The main focus of this paper is on CfDs. However, we are conscious of the need to ensure that any measures we introduce are framed so that they cover other financial instruments that raise the same issues. At the moment, CfDs are the instrument most widely used for holding an economic interest. The discussion in this paper is therefore presented in terms of CfDs, but this should be understood as shorthand for other derivative instruments which may have the same effect.
We are concerned here solely with CfDs referenced to UK shares admitted to trading on a regulated or other prescribed market. This includes UK shares admitted to the 4 CP07/20: Contracts for Difference: Disclosure (November 2007) regulated markets of UK Recognised Investment Exchanges and to UK shares admitted to the LSE’s AIM market. This is the group of shares for which we implemented MSN rules that are super-equivalent to the TD. For non-UK shares, we have implemented only the minimum MSN rules.
We have not brought issues relating to a person voting equities they have borrowed within the scope of this paper. Those stock borrowing and lending issues are currently under consideration by a number of bodies, including the European Commission and, in the UK, the Takeover Panel. We shall be following these discussions closely.
This paper focuses on long CfD positions, that is CfDs where the holder gains from a rise in the underlying share price. While we recognise that not all CfDs are structured this way, it is long CfDs that may be hedged by the underlying equity, and that are most likely to provide a link to voting rights.