AIF participation in credit default swaps permitted with hedging, leverage, earmarking and reporting safeguards under regulatory rules. AIFs may transact in credit default swaps under specified conditions: Category I and II may buy CDS only for hedging while Category III may buy for hedging or other purposes within leverage limits. Category II and III may sell CDS by earmarking unencumbered government securities equal to exposure; such earmarked securities may meet margin requirements and are not treated as leverage. Total investee exposure including CDS must comply with concentration norms. AIFs must report CDS trades to custodians promptly, custodians must monitor compliance, and breach and rectification protocols apply; transactions must occur on regulated trading platforms and comply with central bank credit derivatives directions.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
AIF participation in credit default swaps permitted with hedging, leverage, earmarking and reporting safeguards under regulatory rules.
AIFs may transact in credit default swaps under specified conditions: Category I and II may buy CDS only for hedging while Category III may buy for hedging or other purposes within leverage limits. Category II and III may sell CDS by earmarking unencumbered government securities equal to exposure; such earmarked securities may meet margin requirements and are not treated as leverage. Total investee exposure including CDS must comply with concentration norms. AIFs must report CDS trades to custodians promptly, custodians must monitor compliance, and breach and rectification protocols apply; transactions must occur on regulated trading platforms and comply with central bank credit derivatives directions.
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