Derivative: Difference between revisions

From The Jolly Contrarian
Jump to navigation Jump to search
No edit summary
No edit summary
Line 1: Line 1:
{{anat|isda|{{subtable|'''[[Financial instrument - FCA Rulebook Term|Financial Instruments]]'''
{{def|Derivative|/dɪˈrɪvətɪv/|n|{{subtable|{{financial instruments}}}}
 
(1) [[Transferable securities]]; <br>
(2) [[Money-market instrument]]s; <br>
(3) [[Units in collective investment undertakings]] ({{tag|UCITS}});  <br>
(4) [[Option]]s, [[future]]s, [[swap]]s, [[forward rate agreement]]s and any other [[derivative contract]]s relating to securities, currencies, interest rates or yields, or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash;  <br>
(5) [[Option]]s, [[future]]s, [[swap]]s, [[forward rate agreement]]s and any other [[derivative contract]]s relating to [[commodities]] that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event); <br>
(6) [[Option]]s, [[future]]s, [[swap]]s and any other [[derivative contract]] relating to [[commodities]] that can be physically settled provided that they are traded on a regulated market and/or an MTF; <br>
(7) [[Option]]s, [[future]]s, [[swap]]s, [[forward]]s and any other [[derivative contract]]s  relating to [[commodities]], that can be physically settled not otherwise mentioned in C.6 and not being for commercial purposes, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are cleared and settled through recognised clearing houses or are subject to regular margin calls;
(8) [[credit derivatives|Derivative instruments for the transfer of credit risk]]; <br>
(9) Financial [[contract for differences|contracts for differences]]; <br>
(10) Options, futures, swaps, forward rate agreements and any other derivative contracts relating to climatic variables, freight rates, emission allowances or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties (otherwise than by reason of a default or other termination event), as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market or an MTF, are cleared and settled through recognised clearing houses or are subject to regular margin calls. <br>}}}}
A [[financial instrument]], feared in Nebraska as some kind of [[Financial weapons of mass destruction|WMD]], in the cradle of the Levant as a sort of Godless gambling contract, amongst commodity producers of the Midwest (other than that one fellow in Omaha) as a legitimate [[hedging]] activity, and for legions of patient [[negotiator|negotiators]] in London, New York, Hong Kong and the thriving satellite constellation of low-cost jurisdictions from Bangalore to Nashville, a steady, dreary, unglamorous means of keeping home fires stoked and food upon the table.
A [[financial instrument]], feared in Nebraska as some kind of [[Financial weapons of mass destruction|WMD]], in the cradle of the Levant as a sort of Godless gambling contract, amongst commodity producers of the Midwest (other than that one fellow in Omaha) as a legitimate [[hedging]] activity, and for legions of patient [[negotiator|negotiators]] in London, New York, Hong Kong and the thriving satellite constellation of low-cost jurisdictions from Bangalore to Nashville, a steady, dreary, unglamorous means of keeping home fires stoked and food upon the table.



Revision as of 15:47, 12 December 2020

{{def|Derivative|/dɪˈrɪvətɪv/|n|

Financial instruments

(1) Transferable securities;

(2) Money-market instruments;

(3) Units in collective investment undertakings;

(4) options, futures, swaps, forwards and any other derivative contracts relating to securities, currencies, interest rates or yields, emission allowances or other derivatives instruments, financial indices or financial measures which may be settled physically or in cash;

(5) options, futures, swaps, forwards and any other derivative contracts relating to commodities that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event;

(6) options, futures, swaps, forwards and any other derivative contracts relating to commodities that can be physically settled provided that they are traded on a regulated market, a MTF, or an OTF, except for wholesale energy products traded on an OTF that must be physically settled;

(7) options, futures, swaps, forwards and any other derivative contracts relating to commodities, that can be physically settled not otherwise mentioned in point 6 of this Section and not being for commercial purposes, which have the characteristics of other derivative financial instruments;

(8) Derivative instruments for the transfer of credit risk;

(9) Financial contracts for differences;

(10) options, futures, swaps, forwards and any other derivative contracts relating to climatic variables, freight rates or inflation rates or other official economic statistics that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event, as well as any other derivative contracts relating to assets, rights, obligations, indices and measures not otherwise mentioned in this Section, which have the characteristics of other derivative financial instruments, having regard to whether, inter alia, they are traded on a regulated market, OTF, or an MTF;

(11) Emission allowances consisting of any units recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme).

A financial instrument, feared in Nebraska as some kind of WMD, in the cradle of the Levant as a sort of Godless gambling contract, amongst commodity producers of the Midwest (other than that one fellow in Omaha) as a legitimate hedging activity, and for legions of patient negotiators in London, New York, Hong Kong and the thriving satellite constellation of low-cost jurisdictions from Bangalore to Nashville, a steady, dreary, unglamorous means of keeping home fires stoked and food upon the table.

Could be a swap[1], an option or a future

Not, and especially now in light of the fabulous parallel regulation of the Securities Financing Transactions Regulation, a stock loan or a repo.

Warning: boring stuff below this line

Where do you start?

derivative’ or ‘derivative contract’ means a financial instrument as set out in points (4) to (10) of Section C of Annex I to 2004/39/EC (EUR Lex)[2] as implemented by Article 38 and 39 of 1287/2006 (EUR Lex);
MiFID definition of derivative comes from the latter half (items (4) - (10)) of the definition of “Financial Instruments” set out in Section C of Annex I to MiFID as follows:


See also

References

  1. Also, fondly, known as a sw-ŏp, but never a sw-æp. Swaps aren’t, and don’t rhyme with, crap.
  2. That’s MiFID and not MiFID II to its friends — even though MiFID II has updated somewhat the Section C of Annex I to include emissions certificates.