Derivative contracts: underlying subject matter: contracts for differences
Underlying subject matter of a contract for differences
CTA09/S583 sets out how you determine the underlying subject matter (USM) of a contract for differences.
- If you are dealing with a contract for differences where the payment or payments under the contract depend on the price or value of some particular property described in the contract, the USM of the contract is that property.
- If you are dealing with a contract for differences where payments are determined by reference to an index or other factor designated in the contract, its USM is the matter by which that index or factor is determined.
In order to avoid doubt about whether abstract concepts can be described as ‘property’ or a ‘factor’, CTA09/S583(5) specifically provides that the USM of a contract for differences can include interest rates, weather conditions or creditworthiness.
There are examples at CFM50550.
There is also a specific provision at CTA09/S583(6) that an interest rate is not to be regarded as the USM of a contract just because the contract specifies that payment should be made on a variable date, and the amount of the payment varies, by reference to a rate of interest, according to the date on which it is made. There is an example of this at CFM50560.