable

      Dealer Member’s current month risk adjusted capital is less than the absolute value of its loss, if any, for the three month period ending with the current month.

      Frequency

      Not applicable

      Dealer Member has been designated as being in any early warning, excluding discretionary early warnings, three or more times in the preceding six months, or

      Dealer Member has failed an early warning level 1 profitability test and at the same time has also failed either an early warning level 1 liquidity or capital test.

    There is no history log for this rule.

    There is no history log for this rule.