The European Commission has published a new answer in its Q&As on the Markets in Financial Instruments Directive (MiFID). This is about whether a rolling spot foreign exchange on margin takes the form of a derivative contract or a contract for difference to
be considered a financial instrument under MiFID.
The Q&A explains that as opposed to spot trading where there is immediate delivery, rolling spot forex contracts can be indefinitely renewed and no currency is
actually delivered until a party affirmatively closes out its position. This exposes both parties to fluctuations in the underlying currencies. As a result, rolling spot forex contracts are a type of derivative contract (I.e. either a forward or a financial
contract for difference) relating to currencies and are considered a financial instrument as defined under MiFID.