The following Financial Services guidance note provides comprehensive and up to date legal information covering:
BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Key issues for derivatives transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.
The global commodities market covers a wide range of products, which are traditionally divided into hard and soft commodities:
'soft commodities'—generally refer to harvested products such as wheat, sugar, cocoa, soy beans or corn
'hard commodities'—refer to extracted products such as precious or base metals, rubber or energy products such as oil
Global commodities markets work to standard measurements, such as deliverable grades and standard pricing by weight, which allows participants to buy commodities unseen, safe in the knowledge that they are certified to the recognised standard.
Commodity derivative contracts take their value from the underlying price of a traded commodity and require payments to be made or products delivered based on the movement of that price. They can be traded ‘over-the-counter’ (OTC) or on exchange. These contracts will reference prices quoted for standardised commodities on global commodities markets. See The nature of financial derivatives—Over-the-counter or exchange traded derivatives.
Commodity derivatives are offered
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