DIVISA UK LIMITED PILLAR 3 DISCLOSURES
As at 31st March 2016
TABLE OF CONTENTS:
1. Overview
2. Risk Management framework
3. Capital Resources
4. Business Risks
5. Capital Adequacy
6. Capital Management
7. Remuneration
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]
1. Overview
1.1 Introduction
The disclosures contained herein are made in order to comply with Financial Conduct Authority (FCA) rules
aimed at implementation of the Basel III regulations which were written into EU Law in the form of
regulations commonly known as CRD IV, which came into force on 1 January 2014. These rules make changes
to the definition of capital resources and include additional capital requirements. These regulations have no
material impact on Divisa UK Limited’s (‘Divisa UK’) capital position.
The directive consists of 3 distinct “Pillars”:
Pillar 1: Minimum capital requirements
Pillar 2: Supervisory review
Pillar 3: Market discipline.
The aim of Pillar 3 is to encourage market discipline by developing a set of disclosure requirements which will
allow market participants to assess key pieces of information on a firm's capital, risk exposures and risk
assessment processes. The relevant rules for implementation of Pillar 3 are contained in the FCA’s sourcebook
BIPRU 11, and this document contains the disclosures required under these rules unless it is not applicable to
Divisa UK Limited or it is considered as being proprietary or confidential information.
1.2 Frequency of disclosure
The disclosures are required to be made on an annual basis at a minimum and, if appropriate, some
disclosures will be made more frequently. Divisa UK has an Accounting Reference Date of 31 March. These
disclosures are made as at 31 March 2016.
1.3 Location and verification of disclosure
The disclosures made here have been reviewed by the Board and will be available on our website
(www.divisa.co.uk). These are not subject to external audit and have been compiled
to explain the basis of preparation and provide disclosure of certain capital requirements and information
about the management of certain risks and for no other purposes.
1.4 Scope of Application
Divisa UK offers an execution only trading service to clients wishing to invest in forex and CFDs. The disclosures made
here relate to the business and activities of Divisa UK only.
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]
2. Risk Management framework
2.1 Corporate governance framework
The Board of Directors are ultimately responsible for the monitoring of financial risk management. The Board
incorporates risk discussions which forms part of the regular agenda on the firm’s board meeting and focuses
on current market conditions, client acquisition and transaction activity, current risk management and limits
(i.e. those fixed into the trading platform) as part on Divisa’s ongoing risk review.
The main objective of Divisa UK’s risk management framework is to monitor and control the various risk
scenarios described under section 4 of this document.
3. Capital Resources
Divisa UK’s Capital Resources consist of Tier 1 Capital. Divisa UK does not have any tier 2 or Tier 3 capital resources.
Tier 1 capital comprises of Equity Share Capital and audited reserves.
Divisa UK’s capital resources at 31 March 2016 reflect the audited accounts as at 31 March 2016 and comprise the
following:
£’000
Tier 1 Capital resources
Permanent Share Capital
Retained Earnings
Total Tier 1 Capital before deductions
Deductions from Total Capital
Total Capital after deduction (CR)
Total Pillar 1 Capital Resources
Requirement*
Surplus CR of CRR
% CR to CRR
792
453
1,245
(243)
1,002
236
766
425%
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]
£’000
*Total Pillar 1 Capital Resources
Requirement
Credit Risk Capital Requirement
Market Risk Requirement
Total Credit and Market Risk Requirement
155
43
198
Fixed Overhead Requirement
236
Base Capital Requirement (€125k)
99
CRR = higher of C&MRR, FOR and BCR
236
As the company is a Limited License firm its Pillar 1 capital requirement (as specified under CRR
Article 95), is the greater of:
1) Its base capital requirement (€125,000)
2) Sum of Credit Risk and Market Risk Capital requirements, or
3) Fixed Overhead Requirement.
The fixed overhead capital requirement is based on one quarter of the Firm’s relevant fixed
expenditure as per its most recent audited annual report and accounts.
4. Business Risks
The main objective of Divisa UK’s Risk Management framework is to monitor and control the following risk
scenarios:
4.1 Market Risk
Divisa UK acts as agent or matched principle on all trades so that market risks are assumed by the firm’s
counterparties. No market risk should therefore be outstanding overnight.
Due to the nature of the business the Company is exposed to currency risk caused by receivables and payables
denominated in currencies other than GBP. Currency risk is managed on a daily basis to ensure that there are
sufficient assets to cover liabilities in those particular currencies as and when they fall due.
4.2 Operational Risk
This is the risk of loss arising from inadequate or failed internal processes, people and systems or from
external events.
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]
Business continuity, fraud (internal and external), dealing errors, administrative errors, Information
Technology failure and regulatory action have been identified as the key elements of operational risk to which
Divisa UK is exposed. Not all of these risks can be effectively eliminated; however the Board believes that
these risks are adequately controlled by key personnel and a rigorous control framework.
Divisa UK has adopted the standardised approach to Operational Risk.
4.3 Credit Risk
Divisa UK has elected to adopt the standardised approach for credit risk to calculate the minimum credit risk
capital requirement under Pillar 1 of the Capital Requirements Directive. Under the standardised approach
firms must calculate the minimum credit risk capital requirement as 8% of the total risk weighted exposures.
Credit Risk arises from the risk of default on the part of a single client or counterparty. Divisa UK limited
mitigates the probability of client default by limiting client activity to those clients of good standing with fully
funded accounts. Clients may only trade with the availability of credited, free funds sitting on their Divisa UK
account. It is feasible that clients may go into deficit in a fast moving market or for various other reasons. In
order to further mitigate this risk, Divisa UK has systems in place to electronically monitor exposure and staff
to further protect both the client and Divisa UK from an account going overdrawn.
Divisa UK will make available various currency pairs in its product offering, however, all of them will be
offered only on a Straight Through Processing (STP) settlement basis. By limiting client business to STP
settlement, Divisa UK will avoid all direct market exposure risk. Further, by settling products on an STP basis
directly through to counterparties, Divisa UK is able to operate with minimal dealing staff and very limited
manual intervention.
To mitigate concentration risk, the Back Office software was configured for STPing of all products regardless
of: Open order limits;
 Size of order;
 Product (or product code);
 Time of day (market times); and
 Individual client (or branch of clients).
To mitigate counterparty risk, Divisa UK uses multiple counterparties from top tier banks to brokers around
the world to assist with Divisa UK maintaining its matched-principle basis.
Divisa UK obtains credit ratings of counterparties from reputable third party agencies.
4.4 Liquidity Risk
Liquidity risk is the risk that Divisa UK will encounter difficulties in meeting obligations of financial liabilities
as and when they arise.
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]
It is management’s policy to ensure that the Company will always have sufficient liquidity to meet its financial
obligations as and when they fall due.
The liquidity position is monitored on a daily basis, with management information provided to the Board of
Directors on a weekly basis.
5. Capital Adequacy
The Company’s capital management objectives are:
• To ensure the Company’s ability to continue as a going concern, and
• To meet regulatory capital requirements at all times.
These objectives are primarily met by managing the numerous risks that the Company faces on a regular basis.
The Company is regulated by the Financial Conduct Authority (FCA), and is required to adhere to a minimum
capital requirement. Capital is represented by issued share capital and audited reserves. The capital
requirements are derived from credit risk, operational risk, market risk and counterparty risk.
5.1 Internal Capital Adequacy Assessment Process (“ICAAP”)
Divisa UK performs an internal capital adequacy assessment annually or more often if required. The internal
document covers all of the risks to which the Company is exposed and is approved by the Board.
6. Capital Management
The company believes its capital to be represented by issued share capital as reflected in the financial
statements. The Company has a pro-active approach to managing its capital with the Directors monitoring
financial resources on a regular basis.
7. Remuneration
Divisa UK’s remuneration governance is operated through regular meetings between the Board of Directors.
Divisa UK’s remuneration policy promotes staff retention and loyalty and all variable remuneration paid
rewards excellence based upon individual and team success with long term company profitability
underpinning all variable remuneration schemes in operation.
Remuneration of all employees whose professional activities have a material impact on the firm’s risk profile
(known as “Code staff”) for the year ended 31 March 2016 Divisa identified the following as Code staff and the
disclosure of the aggregate remuneration of the Code Staff is as follows:
Executive Directors
Total fixed £
Total Variable £
522,974
0
Number of beneficiaries
(as at 31st March 2016)
5
Divisa Capital is a registered trade mark of Divisa UK Ltd.
UK: +44.203.318.4573 | AM: +374.10.580972| NZ: +64.9.909.7875 | Email: [email protected]