The Stamp Duty and Stamp Duty Reserve Tax (Investment Exchanges and Clearing Houses) Regulations 1992

Transfers of securities to members of LIFFE—prescribed circumstances

5.—(1) In the circumstances prescribed by paragraph (2), a charge to stamp duty shall be treated as not arising.

(2) The circumstances prescribed by this paragraph are where—

(a) in relation to an instrument transferring equity securities of a particular kind on sale to a member of the description prescribed by regulation 3(c) or the nominee of such a member, it is shown to the satisfaction of the Board that the transaction to which the instrument gives effect was carried out by the member in the circumstances prescribed by sub-paragraphs (b) and (c);

(b) those securities were received by the member pursuant to the transfer—

(i) as an options market maker at the date of the transfer by way of a hedge against the likelihood of his having to deliver such securities on a future exercise of options which he had bought or sold, or

(ii) as an options principal trader at the date of the transfer by way of a hedge against the likelihood of his having to deliver such securities on a future exercise of options which he had bought or sold, or

(iii) in order to meet his obligation to deliver or receive securities resulting from the earlier exercise of options by or against him, or

(iv) in order to meet his obligation to deliver securities as the result of an earlier agreement to sell securities which at the time of the agreement he did not own and had not agreed to purchase and which he had agreed to sell in order to hedge the likelihood of his having to receive such securities on a future exercise of options which he had bought or sold;

(c) the number of securities so received by the member—

(i) where paragraph (i) of sub-paragraph (b) applies, does not result in the total number of securities of that kind held by, or agreed to be transferred to, the member at the date of the transfer for the purpose specified in that paragraph exceeding the Maxlong limit applicable on that date in respect of securities of that kind, or

(ii) where paragraph (ii) of sub-paragraph (b) applies, does not result in the total number of securities of that kind held by, or agreed to be transferred to, the member at the date of the transfer for the purpose specified in that paragraph exceeding the Deltapluslong limit applicable on that date in respect of securities of that kind, or the Maxlong limit applicable on that date in respect of securities of that kind to which he would be subject if he were a market maker, whichever is the less, or

(iii) where paragraph (iii) of sub-paragraph (b) applies, does not exceed the amount, if any, by which the number of securities which he is so obliged to deliver exceeds the number of securities of that kind calculated by reference to the formula—

A + B - C

where—

• A is the number of securities of that kind which he held at the time of exercise of those options, or had previously agreed to receive as a hedge against the likelihood of his having to deliver such securities on a future exercise of those options, other than securities which he was obliged to deliver at that time as the result of an earlier agreement to sell securities which at the time of the agreement he did not own and had not agreed to purchase, which he had agreed to sell in order to hedge the likelihood of his having to receive such securities on a future exercise of options which he had bought or sold, and which did not exceed the appropriate limit at the time of the agreement.

• B is the number of such securities which he was obliged to receive at that time as a result of the exercise of other options by or against him, and

• C is the number of such securities which he held or had agreed to receive at that time as a hedge against the likelihood of his having to deliver such securities on a future exercise of other options which he had bought or sold, or

  (i)

  where paragraph (iv) of sub-paragraph (b) applies, does not exceed the appropriate limit at the time of the agreement.

(3) An instrument on which a charge to stamp duty is treated as not arising by virtue of paragraphs (1) and (2) shall not be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty.

(4) For the purpose of the definition of A in paragraph (2)(c)(iii), “the appropriate limit” means—

(a) where the member was an options market maker at the time of the agreement in relation to the securities which were the subject of the agreement, the Maxlong limit, and

(b) where the member was an options principal trader at the time of the agreement in relation to the securities which were the subject of the agreement, the Deltapluslong limit or the Maxlong limit, whichever is the less.

(5) For the purpose of paragraph (2)(c)(iv), “the appropriate limit” means—

(a) where the member was an options market maker at the time of the agreement in relation to the securities which were the subject of the agreement, the Maxshort limit, and

(b) where the member was an options principal trader at the time of the agreement in relation to the securities which were the subject of the agreement, the Deltaplusshort limit or the Maxshort limit, whichever is the less.