taxud/2414/08 - European Commission - Europa

Article 19
1. The following shall be considered to be services having the specific and essential
character of "exchange of currency" or "provision of cash" as referred to in point (d) of
Article 135(1) of Directive 2006/112/EC:
(a)
the issuance of customer and merchant statements for the exchange and the
distribution of bank notes and coins;
These are services carried out for ensuring the correctness of transactions and they settle
the legal responsibilities and the financial situation;
(b)
operating services for cash machines supplied between financial institutions;
Operating services for cash machines are comparable to exempt interchange services
supplied between credit card operators; they are supplied to ensure the transfer and
clearing between financial institutions of funds dispensed by cash machines. This
includes settlement of accounts following the distribution of banknotes and coins (e.g.:
credit card exchange services following the distribution of cash money via a cash
machine or manually and where not already covered by bank account operation services).
Such services are not only essential and specific elements of exempted cash services but
the core element of modern cash services. (Some lawyers in the Commission's Legal
Service were sceptic about this approach.)
(c)
the issuance of spots, forward transactions, futures, currency swaps, foreign
exchange options and forex swaps;
These are supplies of derivatives. A spot transaction is a two-day delivery transaction.
This trade represents a “direct exchange” between two currencies, has the shortest time
frame, involves cash rather than a contract; and interest is not included in the agreedupon
transaction. Another way to deal with the foreign exchange risk is to engage in a
forward transaction. In this transaction, money does not actually change hands until some
agreed upon future date. A buyer and seller agree on an exchange rate for any date in the
future, and the transaction occurs on that date, regardless of what the market rates are
then. The duration of the trade can be a few days, months or years. Foreign currency
futures are usually forward transactions with standard contract sizes and maturity dates
— for example, 500,000 EURO for next November at an agreed rate. Futures are
standardized and are usually traded on an exchange created for this purpose. The average
contract length is roughly 3 months. Futures contracts are usually inclusive of any
interest amounts. Another common type of forward transaction is the currency swap. In
such a swap, two parties exchange currencies for a certain length of time and agree to
reverse the transaction at a later date. These are not contracts and are not traded through
an exchange. A foreign exchange option is a derivative where the owner has the right but
not the obligation to exchange money denominated in one currency into another currency
at a pre-agreed exchange rate on a specified date. A Forex swap is an over the counter
short term interest rate derivative. It consists of a spot foreign exchange transaction
entered into at exactly the same time and for the same quantity as a forward foreign
exchange transaction. The forward portion is the reverse of the spot transaction, where
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