The European Commission has published a Consultation Paper seeking views on where the boundary lies between what constitutes a foreign exchange (FX) financial instrument and what does not. The Consultation Paper also includes the definition of a spot FX instrument.
The reason for the consultation is that concerns have been raised about whether the regulation of FX activity is adequate and applied consistently. This is an important issue since, once a contract is considered a financial instrument for the purposes of the Markets in Financial Instruments Directive (MiFID), then activity in that instrument may give rise to authorisation and other obligations under MiFID. Moreover, since the definition of financial instrument in MIFID is used in a wide variety of other legislation, the classification of an FX contract as a financial instrument will bring them within the ambit of this legislation, in particular the European Markets Infrastructure Regulation and its reporting obligations.
Contributions to the consultation should be submitted by 9 May 2014.
View Consultation document: FX financial instruments, 10 April 2014