This content is from: Local Insights


Commodity swaps in Italy are classified as financial instruments as are equity, currency and interest rate swaps. This is pursuant to article 1, paragraph 2 of Legislative Decree No 58 of the Consolidated Law on Financial Intermediation (February 24 1998). According to the public authority responsible for regulating the Italian securities market (Consob) trading in commodity swaps can be considered an investment service as defined in article 1, paragraph 5 of the same Decree.

Investment services under Italian law can only be provided by banking institutions, investment firms and authorized intermediaries, and must be carried out in a professional manner and addressed to the public.

Ministerial Decree No 329 (June 26 1997) implementing and supplementing the provisions concerning professional offers to the public of investment services provides for certain exemptions. Pursuant to Article 2, letter (a) of Ministerial Decree No 329 an exemption is made for investment services provided to controlling or controlled companies or to companies that are otherwise linked to others because in such a case investment services may be treated as not addressed to the public. In addition, according to Article 2, letter (b) of Ministerial Decree No 329 persons providing investment services in an incidental manner can benefit from an exemption.

Other exemptions are also provided by Directive No 22 of the European Council of May 10 1993 on investment services in the securities field (Directive No 22). Article 2, paragraph 2, letter (i) of Directive No 22 is of particular concern as it states that "the Directive shall not apply to persons whose main business is trading in commodities among themselves or with producers or professional users of such products and who provide investment services only for such producers and professional users, to the extent necessary for their main business".

This provision has not been implemented by Italian laws. Furthermore, Annex B of Directive No 22 only contemplates interest rate, currency and equity swaps and does not mention swaps on commodities among the transferable securities to which the Directive is applicable.

For these reasons, Italian firms do not seem to be allowed to trade in commodity swaps with other Italian firms unless they are investment firms, authorized intermediaries or banks or unless the investment services are provided to firms that are part of their group or in an incidental manner.

This is highlighted in Consob communication No 1055860 of July 19 2001 but a change allowing Directive No 22 to be reflected more accurately would be welcome.

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