COLL 7.4.9 Permitted Transactions in Derivatives and Forward Transactions—QFC Retail Schemes

(1) A transaction in a derivative by a QFC retail scheme must—
(a) be in an approved derivative; or

Note Approved derivative is defined in r 7.1.8.
(b) if the transaction is in an OTC derivative—comply with rule 7.4.13 (OTC transactions in derivatives—QFC retail schemes).
(2) The underlying of a transaction in a derivative by a QFC retail scheme must—
(a) comply with part 7.2 (Investments generally—QFC retail schemes) and this part; or
(b) consist of any 1 or more of the following to which the scheme is dedicated:
(i) financial indices that are permitted financial indices under rule 7.4.10 (Permitted financial indices—QFC retail schemes);
(ii) interest rates;
(iii) foreign exchange rates;
(iv) currencies.

Note Dedicated is defined in the glossary.
(3) A transaction in an approved derivative by a QFC retail scheme must be effected on, or under the rules of, a derivatives market that is an eligible market.

Note Eligible market is defined r 7.1.7.
(4) A transaction in a derivative must not cause a QFC retail scheme to diverge from its investment objectives, strategies and policy as stated in the constitutional document and the latest filed prospectus.

Note Constitutional document is defined in r 3.1.1. Latest filed prospectus is defined in the glossary.
(5) A transaction in a derivative must not be effected by a QFC retail scheme if the intended effect is to create the potential for an uncovered sale of any of the following:
(a) transferable securities;
(b) money-market instruments;
(c) units in collective investment schemes;
(d) derivatives.

Note Transferable security is defined in r 7.1.6.
(6) For subrule (5), a sale is not considered uncovered if the requirements mentioned in rule 7.4.12 (3) (Requirements to cover sales—QFC retail schemes) are met in relation to the sale.
(7) Any forward transaction by a QFC retail scheme must be made with an eligible bank.

Note Eligible bank is defined in the glossary.
(8) A QFC retail scheme must not effect a transaction in a derivative on a commodity.

Note Commodity is defined in the glossary.
Amended by QFCRA RM/2016-1 (as from 19th September 2016)