Consultation paper: Short duration derivatives

First published 3 April 2017

We are seeking feedback on whether we should confirm that deliverable spot FX contracts (those settled within three working days) are not derivatives for the purposes of the FMC Act, through a proposed class designation under section 562(1)(c) of that Act.

Due to concerns about the potential harm short-duration derivative products pose for investors, we have reviewed how we regulate these products. As a result of this review, we decided that short-duration derivative issuers should be licensed. This decision is based on our view that the law requires businesses selling these products to have a licence.

We are concerned that an unintended consequence of this may be that spot contracts with a delayed settlement are caught by the definition of “derivative” in section 8 of the FMC Act. We don’t believe that ordinary spot FX contracts were intended to be regulated as derivatives.

Submissions closed on Friday 28 April 2017.

If you have questions, please contact us at [email protected]