ELM 3.7 Derivatives
A firm must not be a party to or have a position in a derivative or quasi derivative contract unless ELM 3.7.2 R allows this.
A firm may be a party to a derivative or quasi derivative contract if:
- (1)
the sole purpose (ignoring any other purposes which together are insignificant) of becoming a party to it is hedging market risks arising from:
- (a)
issuing e-money; or
- (b)
the e-money float;
- (a)
- (2)
so far as reasonably possible, being a party to that derivative or quasi derivative contract achieves the permitted purpose described in ELM 3.7.2 R (1);
- (3)
the derivative or quasi derivative contract is sufficiently liquid; and
- (4)
either:
- (a)
the derivative or quasi derivative contract is an exchange rate contract relating to a foreign currency with an original maturity of 14 days or less; or
- (b)
the derivative or quasi derivative contract:
- (i)
is an interest rate or foreign exchange related contract;
- (ii)
is regularly traded on a recognised investment exchange or designated investment exchange; and
- (iii)
is subject to daily margin requirements under the rules of that exchange.
- (i)
- (a)