The ABBL also considers that spot trades, whatever their purpose, should be considered as trades ranging in time from T+2 until T+7, which would cover major differences stemming from time zone differences, banking holidays… In the Association’s view there is no such thing as good or bad transactions, moreover, when it depends on the counterparts' status.
In the specific case of FX forward contracts, the ABBL considers that these are not financial instruments either and certainly not derivatives contracts with regards to EMIR. The reason, which is down to the basics of the transaction, is that the only difference with a spot contract is that the settlement of the operation is postponed in time compared to the moment the contract is signed. Nothing is derived or dependent on an underlying afterwards. The date, the amount, the exchange rates are set from the beginning. In some respect the way the underlying currencies evolve is remote to the obligations of both counterparties. This view is specific to the FX Forward; currency options, swaps… are different instruments.
The ABBL would not favour making a distinction between the purposes of the transactions either. The notions of commercial purposes, hedging, for profit are questions of interpretation and speculation about the intent of the counterparties. Furthermore, in the case of financial counterparties many of the trades that would appear as not covering a direct commercial or industrial purpose may be hedging of a prior position for the account of such corporate or SME. Changing the status of these trades may lead to abolishing risk management or protection for other stakeholders.
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