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Recital 6

Recital 6

(6)A high frequency of switching between the use of K-NPR and K-CMG is a strong indicator of potential disproportionate or unsound use of own funds requirements. It is possible to prevent regulatory arbitrage by constraining the frequency of switching positions between the use of K-NPR and K-CMG. A requirement to make continuous use of one of the two methods for a trading desk for at least 2 years would be proportionate to address the risk of regulatory arbitrage. However, in exceptional cases (e.g. a business restructuring) where a trading desk changes to such an extent that it can be considered as a different trading desk, the competent authority should allow an investment firm to change methods within that 2-year period.

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