On the legal nature of depository receipts and credit notes in terms of financial derivatives

The present article deals with some problems relating to derivatives correlation with such financial instruments as depository receipts and credit notes. The relevance of the problem is caused by the fact that the position of the derivatives turn-round has a direct influence not only on the whole financial market, but also on the overall status of domestic economy as well as on the status of international economy. In spite of the wide use of derivatives, the matter about the examples of derivatives is settled by halves. The author mentions some instances of derivative financial instruments, whose legal nature does not provoke discussion. These are futures, options, swaps, forwards. However, the article states new examples of derivatives. The legal nature of such instruments is still not clear. These are credit notes and depository receipts. In view of their wide use, scholars believe it necessary to determine their legal nature and the aspects of their usage. The author stated these objectives by writing this article. The article compares the characteristics of these instruments in order to reach the stated objectives. As a result, the author comes to a conclusion that depository receipts, being securities, do not have features of derivatives, because derivative instruments are qualified as contracts. The author makes this conclusion by the analysis of current legislation. It provides that depository receipts are securities. The author's conclusion is also confirmed by the analysis of derivatives characteristics: they are contracts, under them one party is obliged to take some actions, for example, to pay money or to deliver goods, and the other party is entitled to require performance. The article also reviews the special aspects of the legal nature and practical use of credit notes. The author adduces a thesis about their qualification as a certain non-defined contractual structure. As a result of this analysis, the author reaches a conclusion about the possibility of their qualification as derivative instruments, but only in case of the consideration of such instruments as contracts. The present article gives examples of the practical use of such financial instruments, the author draws the conclusions.

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