5360. Index participation units and qualifying baskets of index securities

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    1. The minimum Dealer Member inventory margin and client account margin requirements for index participation units and qualifying baskets of index securities are as follows:

      Minimum margin required

      Category (i)

      Index participation units

      Category (ii)

      Qualifying basket of index securities

      1. The floating margin rate percentage (calculated for index participation unit based on its regulatory margin interval),
      2. multiplied by
      3. The market value of index participation units.
      1. The sum of:
        1. the floating margin rate percentage (calculated for a perfect basket of index securities based on its regulatory margin interval),
        2. and
        3. The calculated incremental basket margin rate for the qualifying basket of index securities,
      2. multiplied by
      3. The market value of qualifying basket of index securities.
    2. IIROC calculates a regulatory margin interval according to the following formula:

      Maximum standard deviation of percentage changes in daily closing prices over the most recent 20, 90, 260 trading days

         x

      3 (for a 99% confidence interval)

      x

      Square root of 2 (for 2 days price risk coverage)

      rounded up to the next ¼%.

    3. To calculate the floating margin rate for an index participation unit or a perfect basket of index securities:

      1. IIROC uses the last calculated regulatory margin interval, which is effective for the regular reset period unless a violation occurs,

      2. in normal circumstances, the floating margin rate is reset on the regular reset date to the regulatory margin interval calculated as at the regular reset date,

      3. if a violation occurs, the floating margin rate is reset on the date the violation occurs to the regulatory margin interval determined as at the date of the violation, and

      4. the regulatory margin interval determined in clause 5360(3)(iii) must be effective for a minimum of 20 trading days and reset at the close of the 20th trading day to the regulatory margin interval determined as at that date if a reset results in a lower margin rate.

    4. A basket of equity securities is a qualifying basket of index securities if:

      1. all of the securities in the basket are included in the composition of the same index,

      2. the basket comprises a portfolio with a market value equal to the market value of the underlying securities in the index,

      3. the market value of each equity security comprising the portfolio proportionally equals or exceeds the market value of its relative weight in the index, based on the latest published relative weights of securities comprising the index, and

      4. the required cumulative relative weight percentage of all equity securities comprising the portfolio:

        1. equals 100% of the cumulative weighting of the corresponding index, if the basket of equity securities underlying the index is comprised of less than 20 securities,

        2. equals or exceeds 90% of the cumulative weighting of the corresponding index, if the basket of equity securities underlying the index is comprised of 20 or more securities but less than 100 securities, and

        3. equals or exceeds 80% of the cumulative weighting of the corresponding index, if the basket of equity securities underlying the index is comprised of 100 or more securities,

      5. based on the latest published relative weightings of the equity securities comprising the index.

      6. If the cumulative relative weighting of all equity securities in the basket equals or exceeds the required cumulative relative weight percentage and is less than 100% of the cumulative weighting of the corresponding index, the deficiency in the basket must be filled by other equity securities included in the composition of the index.

    5. The cumulative relative weight percentage is determined:

      1. by calculating for each security in a qualifying basket of index securities:

        1. its actual basket weighting, and

        2. its latest published relative weighting in the index,

      2. and then,

      3. by summing the lesser of the two weighting percentages calculated for each security in sub-clauses 5360(5)(i)(a) and 5360(5)(i)(b) for all of the securities in the qualifying basket of index securities.

    6. The incremental basket margin rate for a qualifying basket of index securities is calculated as the sum:

      Market value of each underweighted security in basket

      x

      Margin rate for that security

      x

      The % by which the security is underweighted (calculated according to the formula: published relative weighting of the security - actual basket weighting of the security)

      for each underweighted security in the basket.

    5361. - 5369.  Reserved.

    There is no history log for this rule.

    There is no history log for this rule.