{
  "url": "https://openlegislation.uk/financial-services-and-markets-act-2000-regulated-activities-order-2001/schedule-2/part-2/paragraph-4",
  "json_url": "https://openlegislation.uk/financial-services-and-markets-act-2000-regulated-activities-order-2001/schedule-2/part-2/paragraph-4.json",
  "legislation": "uksi/2001/544",
  "legislation_title": "The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001",
  "legislation_url": "https://openlegislation.uk/financial-services-and-markets-act-2000-regulated-activities-order-2001",
  "path": "schedule/2/part/2/paragraph/4",
  "kind": "paragraph",
  "number": "4",
  "heading": "Paragraphs 6 and 7 of Part 1: wholesale energy products that must be physically settled",
  "text": "(1) This paragraph has effect for the purposes of paragraphs 6 and 7 of Part 1 of this Schedule.\n(2) A wholesale energy product must be physically settled where it satisfies all the following conditions—\n(a) it contains provisions which ensure that parties to the wholesale energy product have proportionate arrangements in place to be able to make or take delivery of the commodity concerned;\n(b) it establishes unconditional, unrestricted and enforceable obligations of the parties to the wholesale energy product to deliver and take delivery of the commodity concerned;\n(c) it does not allow either party to replace physical delivery with cash settlement;\n(d) the obligations under the wholesale energy product cannot be offset against obligations from other contracts between the parties concerned, without prejudice to the rights of the parties to the wholesale energy product to net their cash payment obligations.\n(3) For the purposes of sub-paragraph (2)(a), a balancing agreement with the transmission system operator in the area of electricity and gas is to be considered a proportionate arrangement where the parties to the agreement have to ensure physical delivery of electricity or gas.\n(4) For the purposes of sub-paragraph (2)(d), operational netting in power and gas markets is not to be considered as the offsetting of obligations under a contract against obligations from other contracts.\n(5) In sub-paragraph (4), “operational netting” means any nomination of quantities of power and gas to be fed into a gridwork, upon being so required by the rules or requests of a transmission system operator for an entity performing an equivalent function to a transmission system operator at the national level, where the nomination of quantities is not at the discretion of the parties to the contract.\n(6) The existence of force majeure or bona fide inability to settle provisions does not prevent a contract from being considered as “physically settled”, and in this sub-paragraph—\n(a) “force majeure” includes any exceptional event or set of circumstances which—\n(i) is outside the control of the parties to the contract,\n(ii) the parties to the contract could not have reasonably foreseen or avoided by the exercise of appropriate and reasonable due diligence, and\n(iii) prevents one or both parties to the contract from fulfilling their contractual obligations;\n(b) “bona fide inability to settle” includes any event or set of circumstances, not qualifying as force majeure as referred to in paragraph (a), which are objectively and expressly defined in the contractual terms, as a ground for one or both of the parties to the contract, acting in good faith, not to fulfil their contractual obligations.\n(7) The existence of a default clause providing that a party is entitled to financial compensation in the case of non-performance, or defective performance, of the contract does not prevent the contract from being considered as “physically settled”.\n(8) The delivery methods for a contract that is to be considered as “physically settled” must include at least—\n(a) physical delivery of the commodity concerned itself,\n(b) delivery of a document transferring ownership of the commodity concerned or the relevant quantities of the commodity concerned, or\n(c) other methods of bringing about the transfer of ownership of the relevant quantity of the commodity concerned without physically delivering it, including notification, scheduling or nomination to the operator of an energy supply network, that entitles the recipient to the relevant quantity of the commodity concerned.",
  "extent": null,
  "status": null,
  "version": "current",
  "annotations": [
    {
      "type": "F",
      "label": "F1",
      "text": "Sch. 2 substituted (1.4.2007 for specified purposes, 1.11.2007 in so far as not already in force) by The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment No. 3) Order 2006 (S.I. 2006/3384), arts. 1(2), 29"
    },
    {
      "type": "F",
      "label": "F2",
      "text": "Sch. 2 Pt. 2 substituted (23.10.2025) by The Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025 (S.I. 2025/1020), regs. 1(2), 7(2) (with reg. 17); S.I. 2025/1078, reg. 2(b) (with reg. 11)"
    }
  ],
  "outstanding_effects": [],
  "provenance": {
    "source": "legislation.gov.uk",
    "source_url": "https://www.legislation.gov.uk/uksi/2001/544/schedule/2/part/2/paragraph/4",
    "retrieved_at": "2026-10-29T08:01:12.377334+00:00"
  },
  "licence": "Open Government Licence v3.0",
  "licence_url": "https://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/",
  "attribution": "Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives."
}