SPAIN Law and Practice Contributed by: Miguel Cases and Claudi Rossell, Cases & Lacambra
whose potential losses are not limited at the time of closing. In the last four years, derivatives on emission allow - ances have been steadily growing in Spain, spurred by the impending discontinuation of the emission allow - ances that are currently freely assigned to major emit - ters of greenhouse gases. At present, forwards are the most common type of OTC product in this market. Sustainability-linked derivatives (SLDs) – ie, OTC derivatives whose pricing and/or payment obliga - tions rely on meeting certain climate-related key per - formance indicators (KPIs), sustainable performance targets (SPTs) or ESG scores, are also well known in Spain. For the time being, when based on the frame - work contract for financial operations ( contrato marco de operaciones financieras (CMOF)) model, the related provisions are typically bespoke (tailor-made). It is quite likely that, assuming the standardised clauses for SLDs of the International Swaps and Derivatives Association (ISDA) win favour among derivatives prac - titioners, such clauses will become the standard in Spanish practice. In connection with derivatives on crypto-assets, after being fully authorised by the CNMV in 2023, MEFF published a set of terms and conditions for futures on crypto indexes in May 2024 and is about to trade futures in Bitcoin and Ethereum. This market segment is restricted to institutional investors, with all products settled by differences. MEFF does not clear any trans - actions involving custody arrangements. In addition to this authorisation, the CNMV released a set of rules on publicity related to crypto-assets, whose scope embraces all assets other than financial instruments and consequently should not be deemed applicable to derivative transactions. It is quite likely that the ISDA digital asset derivatives definitions will win favour in Spain in the near future, although this is a matter not yet covered by the SMA (for the time being, this piece of legislation is exclusively focused on tokens, and cryptocurrencies such as Bitcoin and Ethereum are far beyond its current scope), and there are deep con - cerns related to the legal nature of cryptocurrencies under Spanish law that may delay further develop - ments in the trading of such products in Spain.
In addition, it should be noted that EMIR 3 has set out for the first time a prior authorisation regime for Initial Margin (IM) models used as a risk-mitigation technique for OTC derivative contracts not cleared by a CCP. Such authorisation shall be applied to the rel - evant competent authorities (in Spain, CNMV) before using, or adopting a change to, a model for initial mar - gin calculation. In this regard, the European Banking Authority (EBA) has issued an opinion on 17 December 2024. The CNMV has indicated that until the RTS or guide - lines developing the details of the authorisation and validation process for IM exchange models are adopt - ed, the CNMV, following EBA’s recommendations, believes that entities may continue to make use of the existing models and, if any modifications are made to such extent, they must notify such circumstance as an update to the initial application by submitting the information specified in EBA’s statement. 2.6 Exemptions, Non-Derivative Products and Spot Transactions Forwards are deemed OTC derivatives except when used for commercial purposes under the terms set forth in Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU. The most relevant exception is the use of FX forwards as means of payment when the following conditions are met. • They are settled physically other than by reason of a default or other termination event. • At least one of the parties is not a financial coun - terparty (FC) as defined by EMIR. • Their purpose is to facilitate payment for identifi - able goods, services or direct investment. • They are not traded on a trading venue. On 28 September 2020, the CNMV issued a set of guidelines to prevent such conditions being used as a “way out” of MiFID. In particular, these guidelines set out the operational procedures needed to check the existence of actual transactions related to goods, services and investments before closing the contract, coupled with a post-closing review of the commercial character of the related hedged activities.
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