The European Securities and Markets Authority (ESMA) has published a letter from Steven Maijoor, ESMA Chair, to Michel Barnier, European Commissioner for Internal Market and Services.

The letter is in respect of the definition of derivative or derivative contract in the European Markets Infrastructure Regulation (EMIR), which refers to the list of financial instruments in the Markets in Financial Instruments Directive (MiFID). It explains that different transpositions of MiFID across Member States mean that there is no single, commonly adopted definition of derivative or derivative contract in the EU which prevents the convergent application of EMIR. The letter states that this is particularly true in the case of foreign exchange forwards and physically settled commodity forwards.

ESMA asks the Commission to adopt as a matter of urgency, an implementing act under article 4(2) of MiFID, or any other measure it deems appropriate to clarify the position. In particular, the Commission is asked to clarify:

  • the definition of currency derivatives in relation to: (i) the frontier between spot and forward; and (ii) their conclusion for commercial purposes; and
  • the definition of commodity forwards that can be physically settled.

View Letter to Commissioner Barnier on the classification of financial instruments as derivatives, 14 February 2014

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