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CORPORATIONS REGULATIONS 2001 - REG 7.1.04

Derivatives

             (1)  For paragraph 761D(1)(b) of the Act, the prescribed period is:

                     (a)  for a foreign exchange contract-- 3 business days; and

                     (b)  in any other case--1 business day.

             (2)  For subsection 761D(2) of the Act, and subject to this regulation, an arrangement is declared to be a derivative if the following conditions are satisfied in relation to the arrangement:

                     (a)  the arrangement is not a foreign exchange contract;

                     (b)  under the arrangement, a party to the arrangement must, or may be required to, provide at some future time (which may be less than 1 day after the arrangement is entered into) consideration of a particular kind or kinds to someone;

                     (c)  the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, one or more of the following:

                              (i)  an asset;

                             (ii)  a rate (including an interest rate or exchange rate);

                            (iii)  an index;

                            (iv)  a commodity.

             (4)  An arrangement under which:

                     (a)  a party has, or may have, an obligation to buy tangible property (other than Australian or foreign currency) at a price and on a date in the future; and

                     (b)  another party has, or may have, an obligation to sell that property; and

                     (c)  the arrangement does not permit the seller's obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and

                     (d)  neither usual market practice, nor the rules of a licensed market or a licensed CS facility, permits the seller's obligations to be closed out by the matching up of the arrangement with another arrangement of the same kind under which the seller has offsetting obligations to buy;

is not an arrangement to which subregulation (2) applies to the extent only that the arrangement deals with that purchase and sale.

             (5)  An arrangement under which:

                     (a)  a party has an obligation to buy property; and

                     (b)  another party has an obligation to sell the property;

is not an arrangement to which subregulation (2) applies merely because the arrangement provides for the consideration to be varied by reference to a general inflation index (for example, the Consumer Price Index).

             (6)  A contract for the future provision of services is not an arrangement to which subregulation (2) applies.

             (7)  A thing that is described in subsection 764A(1) of the Act, other than paragraph 764A(1)(c), is not an arrangement to which subregulation (2) applies.

             (8)  For paragraph 761D(3)(d) of the Act, each of the following is declared not to be a derivative for Chapter 7 of the Act:

                     (a)  tradeable water rights;

                     (b)  an arrangement:

                              (i)  under which a person (the seller ) has, or may have, an obligation to sell tradeable water rights at a future date; and

                             (ii)  under which another person (the buyer ) has, or may have, an obligation to buy the tradeable water rights, or replacement water rights, at a future date; and

                            (iii)  that does not permit the seller's obligations to be wholly settled by cash, or by set-off between the seller and the buyer, rather than by transfer of ownership of the tradeable water rights or replacement water rights; and

                            (iv)  in relation to which neither usual market practice, nor the rules, allow the seller's obligations to be closed out by matching up the arrangement with another arrangement of the same kind under which the seller has offsetting obligations to buy the tradeable water rights or replacement water rights;

                     (c)  a carbon abatement contract.

Note:          For carbon abatement contract , see subregulation 1.0.02(1).

             (9)  Subregulations (4) to (8) apply whether or not a matter mentioned in those subregulations is described in subsection 761D(1) of the Act.

           (10)  In subregulation (8):

replacement water rights means tradeable water rights that are granted, issued or authorised as a replacement for the seller's tradeable water rights, including as a result of transformation arrangements mentioned in subsection 97(1) of the Water Act 2007 .

rules means the rules of:

                     (a)  a licensed market; or

                     (b)  a licensed CS facility.

tradeable water rights has the same meaning as in the Water Act 2007 .



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