ASIC Regulatory Guide 166 AFS Licensing: Financial Requirements (Australia) rg166-app7-retail-otc-derivative-issuers: Retail over-the-counter derivative issuers hold net tangible assets of the greater of one million dollars or ten per cent of average revenue, with half in cash or cash equivalents, prepare a twelve-month projection with stress scenarios approved by directors, and report to ASIC at the seventy-five and one hundred per cent triggers

What does rg166-app7-retail-otc-derivative-issuers require?

A licensee that issues over-the-counter derivatives to retail clients must hold net tangible assets of at least the greater of one million dollars or ten per cent of its average revenue, with at least fifty per cent in cash or cash equivalents and the rest in liquid assets, calculated on the definitions in Appendix 7 (which deal with client money, hedging counterparty exposures and the treatment of open positions). It must prepare a rolling twelve-month cash flow projection that includes the effect of adverse scenarios the directors consider, approved by the directors and updated when it no longer holds, and ASIC may ask for the projections at any time. If NTA falls below one hundred per cent of the requirement the licensee must notify ASIC and provide the plan to restore it; at seventy-five per cent or below it must also stop entering into new transactions with clients other than closing positions, and it must notify ASIC again if NTA falls below seventy-five per cent, because drawing down too far on the buffer is itself a breach. The requirements, formerly in RG 239, were incorporated into RG 166 in 2012 and increased in 2013 and 2014.