As a registered swap dealer, MUFG Securities EMEA PLC (“MUSE”) is subject to regulation by the U.S. Commodity Futures Trading Commission (“CFTC”). CFTC Rule 23.431(a)(3)(i) requires MUSE to disclose, along with the price of the swap, a pre-trade mid-market mark (or “PTMMM”) to its U.S. Swap counterparties at a reasonably sufficient time prior to entering into a swap transaction.
Manner of Disclosure
MUSE will disclose a PTMMM to you either (i) in writing (including by email, electronic chat, or other means of written electronic communication) or (ii) orally, including over a recorded line, followed by written confirmation of the disclosed PTMMM. Oral disclosure of a PTMMM will only be provided where you have consented in writing to receive oral disclosure followed by written confirmation. MUSE requests and you can provide such consent by completing the ISDA August 2012 DF Protocol Questionnaire (including through IHS Markit/ISDA Amend). If you have any questions regarding this consent, please reach out to your MUSE relationship contact.
In certain cases, the PTMMM will be provided to you by or through the electronic platform on which you may execute your swap transactions.
Waiver of PTMMM Disclosure Requirement
In addition, pursuant to certain no-action relief issued by the CFTC (including but not limited to CFTC No-Action Letters 12-42, 12-58, and 24-02), MUSE will not provide a PTMMM for certain covered FX, interest rate, and CDS transactions provided you have consented in writing in advance that MUSE need not disclose a PTMMM for such transactions. MUSE requests and you can provide such consent by completing Addendum II to the ISDA August 2012 DF Protocol Questionnaire (including through IHS Markit/ISDA Amend). If you have any questions regarding this consent, please reach out to your MUSE relationship contact.
General Information on PTMMM Methodologies and Assumptions
PTMMMs are based on MUSE's internal methodologies and models using a range of factors, assumptions, and information generally available to the public which MUSE reasonably believes to be reliable. Such factors include the material terms of the proposed swap and may also include the material terms of any other agreement between us concerning such swap including, but not limited to, any ISDA relationship agreement.
The PTMMMs for standardised swaps are generated using models that employ simple cash flow-based methodologies, with cash flows discounted by reference to market standard reference rates. The PTMMMs for more complex swaps, including swaps with embedded features such as caps, collars, floors, knock-ins and knock-outs, are produced by models that may utilize other methodologies determined in MUSE's sole discretion, including without limitation probabilistic models, Monte Carlo simulations, Black-Scholes based models, or other mathematical pricing models. Models employed to produce PTMMMs use inputs that include, but are not limited to, assumptions relating to interest rates, volatility, correlation and other assumptions relating to market conditions. The assumptions underlying the information may be modified from time to time to reflect changes in circumstances or the markets. The PTMMM we provide is by necessity produced during the trading day during which markets and market information move quickly. No representation is made to the reasonableness of any assumptions or the accuracy or completeness of any models or publicly available information and nothing contained herein should be relied on as such.
Where MUSE provides you a two-way price (i.e., a bid and ask) with respect to a swap transaction, the PTMMM, unless otherwise indicated, is the midpoint between the bid and offer, or the calculated equivalent thereof at the time the two-way price is delivered.
Pursuant to CFTC Rule 23.431(a)(3) and 23.431(d), a PTMMM we provide shall not include amounts for profit, credit reserve, hedging, funding, liquidity, or any other costs or adjustments. Thus, (a) the PTMMM may not necessarily be, and often will not be, a price at which we would agree to enter into, replace or terminate the swap; (b) it may not necessarily represent the value assigned to the relevant swap for the purpose of computing margin calls; and (c) the PTMMM may not necessarily be the value of the relevant swap that is marked on MUSE's books and records. Moreover, any PTMMM we provide to you is time-sensitive and only current as of the time at which it is provided to you. Accordingly, the PTMMM you receive for a swap transaction may change with the passage of time even if the price at which we would agree to enter into or terminate such swap has not changed over the same period of time.
MUSE makes no representations or warranties that any such PTMMM are suitable for your accounting or investment purposes, complying with any financial or tax reporting obligation, determining net asset value, computing any tax liability or any other purpose, matters which you should discuss with your own financial, legal, tax, accounting and other professional advisors. MUSE reserves all of its rights and disclaims any and all liability for any such use or reliance on any PTMMM provided to you and whether losses or damages are direct, indirect, incidental, consequential or otherwise.