Template:Commodity regulation

You must have a taste for multi-dimensional chess if you want to understand what is required in the world of commodities, freight, weather derivatives and emission allowances. To wit:

Section C of Annex I to MiFID includes the following emissions and commodity products as within the scope for financial instruments:

(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;


In scope

Out of... In scope

Really out of scope

  • Actual commodities, being consumable, perishable, paint ’em yellow ’n’ pass ’em off as copper, real-world things that people actually need to live, are out of scope.
  • Physically-settled commodity derivatives (not falling into the no-man’s land bucket above) are out of scope ...
... unless they are traded on an EU trading venue, (i.e, OTC physically-settled commodity derivatives) in which case they are in scope ...
... unless they are “wholesale energy products traded on an OTF that must be physically settled” — which case they are out of scope again. I DON’T MAKE THE RULES FOLKS.