Derivative financial instruments in terms of book-entry securities

The subject being analyzed in the present article is a point about qualification of derivative financial instruments as book-entry securities and about a possibility of their legal regime application to derivative instruments. The objective of the present article was to examine book-entry securities as objects of civil rights, to determine their characteristics and particularities of their accruer, to compare book-entry securities and derivatives, to determine analogous features. The main objective was to examine derivatives in terms of right. The author considered different literature sources and statutes in force. The general scientific methods used in the study were analysis, synthesis and analog method. The specific scientific methods were technical and hermeneutic methods. As a result of the research the author comes to a conclusion that it is incorrect to qualify derivative financial instruments as book-entry securities. The author adduces the following arguments. Firstly, derivative instruments do not always give rise to right of a particular party. Accrue always depends on the existence of a certain condition. The author points out that by the qualification of derivative financial instruments as book-entry securities, the incurrence or dissolution of derivatives as an object will be always under condition. Secondly, book-entry securities always allow stating an entitled or obliged party. But every party of a non-deliverable derivative instrument can be either entitled or obliged subject under certain conditions. Analyzing special aspects of deliverable derivative instruments the author suggests an idea that such instruments can be qualified as book-entry securities under certain conditions. But such a qualification is rather of theoretical than practical importance. In practical terms the right and duty exist inseparably (in a deliverable derivative instrument). Therefore, such financial instruments can not be qualified as book-entry securities. Furthermore, the author raises a question about the differences between a right as a book-entry security and a right as an element of contractual relationship. As a result, the author comes to a conclusion that it is incorrect to qualify derivative financial instruments as book-entry securities because of the absence of an autonomous right by such financial instruments. Consequently, there are no grounds to extend securities regulation on derivatives. In addition, the author finds this approach impractical in terms of regulation of derivatives turn-round.

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