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Novarum Global Trading GmbH was specifically structured to eliminate, to the fullest extent possible, any credit risk between itself and its APPROVED COUNTERPARTIES. Based upon the credit risk mitigation summarized below, Novarum Global Trading GmbH expects to receive an independent Counterparty Credit Rating from Standard and Poor's.
- All APPROVED TRADING INSTRUMENTS executed by Novarum Global Trading GmbH are governed under an ISDA Credit Support Annex ("CSA") requiring both Novarum Global Trading GmbH and its APPROVED COUNTERPARTIES post daily cash collateral equal to the current replacement cost of all outstanding contracts.
- The potential future replacement cost of APPROVED TRADING INSTRUMENTS, over and above their current replacement cost, is determined by Novarum Global Trading GmbH at the close of each business day using a proprietary VaR Model (referred to in the OG as the "CAPITAL ADEQUACY TEST"). Novarum Global Trading GmbH is required under the OG to maintain an amount of AVAILABLE CAPITAL, over and above any collateral paid to APPROVED COUNTERPARTIES, sufficient to fully collateralize any potential future replacement cost up to a confidence factor commensurate with its Counterparty Credit Rating.
- Under the CSA, APPROVED COUNTERPARTIES are granted an exclusive first priority floating security interest over Novarum Global Trading GmbH's AVAILABLE CAPITAL. AVAILABLE CAPITAL is comprised of all financial assets held in the form of ELIGIBLE INVESTMENTS.
AVAILABLE CAPITAL is comprised of Members’ capital contribution, capital raised through borrowings, reserves withheld and retained earnings.
- Novarum Global Trading GmbH is required to fully comply with the terms of the OG. Failure to do so, will result in the automatic early termination of all outstanding APPROVED TRADING INSTRUMENTS at their current replacement cost and the immediate dissolution of Novarum Global Trading GmbH.
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