INTM552150 - Hybrids: hybrid transfers (Chapter 4): conditions to be satisfied: condition E - structured arrangements

The concept of a structured arrangement is relevant in two contexts.

It determines whether there is sufficient connection to satisfy Condition E for Chapter 4 to apply, and in the case of a substitute payment made by a financial trader, the financial trader exemption will not apply in the case of a structured arrangement, see INTM552170.

An arrangement is a structured arrangement if it is reasonable to suppose that

• it is designed to secure a hybrid payer deduction/non-inclusion mismatch
• the terms of the arrangement share the economic benefit of the mismatch between the parties to that arrangement, or
• the terms of the arrangement otherwise reflect an expected mismatch

An arrangement may be designed to secure a commercial or other objective, and yet also still secure a hybrid payer deduction/ non-inclusion mismatch. When considering this issue, the test is whether it is reasonable to suppose that the arrangement was designed to secure the mismatch.

See INTM551110 for further commentary on structured arrangements as they apply to financial instruments.