Entire Section

  • GEN A2.3.1 GEN A2.3.1

    For the purposes of GEN Rule A2.1.3:

    Options

    (a) An Option is an instrument that confers on the holder, upon exercise, rights of the kind referred to in any of the following:
    (i) a right to acquire or dispose of:
    (A) a Security (other than a Warrant) or contractually based investment;
    (B) currency of any country or territory;
    (C) a commodity of any kind;
    (ii) a right to receive a cash settlement, the value of which is determined by reference to:
    (A) the value or price of an index, interest rate or exchange rate; or
    (B) any other rate or variable; or
    (iii) a right to acquire or dispose of another Option under (i) or (ii).

    Futures

    (b) a Future is an instrument comprising rights under a contract:
    (i) for the sale of a commodity or property of any other description under which delivery is to be made at a future date and at a price agreed on when the contract is made and that contract:
    (A) is made or traded on a regulated exchange;
    (B) is made or traded on terms that are similar to those made or traded on a regulated exchange; or
    (C) would, on reasonable grounds, be regarded as made for investment and not for commercial purposes; or
    (ii) where the value of the contract is ultimately determined by reference, wholly or in part, to fluctuations in:
    (A) the value or price of property of any description; or
    (B) an index, interest rate, exchange rate, any combination of these, or other factor designated for that purpose in the contract; and
    which is wholly settled by cash or set-off between the parties but excludes:
    (C) rights under a contract where one or more of the parties takes delivery of any property to which the contract relates;
    (D) a contract under which money is received by way of deposit or an acknowledgement of a debt on terms that any return to be paid on the sum deposited or received will be calculated by reference to an index, interest rate, exchange rate or any combination of these or other factors; or
    (E) a Contract of Insurance.
    [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]

    • GEN A2.3.1 Guidance

      Options

      1.  For example, a call Option confers on the holder, upon exercise, a right but not an obligation to acquire an issued (i.e. existing) Security, thereby distinguishing it from a Warrant which entitles the holder, upon exercise, to acquire an unissued Share, Debenture or Unit.
      2.  Options over a 'contractually based investment' referred to in GEN Rule A2.3.1(a)(i)(A) covers Options over Futures.
      3.  Cash settled Options such as Index Options are covered under GEN Rule A2.3.1(a)(ii). Other cash settled Options that are covered under this Rule include instruments which confer rights determined by reference to climatic variables, inflation or other official economic statistics, freight rates or emission allowances.
      4.  Options over Options are covered under GEN A2.3.1(a)(iii).

      Futures

      1.  An over the counter (OTC) contract may qualify as a Future under GEN Rule A2.3.1(b)(i)(C) if it can reasonably be regarded as being made for investment and not for commercial purposes. Some of the indicative factors that such a contract is reasonably likely to be made for commercial rather than investment purposes include the following:
      a.  a party to the contract is the producer or a user of the underlying commodity;
      b.  the delivery of the underlying commodity is intended to take place within 7 days of the date of the contract;
      c.  there is no provision made in the contract for margin arrangements; and
      d.  the terms of the contract are not standardised terms.
      2.  A contract under GEN Rule A2.3.1(b)(i) can provide for the physical delivery of the underlying commodity or property. Further, the price agreed under such a contract can be by reference to an underlying factor, such as by reference to an index or a spot price on a given date.
      3.  Contracts for differences (CFDs) fall under the definition in GEN A2.3.1(b)(ii) and may include credit default swaps (CDSs) and forward rate agreements (FRAs). More exotic types of Derivative contracts may also fall within the definition in GEN A2.3.1(b)(ii). These can include weather or electricity derivatives where the underlying factor by reference to which the parties' entitlements are calculated can be the number of days in a period in which the temperature would reach below or above a specified level.
      [Added] DFSA RM62/2008 (Made 4th January 2009). [VER22/01-09]