# The Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025, Regulation 7: Schedule 2 to the Regulated Activities Order


(1) Schedule 2 to the Regulated Activities Order (financial instruments and investment services and activities) is amended as follows.
(2) For Part 2 substitute—
“Part 2
Provisions supplementing Part 1
Interpretation
1 In this Part of this Schedule “transmission system operator”—
(a) in relation to electricity, means a person who is designated as an electricity transmission system operator under section 10H of the Electricity Act 1989;
(b) in relation to gas, means a person who is designated as a gas transmission system operator under—
(i) section 8J of the Gas Act 1986, or
(ii) article 8H of the Gas (Northern Ireland) Order 1996.
Paragraph 2 of Part 1: “money-market instruments”
2 (1) In paragraph 2 of Part 1 of this Schedule “money-market instruments” means those classes of instruments which are normally dealt with on the money market, such as treasury bills, certificates of deposit, commercial papers and other instruments with substantively equivalent features, but only where they have the characteristics specified in sub-paragraph (2), and excluding instruments of payment.
(2) Those characteristics are—
(a) they have a value that can be determined at any time,
(b) they are not derivatives, and
(c) they have a maturity at issuance of 397 days or less.
Paragraph 4 of Part 1: exclusion of certain derivative contracts relating to currencies
3 (1) A derivative contract relating to a currency is not a financial instrument by virtue of the reference in paragraph 4 of Part 1 of this Schedule to “other derivative contracts” if the contract is—
(a) a spot contract as defined in sub-paragraph (2), or
(b) a means of payment that meets all the following conditions—
(i) it must be settled physically otherwise than by reason of a default or other termination event,
(ii) at least one of the parties is a person who is not a financial counterparty as defined in Article 2(8) of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade depositories,
(iii) it is entered into in order to facilitate payment for identifiable goods, services or direct investment, and
(iv) it is not traded on a trading venue.
(2) For the purposes of sub-paragraph (1), a spot contract is a contract for the exchange of one currency against another currency, under the terms of which delivery is scheduled to be made within whichever of the following periods is applicable—
(a) where the contract for the exchange of those currencies is used for the main purpose of the sale or purchase of a transferable security or a unit in a collective investment undertaking, the period generally accepted in the market for the settlement of that transferable security or a unit in a collective investment undertaking as the standard delivery period or 5 trading days, whichever is shorter;
(b) in any other case—
(i) 2 trading days in respect of any pair of the major currencies specified in sub-paragraph (4), or
(ii) where at least one of the pair of currencies is not a major currency specified in sub-paragraph (4), the longer of 2 trading days or the period generally accepted in the market for that currency pair as the standard delivery period.
(3) A contract is not to be considered a spot contract where, irrespective of its explicit terms, there is an understanding between the parties to the contract that delivery of the currency is to be postponed and not to be performed within the period set out in sub-paragraph (2).
(4) The major currencies for the purposes of sub-paragraph (2) are the US dollar, Euro, Japanese yen, Pound sterling, Australian dollar, Swiss franc, Canadian dollar, Hong Kong dollar, Swedish krona, New Zealand dollar, Singapore dollar, Norwegian krone, Mexican peso, Croatian kuna, Bulgarian lev, Czech koruna, Danish krone, Hungarian forint, Polish złoty and Romanian leu.
(5) For the purposes of sub-paragraph (2), a trading day means any day of normal trading in the jurisdiction of both the currencies that are exchanged under the contract for the exchange of those currencies and in the jurisdiction of a third currency where any of the following conditions are met—
(a) the exchange of those currencies involves converting them through that third currency for the purposes of liquidity;
(b) the standard delivery period for the exchange of those currencies references the jurisdiction of that third currency.
Paragraphs 6 and 7 of Part 1: wholesale energy products that must be physically settled
4 (1) This paragraph has effect for the purposes of paragraphs 6 and 7 of Part 1 of this Schedule.
(2) A wholesale energy product must be physically settled where it satisfies all the following conditions—
(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;
(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;
(c) it does not allow either party to replace physical delivery with cash settlement;
(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.
(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.
(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.
(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.
(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—
(a) “force majeure” includes any exceptional event or set of circumstances which—
(i) is outside the control of the parties to the contract,
(ii) the parties to the contract could not have reasonably foreseen or avoided by the exercise of appropriate and reasonable due diligence, and
(iii) prevents one or both parties to the contract from fulfilling their contractual obligations;
(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.
(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”.
(8) The delivery methods for a contract that is to be considered as “physically settled” must include at least—
(a) physical delivery of the commodity concerned itself,
(b) delivery of a document transferring ownership of the commodity concerned or the relevant quantities of the commodity concerned, or
(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.
Paragraph 7 of Part 1: treatment of certain derivative financial instruments
5 (1) This paragraph has effect for the purposes of paragraph 7 of Part 1 of this Schedule, except in the case of—
(a) a spot contract as defined in sub-paragraph (3), or
(b) a contract which is for commercial purposes as provided by paragraph 6 of this Part of this Schedule.
(2) A contract is to be considered as having the characteristics of other derivative financial instruments where it satisfies both the following conditions—
(a) it meets one of the following criteria—
(i) it is traded on a trading venue other than a UK trading venue (“an overseas trading venue”),
(ii) it is expressly stated to be traded on, or is subject to the rules of, a UK regulated market, a UK MTF, a UK OTF or an overseas trading venue, or
(iii) it is equivalent to a contract traded on a UK regulated market, a UK MTF, a UK OTF or an overseas trading venue, with regards to the price, the lot, the delivery date and other contractual terms;
(b) it is standardised so that the price, the lot and the delivery date are determined principally by reference to regularly published prices, standard lots or standard delivery dates.
(3) For the purposes of sub-paragraph (1)(a), a spot contract is a contract for the sale of a commodity, asset or right, under the terms of which delivery is scheduled to be made within the longer of the following periods—
(a) 2 trading days;
(b) the period generally accepted in the market for that commodity, asset or right as the standard delivery period.
(4) A contract is not to be considered a spot contract where, irrespective of its explicit terms, there is an understanding between the parties to the contract that delivery of the commodity, asset or right is to be postponed and not to be performed within the period referred to in sub-paragraph (3).
Paragraphs 7 and 10 of Part 1: exclusion of certain energy contracts
6 (1) Where both the conditions in sub-paragraph (2) are met, a contract is to be treated—
(a) for the purposes of paragraph 7 of Part 1 of this Schedule, and of paragraph 5(1)(b) of this Part of this Schedule, as being for commercial purposes, and
(b) for the purposes of paragraphs 7 and 10 of Part 1 of this Schedule, as not having the characteristics of other derivative financial instruments.
(2) Those conditions are—
(a) that the contract is entered into with or by an operator or administrator of an energy transmission grid, energy balancing mechanism or pipeline network, and
(b) that it is necessary to keep in balance the supplies and uses of energy at a given time, including the case when the reserve capacity contracted by an electricity transmission system operator is being transferred from one prequalified balancing service provider to another prequalified balancing service provider with the consent of the relevant transmission system operator.
(3) In sub-paragraph (2)(b), “balancing service provider” has the meaning given in Article 2 of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity.
Paragraph 10 of Part 1: further derivative contracts included
7 In addition to the derivative contracts expressly referred to in paragraph 10 of Part 1 of this Schedule, a derivative contract is a “financial instrument” by virtue of that paragraph where it meets the criteria set out in that paragraph and in paragraph 8 of this Part and relates to any of the following—
(a) telecommunications bandwidth;
(b) commodity storage capacity;
(c) transmission or transportation capacity relating to commodities, whether cable, pipeline or other means with the exception of transmission rights related to cross-zonal electricity transmission capacities when the contract is, on the primary market, entered into with or by a transmission system operator or any persons acting as service providers on their behalf and in order to allocate the transmission capacity;
(d) an allowance, credit, permit, right or similar asset which is directly linked to the supply, distribution or consumption of energy derived from renewable resources, except where the contract is already with the scope of paragraph 4 of Part 1 of this Schedule;
(e) a geological, environmental or other physical variable, except where the contract relates to any emission allowances referred to in paragraph 11 of Part 1 of this Schedule;
(f) any other asset or right of a fungible nature, other than a right to receive a service, that is capable of being transferred;
(g) an index or measure related to the price or value of, or volume of transactions in, any asset, right, service or obligation;
(h) an index or measure based on actuarial statistics.
Paragraph 10 of Part 1: treatment of certain derivative contracts
8 For the purposes of paragraph 10 of Part 1 of this Schedule, a derivative contract relating to an underlying referred to in that Part or in paragraph 7 of this Part is to be considered to have the characteristics of other derivative financial instruments where one of the following conditions is satisfied—
(a) it is settled in cash or may be settled in cash at the option of one or more of the parties, otherwise than by reason of a default or other termination event;
(b) it is traded on a regulated market, an MTF, or an OTF;
(c) the conditions in paragraph 5(2) of this Part are satisfied in relation to the contract.”.
(3) In Part 4—
(a) for the main heading to the Part substitute “Investment advice”;
(b) omit the sub-headings “Article 9” and “Investment advice”.

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Source: https://www.legislation.gov.uk/uksi/2025/1020/regulation/7 (the official version)
Page: https://openlegislation.uk/markets-in-financial-instruments-miscellaneous-amendments-regulations-2025/regulation-7
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.