Part 7Derivative contracts
Chapter 2Contracts to which this Part applies
Meaning of “derivative contract” and other basic definitions
583“Underlying subject matter”
1
In this Part references to the underlying subject matter of a relevant contract are to be read as follows.
2
The underlying subject matter of an option is—
a
the property which would fall to be delivered if the option were exercised, or
b
if the property which would so fall is a derivative contract, the underlying subject matter of that contract.
3
The underlying subject matter of a future is—
a
the property which, if the future were to run to delivery, would fall to be delivered at the date and price agreed when the contract is made, or
b
if the property which would so fall is a derivative contract, the underlying subject matter of that contract.
4
The underlying subject matter of a contract for differences is—
a
if the contract for differences relates to fluctuations in the value or price of property described in the contract, the property so described, or
b
if an index or factor is designated in the contract for differences, the matter by reference to which the index or factor is determined.
5
The things which may be the subject matter of a contract for differences include—
a
interest rates,
b
weather conditions, and
c
creditworthiness.
6
Interest rates are not the underlying subject matter of a relevant contract if—
a
under the terms of that contract—
i
the date on which a party to that contract becomes subject to a duty to make a payment is a variable date, and
ii
the amount of that payment varies according to the date of payment, and
b
those terms refer to an interest rate only for the purpose of establishing that amount.
7
The underlying subject matter of a relevant contract is not treated as being—
a
land,
b
shares in a company, or
c
rights of a unit holder under a unit trust scheme,
just because its underlying subject matter includes income from that kind of property.