GENE 11.2.2 Options and futures that are and are not specified products

The circumstances in which either an option or a futures contract is regarded as being made for commercial purposes and therefore excluded from the respective definition of a specified product; and conversely, the circumstances in which it is considered to be made for investment purposes and therefore included within the respective definition, are set out below:

(a) a contract is regarded as made for investment purposes if:
(i) it is made, or traded, on a regulated exchange; or
(ii) it is made otherwise than on a regulated exchange, but is expressed to be traded on:
(A) a regulated exchange; or
(B) the same terms on which an equivalent contract would be traded on a regulated exchange;
(b) a contract not falling within paragraph (a) is regarded as made for commercial purposes if under the terms of the contract delivery is to be made within 7 days, unless it can be shown that there existed an understanding that (notwithstanding the express terms of the contract) delivery would not be made within 7 days;
(c) the following are indications that a contract not falling within paragraph (a) or (b) is made for commercial purposes (the absence of them is an indication that it is made for investment purposes):
(i) 1 or more of the parties produces, or uses in its business, the commodity or other property;
(ii) the seller delivers or intends to deliver the property or the purchaser takes or intends to take delivery of it; or
(iii) the price, the lot size, the delivery date and other terms are determined by the parties for the purposes of the particular contract and not by reference (or not solely by reference) to regularly published prices, to standard lots or delivery dates or to standard terms;
(d) the following are indications that a contract is made for investment purposes:
(i) it is expressed to be as traded on a regulated exchange;
(ii) performance of the contract is ensured by a regulated exchange or a clearing house; or
(iii) there are arrangements for the payment or provision of margin; and
(e) for the purposes of paragraph (a), a price is to be taken to be agreed on when a contract is made:
(i) notwithstanding that it is left to be determined by reference to the price at which a contract could be entered into on a market or exchange or could be entered into at a time and place specified in the contract; or
(ii) in a case where the contract is expressed to be by reference to a standard lot and quality, notwithstanding that provision is made for a variation in the price to take account of any variation in quantity or quality on delivery.
Amended by QFCRA RM/2020-6 (as from 15th October 2020)