Ordinance of the Swiss Financial Market Supervisory Authority on Collective Investment Schemes

¹Counter po­s­i­tions in de­riv­at­ives based on the same un­der­ly­ing as well as counter po­s­i­tions in de­riv­at­ives and in in­vest­ments in the same un­der­ly­ing may be net­ted, ir­re­spect­ive of the ma­tur­ity date of the de­riv­at­ives, provided that:

a.

the de­riv­at­ive trans­ac­tion was con­cluded with the sole pur­pose of elim­in­at­ing the risks as­so­ci­ated with the de­riv­at­ives or in­vest­ments ac­quired;

b.

no ma­ter­i­al risks are dis­reg­arded in the pro­cess; and

c.

the con­ver­sion amount of the de­riv­at­ives is de­term­ined pur­su­ant to Art­icle 35.

²If the de­riv­at­ives in hedging trans­ac­tions do not re­late to the same un­der­ly­ing as the as­set that is to be hedged, the fol­low­ing ad­di­tion­al con­di­tions must be met for net­ting:

a.

The de­riv­at­ive trans­ac­tion is not based on an in­vest­ment strategy that serves to gen­er­ate a profit.

b.

The de­riv­at­ive res­ults in a demon­strable re­duc­tion in the risk of the se­cur­it­ies fund.

c.

The gen­er­al and spe­cial risks of the de­riv­at­ive are bal­anced out.

d.

The de­riv­at­ives, un­der­ly­ings or as­sets that are to be net­ted re­late to the same class of fin­an­cial in­stru­ments.

e.

The hedging strategy re­mains ef­fect­ive even un­der ex­cep­tion­al mar­ket con­di­tions.

³Where in­terest rate de­riv­at­ives are pre­dom­in­antly used, the amount to be in­cluded in the over­all ex­pos­ure arising from de­riv­at­ives can be de­term­ined us­ing in­ter­na­tion­ally re­cog­nised dur­a­tion-net­ting rules provided that:

a.

the rules res­ult in a cor­rect de­term­in­a­tion of the risk pro­file of the se­cur­it­ies fund;

b.

the ma­ter­i­al risks are taken in­to ac­count;

c.

the use of these rules does not gen­er­ate an un­jus­ti­fied level of lever­age;

d.

no in­terest rate ar­bit­rage strategies are pur­sued; and

e.

the lever­age of the se­cur­it­ies fund is not in­creased either by ap­ply­ing these rules or through in­vest­ments in short-term po­s­i­tions.

⁴Not­with­stand­ing para­graph 2, de­riv­at­ives that are used solely for cur­rency hedging pur­poses and do not res­ult in lever­age or con­tain ad­di­tion­al mar­ket risks may be net­ted when cal­cu­lat­ing the over­all ex­pos­ure arising from de­riv­at­ives.