Requirement (MIFID)
Article 38 Characteristics of other derivative financial instruments
Requirements MIFID - REGULATION (EC) No 1287/2006
Description
Description
1. For the purposes of Section C(7) of Annex I to Directive
2004/39/EC, a contract which is not a spot contract within the
meaning of paragraph 2 of this Article and which is not covered
by paragraph 4 shall be considered as having the characteristics
of other derivative financial instruments and not being for
commercial purposes if it satisfies the following conditions:
(a) it meets one of the following sets of criteria:
(i) it is traded on a third country trading facility that
performs a similar function to a regulated market or
an MTF;
(ii) it is expressly stated to be traded on, or is subject to
the rules of, a regulated market, an MTF or such a
third country trading facility;
(iii) it is expressly stated to be equivalent to a contract
traded on a regulated market, MTF or such a third
country trading facility;
(b) it is cleared by a clearing house or other entity carrying out
the same functions as a central counterparty, or there are
arrangements for the payment or provision of margin in
relation to the contract;
(c) it is standardised so that, in particular, the price, the lot, the
delivery date or other terms are determined principally by
reference to regularly published prices, standard lots or
standard delivery dates.
2. A spot contract for the purposes of paragraph 1 means a
contract for the sale of a commodity, asset or right, under the
terms of which delivery is scheduled to be made within the
longer of the following periods:
(a) two trading days;
(b) the period generally accepted in the market for that
commodity, asset or right as the standard delivery period.
However, a contract is not a spot contract if, irrespective of its
explicit terms, there is an understanding between the parties to
the contract that delivery of the underlying is to be postponed
and not to be performed within the period mentioned in the first
subparagraph.
3. For the purposes of Section C(10) of Annex I to Directive
2004/39/EC, a derivative contract relating to an underlying
referred to in that Section or in Article 39 shall be considered to
have the characteristics of other derivative financial instruments
if one of the following conditions is satisfied:
(a) that contract is settled in cash or may be settled in cash at
the option of one or more of the parties, otherwise than by
reason of a default or other termination event;
(b) that contract is traded on a regulated market or an MTF;
(c) the conditions laid down in paragraph 1 are satisfied in
relation to that contract.
4. A contract shall be considered to be for commercial
purposes for the purposes of Section C(7) of Annex I to
Directive 2004/39/EC, and as not having the characteristics of
other derivative financial instruments for the purposes of
Sections C(7) and (10) of that Annex, if it is entered into with
or by an operator or administrator of an energy transmission
grid, energy balancing mechanism or pipeline network, and it is
necessary to keep in balance the supplies and uses of energy at a
given time.
Comment
Applies to Article 4(1)(2) of Directive 2004/39/EC