According to the European Securities and Markets Authority the commodity derivative contract in the legal form of a “spread” or “diff” contract is a contract that is cash-settled and whose value is determined by the difference between two reference commodities which may vary in type, grade, location, time of delivery, or other features (Questions and Answers on MiFID II and MiFIR commodity derivatives topics, 05 April 2017, ESMA70-872942901-28).
In turn, REMIT Transaction Reporting User Manual (TRUM, Version 4.1, 30 April 2021) published by the European Agency for the Cooperation of Energy Regulators (ACER) includes - for the purpose of transaction reporting under REMIT - the following definition of spread contracts related to financial products:
“Spread: contract that involves using price differences in forwards / future / option prices, rates, based upon inter-market relationships (time differences (maturities), locational differences, commodity differences). Spread can be established by taking a position in one contract (first leg) and simultaneously taking an opposite position in another contract (second leg). However spread might also refer to trading based on pure price difference with an index or reference price”.
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Documentation |
Questions and Answers on MiFID II and MiFIR commodity derivatives topics, 05 April 2017, ESMA70-872942901-28, Question 10
REMIT Transaction Reporting User Manual (TRUM), ACER, Version 4.1, 30 April 2021
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