Municipal Bonds | Good Grade Guarantee!
Municipal Bonds – Municipal bonds are haircut per Exhibit 1 based on both their time to maturity and scheduled maturity at date of issue. The bond details can be found on the Bonds & Ratings Information tab in the spreadsheet.
Corporate Bonds – Corporate bonds are haircut based on both their time to maturity and whether they are rated as investment grade (defined by S&P and Fitch as BBB- and above and by Moody’s as Baa3 and above) by at least two of the nationally recognized statistical rating organizations. If the bonds qualify as investment grade, use Exhibit 2 to determine the haircut of the bonds. If they do not qualify as investment grade, then they are considered non-marketable and follow the haircut rules as stated in Exhibit 3.
It is important to note that the haircut is calculated using the absolute value of the market value of the relevant bond.
Question: What is the total haircut in USD on the positions in the accompanying spreadsheet as of 2017-12-31?
 In Exhibit 2, the text references “one of the four highest ratings categories”. The four highest ratings categories for S&P and Fitch are AAA, AA, A, and BBB. The four highest ratings categories for Moody’s are Aaa, Aa, A, and Baa. The plus/minus signs and numbers next to the ratings are used for increased specificity within the ratings categories.
Position Symbol Currency Quantity Price (USD) Market Value (USD)073902PP7 Corp USD 185,000 0.99 182,225.0038144LAB6 Corp USD 465,000 1.04 481,275.00605360QF6 Muni USD 1,500,000 1.00 1,500,000.00794458CM9 Muni USD 915,000 1.00 915,000.00929903CF7 Corp USD 543,000 1.04 564,720.00007903AS6 Corp USD (1,500,000) 1.04 (1,552,500.00)Bond & Ratings InformationSymbol Maturity Moody’s S&P Fitch Issue Size929903CF7 Corp 9/15/2019 Aa3 AA- AA- $ 800,000,000073902PP7 Corp 2/1/2020 Baa3 BB+ BBB- $ 2,500,000,00038144LAB6 Corp 9/1/2022 Aa3 AA- AA- $ 3,350,000,000794458CM9 Muni 8/15/2026 A1 A+ A+ $ 34,500,000605360QF6 Muni 8/15/2041 A1 A+ A $ 120,000,000007903AS6 Corp 8/1/2025 Ba2 BB+ BBB- $ 90,000,000Ratings scaleS&P Moody’s FitchAAA Aaa AAAAA+ Aa1 AA+AA Aa2 AAAA- Aa3 AA-A+ A1 A+A A2 AA- A3 A-BBB+ Baa1 BBB+BBB Baa2 BBBBBB- Baa3 BBB- Investment gradeBB+ Ba1 BB+ Speculative grade (“junk”)BB Ba2 BBBB- Ba3 BB-B+ B1 B+B B2 BB- B3 B-CCC+ Caa1 CCCCCC Caa2 DDDCCC- Caa3 DDCC Ca DC CDEXHIBIT #1(c)(2) Definitions: Net Capital (Continued) (vi) SECURITIES HAIRCUTS (Continued) (B) MUNICIPALS(1) In the case of any municipal security which has a scheduled maturity at date of issue of 731 days or less and which is issued at par value and pays interest at maturity, and which is not traded flat or in default as to principal or interest, the applicable percentages of the market value on the greater of the long or short position in each of the categories specified below are:(i) Less than 30 days to maturityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..0%(ii) 30 days but less than 91 days to maturityâ€¦â€¦â€¦â€¦1/8 of 1%(iii) 91 days but less than 181 days to maturityâ€¦â€¦â€¦.1/4 of 1%(iv) 181 days but less than 271 days to maturityâ€¦â€¦..3/8 of 1%(v) 271 days but less than 366 days to maturityâ€¦â€¦â€¦1/2 of 1%(vi) 366 days but less than 456 days to maturityâ€¦â€¦â€¦3/4 of 1%(vii) 456 days but less than 732 days to maturityâ€¦â€¦â€¦â€¦â€¦â€¦.. 1%
(2) In the case of any municipal security, other than those specified in paragraph (c)(2)(vi)(B)(1), which is not traded flat or in default as to principal or interest, the applicable percentages of the market value of the greatest of the long or short position in each of the categories specific below are:(i) Less than 1 year to maturityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..1%(ii) 1 year but less than 2 years to maturityâ€¦â€¦â€¦â€¦â€¦â€¦.2%(iii) 2 years but less than 3 Â½ years to maturityâ€¦â€¦â€¦â€¦..3%(iv) 3 Â½ years but less than 5 years to maturityâ€¦â€¦â€¦â€¦..4%(v) 5 years but less than 7 years to maturityâ€¦â€¦â€¦â€¦â€¦…5%(vi) 7 years but less than 10 years to maturityâ€¦â€¦â€¦â€¦.5 Â½%(vii) 10 years but less than 15 years to maturityâ€¦â€¦â€¦â€¦â€¦6%(viii) 15 years but less than 20 years to maturityâ€¦â€¦â€¦â€¦6 Â½%(ix) 20 years or more to maturityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.7%
EXHIBIT #2(c)(2) Definitions: Net Capital (Continued) (vi) SECURITIES HAIRCUTS (F) NONCONVERTIBLE DEBT SECURITIES(1) In the case of nonconvertible debt securities having a fixed interest rate and a fixed maturity date and which are not traded flat or in default as to principal or interest and which are rated in one of the four highest rating categories by at least two of the nationally recognized statistical rating organizations, the applicable percentages of the market of the greater of the long or short position in each of the categories specific below are:(i) Less than 1 year to maturityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..â€¦……2%(ii) 1 year but less than 2 years to maturityâ€¦â€¦â€¦â€¦..â€¦.3%(iii) 2 years but less than 3 years to maturityâ€¦â€¦â€¦â€¦….5%(iv) 3 years but less than 5 years to maturityâ€¦â€¦â€¦.â€¦â€¦6%(v) 5 years but less than 10 years to maturityâ€¦â€¦â€¦â€¦..7%(vi) 10 years but less than 15 years to maturityâ€¦â€¦..7 Â½%(vii) 15 years but less than 20 years to maturityâ€¦â€¦..â€¦..8%(viii) 20 years but less than 25 years to maturityâ€¦â€¦.â€¦8 Â½%(ix) 25 years or more to maturityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..9%
(2) A broker or dealer may elect to exclude from the above categories long or short positions that are hedged with short or long positions in securities issued by the United States or any agency thereof or nonconvertible debt securities having a fixed interest rate and a fixed maturity date and which are not traded flat or in default as to principal or interest and which are rated in one of the four highest rating categories by at least two of the nationally recognized statistical rating organizations if such securities have maturity dates:(i) Less than five years and within 6 months of each other,(ii) Between 5 years and 10 years and within 9 months of each other,(iii) Between 10 and 15 years and within 2 years of each other; or(iv) 15 years or more and within 10 years of each other.
EXHIBIT #3(c)(2) Definitions: Net Capital (Continued) (vii) NON-MARKETABLE SECURITIES (Continued) /09 Marketability of Money Market Instruments (Continued)Note: For purpose of this interpretation 15c3-1(c)(2)(vii)/09 only, major money markets include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United States and United Kingdom/10 Marketability of Nonconvertible Debt Securities Which Are Not Highly RatedThe SEC Division of Market Regulation will not recommend enforcement action to the Commission if broker-dealers apply the haircuts described below to nonconvertible debt securities held in their proprietary accounts which are not rated in one of the four highest rating categories by at least two NRSROs provided the following conditions are met:
The securities can be publicly sold without registration with the Commission under Section 5 of the Securities Act of 1933, and 2. Current information concerning the issuer is available to the public. Current information is deemed to be available to the public if: a. The issuer filed with the Commission public reports consisting of the most recently required periodic financial report, or b. The issuer (provided it is the subject of a bankruptcy proceeding) filed with a bankruptcy court, public information that is sufficient to value the assets and liabilities of the issuer and such information is dated not more than six months prior to the date of the brokerdealerâ€™s capital computation.The current information requirement will also be deem to be satisfied by the existence of current ratings by two NRSROs on any issuance of the issuer. A rating by an NRSRO is considered to be current if the NRSRO itself continues to hold out its rating for the issuance of the issuer. Non-investment grade nonconvertible debt securities shall be treated as follows:
The broker-dealer shall deduct from its net worth the following percentages applied to the greater of the gross long or the gross short market value of non-investment grade, nonconvertible debt securitiesâ€™ positions in each of the categories specified below:
a. An initial issuance of at least $100 millionâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..15% b. An initial issuance of at least $75 million and less than $100 millionâ€¦â€¦..20% c. An initial issuance of at least $50 million and less than $75 million..â€¦â€¦..25% d. An initial issuance of at least $20 million and less than $50 million..â€¦â€¦..50% e. An initial issuance of less than $20 million or have been held in inventory for more than 90 days as the result of the failure to complete an underwritingâ€¦â€¦â€¦â€¦100%Broker-dealers may not include the value of non-investment grade, nonconvertible debt securities, subject to the haircut percentages set forth above, in paragraph (c)(2)(vi)(J) of Rule 15c3-1 for the purpose of netting long or short securities positions under paragraph (c)(2)(vi)(J).
The broker-dealer shall take an additional portfolio concentration charge on the securities in categories (b), (c) and (d) above, to the extent the market value of the greater of the gross total long or gross total short positions in categories (b), (c) and (d) combined exceeds 25 percent of the broker-dealerâ€™s tentative net capital. The portfolio concentration charge shall be 50 percent of the haircuts otherwise taken on that portion of the total market value of the securities in categories (b), (c) and (d) in excess of 25 percent of tentative net capital. This portfolio concentration charge may be reduced by any undue concentration charge computed in accordance with paragraph (c)(2)(vi)(M) of Rule 15c3-1.Securities with an initial issuance of less than $20 million will be deemed to be included in category (d) above if the issuer has another outstanding issue of non-investment grade, nonconvertible debt securities, which has an initial issuance of $50 million or more.
Attached File: df
QUALITY: 100% ORIGINAL – NO PLAGIARISM.
- **REMEMBER TO PRECISE PAGE NUMBER**
- Hit The Order Button To Order A **Custom Paper**