ANNEX III Liquidity assessment, LIS and SSTI thresholds for non-equity financial instruments

means a bond issued by a sovereign issuer which is either:

(a) the European Union;

(b) the United Kingdom including a government department, an agency or a special purpose vehicle of the United Kingdom;

(ba) a State other than the United Kingdom, including a government department, an agency or a special purpose vehicle of the State;

(c) a sovereign entity which is not listed under points (a) to (ba).

means a bond issued by any of the following public issuers:

in the case of a federal State, a member of that federation;

a special purpose vehicle for several States;

an international financial institution established by two or more States which have the purpose of mobilising funding and providing financial assistance to the benefit of its members that are experiencing or are threatened by severe financial problems;

the European Investment Bank;

the International Finance Corporation;

the International Monetary Fund;

a public entity which is not an issuer of a sovereign bond as specified in the previous row.

Exchange Traded Commodities (ETCs)

a debt instrument issued against a direct investment by the issuer in commodities or commodities derivative contracts. The price of an ETC is directly or indirectly linked to the performance of the underlying. An ETC passively tracks the performance of the commodity or commodity indices to which it refers.

Exchange Traded Notes (ETNs)

a debt instrument issued against a direct investment by the issuer in the underlying or underlying derivative contracts. The price of an ETN is directly or indirectly linked to the performance of the underlying. An ETN passively tracks the performance of the underlying to which it refers.

Fixed-to-Float "multi-currency swaps" or "cross-currency swaps" and futures/forwards on Fixed-to-Float "multi-currency swaps" or "cross-currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in different currencies and the cash flows of one leg are determined by a fixed interest rate while those of the other leg are determined by a floating interest rate

Float-to-Float "multi-currency swaps" or "cross-currency swaps" and futures/forwards on Float-to-Float "multi-currency swaps" or "cross-currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in different currencies and where the cash flows of both legs are determined by floating interest rates

Fixed-to-Fixed "multi-currency swaps" or "cross-currency swaps" and futures/forwards on Fixed-to-Fixed "multi-currency swaps" or "cross-currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in different currencies and where the cash flows of both legs are determined by fixed interest rates

Overnight Index Swap (OIS) "multi-currency swaps" or "cross-currency swaps" and futures/forwards on Overnight Index Swap (OIS) "multi-currency swaps" or "cross-currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in different currencies and where the cash flows of at least one leg are determined by an Overnight Index Swap (OIS) rate

Inflation "multi-currency swaps" or "cross-currency swaps" and futures/forwards on Inflation "multi-currency swaps" or "cross-currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in different currencies and where the cash flows of at least one leg are determined by an inflation rate

Fixed-to-Float "single currency swaps" and futures/forwards on Fixed-to-Float "single currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in the same currency and the cash flows of one leg are determined by a fixed interest rate while those of the other leg are determined by a floating interest rate

Float-to-Float "single currency swaps" and futures/forwards on Float-to-Float "single currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in the same currency and where the cash flows of both legs are determined by floating interest rates

Fixed-to-Fixed "single currency swaps" and futures/forwards on Fixed-to-Fixed "single currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in the same currency and where the cash flows of both legs are determined by fixed interest rates

Overnight Index Swap (OIS) "single currency swaps" and futures/forwards on Overnight Index Swap (OIS) "single currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in the same currency and where the cash flows of at least one leg are determined by an Overnight Index Swap (OIS) rate

Inflation "single currency swaps" and futures/forwards on Inflation "single currency swaps"

a swap or a future/forward on a swap where two parties exchange cash flows denominated in the same currency and where the cash flows of at least one leg are determined by an inflation rate

any contract as defined paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order related to:

(a) one or more shares, depositary receipts, ETFs, certificates, other similar financial instruments, cash-flows or other products related to the performance of one or more shares, depositary receipts, ETFs, certificates, or other similar financial instruments;

(b) an index of shares, depositary receipts, ETFs, certificates, other similar financial instruments, cash-flows or other products related to the performance of one or more shares, depositary receipts, ETFs, certificates, or other similar financial instruments

Stock index options

an option whose underlying is an index composed of shares

Stock index futures/forwards

a future/forward whose underlying is an index composed of shares

Stock options

an option whose underlying is a share or a basket of shares resulting from a corporate action

Stock futures/forwards

a future/forward whose underlying is a share or a basket of shares resulting from a corporate action

Stock dividend options

an option on the dividend of a specific share

Stock dividend futures/forwards

a future/forward on the dividend of a specific share

Dividend index options

an option on an index composed of dividends of more than one share

Dividend index futures/forwards

a future/forward on an index composed of dividends of more than one share

Volatility index options

an option whose underlying is a volatility index defined as an index relating to the volatility of a specific underlying index of equity instruments

Volatility index futures/forwards

a future/forward whose underlying is a volatility index defined as an index relating to the volatility of a specific underlying index of equity instruments

ETF options

an option whose underlying is an ETF

ETF futures/forwards

a future/forward whose underlying is an ETF

a stock index option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying stock index

a stock index future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying stock index

a stock option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying share

an stock future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying share

a stock dividend option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying share entitling to dividends

a stock dividend future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying share entitling to dividends

a dividend index option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying dvidend index

a dividend index future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying dividend index

a volatility index option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying volatility index

a volatility index future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying volatility index

an ETF option sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying ETF

an ETF future/forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying ETF

Non-deliverable forward (NDF)

means a forward that, by its terms, is cash-settled between its counterparties, where the settlement amount is determined by the difference in the exchange rate of two currencies as between the trade date and the valuation date. On the settlement date, one party will owe the other party the net difference between (i) the exchange rate set at the trade date; and (ii) the exchange rate on the valuation date, based upon the notional amount, with such net amount payable in the settlement currency stipulated in the contract.

a non-deliverable FX forward sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying currency pair defined as combination of the two currencies underlying the derivative contract

Segmentation criterion 2 — time to maturity bucket of the forward defined as follows:

Maturity bucket 1: 0 < time to maturity ≤ 1 week

Maturity bucket 2: 1 week < time to maturity ≤ 3 months

Maturity bucket 3: 3 months < time to maturity ≤ 1 year

Maturity bucket 4: 1 year < time to maturity ≤ 2 years

Maturity bucket 5: 2 years < time to maturity ≤ 3 years

...

Maturity bucket m: (n-1) years < time to maturity ≤ n years

Deliverable forward (DF)

means a forward that solely involves the exchange of two different currencies on a specific future contracted settlement date at a fixed rate agreed upon on the inception of the contract covering the exchange.

Non-Deliverable FX options (NDO)

means an option that, by its terms, is cash-settled between its counterparties, where the settlement amount is determined by the difference in the exchange rate of two currencies as between the trade date and the valuation date. On the settlement date, one party will owe the other party the net difference between (i) the exchange rate set at the trade date; and (ii) the exchange rate on the valuation date, based upon the notional amount, with such net amount payable in the settlement currency stipulated in the contract.

Deliverable FX options (DO)

means an option that solely involves the exchange of two different currencies on a specific future contracted settlement date at a fixed rate agreed upon on the inception of the contract covering the exchange.

Non-Deliverable FX swaps (NDS)

means a swap that, by its terms, is cash-settled between its counterparties, where the settlement amount is determined by the difference in the exchange rate of two currencies as between the trade date and the valuation date. On the settlement date, one party will owe the other party the net difference between (i) the exchange rate set at the trade date; and (ii) the exchange rate on the valuation date, based upon the notional amount, with such net amount payable in the settlement currency stipulated in the contract.

Deliverable FX swaps (DS)

means a swap that solely involves the exchange of two different currencies on a specific future contracted settlement date at a fixed rate agreed upon on the inception of the contract covering the exchange.

Index credit default swap (CDS)

a swap whose exchange of cash flows is linked to the creditworthiness of several issuers of financial instruments composing an index and the occurrence of credit events

The underlying index is considered to have a liquid market:

"on-the-run" index means the rolling most recent version (series) of the index created on the date on which the composition of the index is effective and ending one day prior to the date on which the composition of the next version (series) of the index is effective.

"1x off-the-run status" means the version (series) of the index which is immediately prior to the current "on-the-run" version (series) at a certain point in time. A version (series) ceases being "on-the-run" and acquires its "1x off-the-run" status when the latest version (series) of the index is created.

Single name credit default swap (CDS)

a swap whose exchange of cash flows is linked to the creditworthiness of one issuer of financial instruments and the occurrence of credit events

a single name credit default swap sub-class is defined by the following segmentation criteria:

Segmentation criterion 1 — underlying reference entity

Segmentation criterion 2 — underlying reference entity type defined as follows:

"Issuer of sovereign and public type" means an issuer entity which is either:

(a) the European Union;

(b) the United Kingdom including a government department, an agency or a special purpose vehicle of the United Kingdom;

(ba) a State other than the United Kingdom, including a government department, an agency or a special purpose vehicle of the State;

(c) a sovereign entity which is not listed under points (a) to (ba);

(d) in the case of a federal State, a member of that federation;

(e) a special purpose vehicle for several States;

(f) an international financial institution established by two or more States which have the purpose of mobilising funding and providing financial assistance to the benefit of its members that are experiencing or are threatened by severe financial problems;

(g) the European Investment Bank;

(ga) the International Finance Corporation;

(gb) the International Monetary Fund;

(h) a public entity which is not a sovereign issuer as specified in the points (a) to (c).

"Issuer of corporate type" means an issuer entity which is not an issuer of sovereign and public type.

Segmentation criterion 3 — notional currency defined as the currency in which the notional amount of the derivative is denominated

Segmentation criterion 4 — time maturity bucket of the CDS defined as follows:

Maturity bucket 1: 0 < time to maturity ≤ 1 year

Maturity bucket 2: 1 year < time to maturity ≤ 2 years

Maturity bucket 3: 2 years < time to maturity ≤ 3 years

...

Maturity bucket m: (n-1) years < time to maturity ≤ n years

CDS index options

an option whose underlying is a CDS index

a CDS index option whose underlying CDS index is a sub-class determined to have a liquid market and whose time to maturity bucket is 0-6 months is considered to have a liquid market

a CDS index option whose underlying CDS index is a sub-class determined to have a liquid market and whose time to maturity bucket is not 0-6 months is not considered to have a liquid market

a CDS index option whose underlying CDS index is a sub-class determined not to have a liquid market is not considered to have a liquid market for any given time to maturity bucket

Single name CDS options

an option whose underlying is a single name CDS

a single name CDS option whose underlying single name CDS is a sub-class determined to have a liquid market and whose time to maturity bucket is 0-6 months is considered to have a liquid market

a single name CDS option whose underlying single name CDS is a sub-class determined to have a liquid market and whose time to maturity bucket is not 0-6 months is not considered to have a liquid market

a single name CDS option whose underlying single name CDS is a sub-class determined not to have a liquid market is not considered to have a liquid market for any given time to maturity bucket

Freight derivatives

a financial instrument relating to freight rates as defined in paragraph 10 of Part 1 of Schedule 2 to the Regulated Activities Order

European Union Allowances (EUA)

any unit recognised for compliance with the requirements of Directive 2003/87/EC of the European Parliament and of the Council (Emissions Trading Scheme) which represents the right to emit the equivalent to 1 tonne of carbon dioxide equivalent (tCO₂e)

European Union Aviation Allowances (EUAA)

any unit recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme) which represents the right to emit the equivalent to 1 tonne of carbon dioxide equivalent (tCO₂e) from aviation

Certified Emission Reductions (CER)

any unit recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme) which represents the emissions reduction equivalent to 1 tonne of carbon dioxide equivalent (tCO₂e)

Emission Reduction Units (ERU)

any unit recognised for compliance with the requirements of Directive 2003/87/EC (Emissions Trading Scheme) which represents the emissions reduction equivalent to 1 tonne of carbon dioxide equivalent (tCO₂e)

Emission allowance derivatives whose underlying is of the type European Union Allowances (EUA)

a financial instrument relating to emission allowances of the type European Union Allowances (EUA) as defined in paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order

Emission allowance derivatives whose underlying is of the type European Union Aviation Allowances (EUAA)

a financial instrument relating to emission allowances of the type European Union Aviation Allowances (EUAA) as defined in paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order

Emission allowance derivatives whose underlying is of the type Certified Emission Reductions (CER)

a financial instrument relating to emission allowances of the type Certified Emission Reductions (CER) as defined in paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order

Emission allowance derivatives whose underlying is of the type Emission Reduction Units (ERU)

a financial instrument relating to emission allowances of the type Emission Reduction Units (ERU) as defined in paragraph 4 of Part 1 of Schedule 2 to the Regulated Activities Order