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Financial instrument: Difference between revisions
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In any case, but for that odd exception for wholesale gas and power traded on an OTF — which is a ''non''-non-discretionary venue not qualifying as a [[regulated market]] or an [[MTF]], so chapeau for the multi-dimensional negative there and note this is a very limited carve-out pertaining to wholesale participants in the gas and power industry — [[Exchange-traded products|exchange-traded]] commodity futures and options ''are'' in scope for MiFID, even where physically settled. Which we think makes sense: it would be arbitrary indeed to exclude a class of exchange-traded derivatives just because of their settlement method, when most of the “[[regulatey]]” things about them — the risk, the market infrastructure, the consumer protection requirements, the capital and solvency issues for clearers and settlers — are exactly the same. | In any case, but for that odd exception for wholesale gas and power traded on an OTF — which is a ''non''-non-discretionary venue not qualifying as a [[regulated market]] or an [[MTF]], so chapeau for the multi-dimensional negative there and note this is a very limited carve-out pertaining to wholesale participants in the gas and power industry — [[Exchange-traded products|exchange-traded]] commodity futures and options ''are'' in scope for MiFID, even where physically settled. Which we think makes sense: it would be arbitrary indeed to exclude a class of exchange-traded derivatives just because of their settlement method, when most of the “[[regulatey]]” things about them — the risk, the market infrastructure, the consumer protection requirements, the capital and solvency issues for clearers and settlers — are exactly the same. | ||
===“...having the characteristics of other derivative financial instruments and not being for commercial purposes”=== | |||
Limb (7) throws a curve ball. A cautious fellow might squeak a bit and say, but any physically settled commodity derivative has some of the characteristics of other financial derivatives, so where does this leave me? Well, the implementing regulation (EC) No 1287/2006 — which was further restricted in 2017 — has something to say about what this means: | |||
{{quote|1. For the purposes of Section C(7) of Annex I to Directive 2014/65/EU, a contract which is not a spot contract in accordance with paragraph 2 and which is not for commercial purposes as laid down in paragraph 4 shall be considered as having the characteristics of other derivative financial instruments where it satisfies the following conditions: | |||
:(a) it meets one of the following criteria: | |||
::(i) it is traded on a third country trading venue that performs a similar function to a regulated market, an MTF or an OTF; | |||
::(ii) it is expressly stated to be traded on, or is subject to the rules of, a regulated market, an MTF, an OTF or such a third country trading venue; | |||
::(iii) it is equivalent to a contract traded on a regulated market, MTF, an OTF or such a third country trading venue, with regards to the price, the lot, the delivery date and other contractual terms; | |||
:(b) it is standardised so that the price, the lot, the delivery date and other terms are determined principally by reference to regularly published prices, standard lots or standard delivery dates.}} | |||
In practice this narrows things down a lot. Either it is (in a loose sense) [[exchange-traded]], or standardised by reference to lot size, delivery date and so on. It feels like this is targeting standardised, fungible contract types; OTC trades are not meant to be included.<ref>An earlier requirement for a margin requirement was removed by [https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32017R0565 Article 7 of Commission Delegated Regulation (EU) 2017/565]</ref> | |||
===What ''isn’t'' a {{t|MiFID}} financial instrument=== | ===What ''isn’t'' a {{t|MiFID}} financial instrument=== | ||