Title 12
SECTION 703.102
703.102 Permissible derivatives.
§ 703.102 Permissible derivatives.(a) Products and characteristics. A Federal credit union with derivatives authority may apply to use each of the following products and characteristics, subject to the limits in § 703.103 of this subpart:
(1) Interest rate swaps with the following characteristics:
(i) Settle within three business days, unless the Federal credit union is approved for a forward start date of no more than 90 days from the trade date; and
(ii) Do not have fluctuating notional amounts, unless the Federal credit union is approved to use derivatives with amortizing notional amounts.
(2) Basis swaps with the following characteristics:
(i) Settle within three business days, unless the Federal credit union is approved for a forward start date of no more than 90 days from the trade date; and
(ii) Do not have fluctuating notional amounts, unless the Federal credit union is approved to use derivatives with amortizing notional amounts.
(3) Purchased interest rate caps with no fluctuating notional amounts, unless the Federal credit union is approved to use derivatives with amortizing notional amounts.
(4) Purchased interest rate floors with no fluctuating notional amounts, unless the Federal credit union is approved to use derivatives with amortizing notional amounts.
(5) U.S. Treasury note futures (2-, 3-, 5-, and 10-year contracts).
(b) Overall program characteristics. A Federal credit union may only enter into derivatives, as identified and described in paragraph (a) of this section, that have the following characteristics:
(1) Not leveraged;
(2) Based on domestic rates, as defined in § 703.14(a) of subpart A of this part;
(3) Denominated in U.S. dollars;
(4) Except as provided in § 703.14(g) of subpart A of this part, not used to create structured liability offerings for members or nonmembers;
(5) Have contract maturity terms of equal to or less than 15 years, at the trade date; and
(6) Meet the definition of a derivative under GAAP.