“(2)

Subject to paragraph (4), options—

(a)

to which paragraph (1) does not apply;

(b)

which relate to commodities;

(c)

which may be settled physically; and

(d)

either—

(i)

to which paragraph 5 or 6 of Section C of Annex I to the markets in financial instruments directive, the text of which is set out in Part 1 of Schedule 2, applies, or

(ii)

which in accordance with Article 38 of the Commission Regulation (the text of which is set out in Part 2 of Schedule 2) are to be considered as having the characteristics of other derivative financial instruments and not being for commercial purposes, and to which paragraph 7 of Section C of Annex I to the markets in financial instruments directive applies.

(3)

Subject to paragraph (4), options—

(a)

to which paragraph (1) does not apply;

(b)

which may be settled physically; and

(c)

to which paragraph 10 of Section C of Annex I to the markets in financial instruments directive (read with the Commission Regulation) applies.

(4)

Paragraphs (1)(e), (2) and (3) only apply to options in relation to which—

(a)

an investment firm or credit institution is providing or performing investment services and activities on a professional basis,

(b)

a management company is providing, in accordance with Article 5(3) of the UCITS directive, the investment service specified in paragraph 4 or 5 of Section A, or the ancillary service specified in paragraph 1 of Section B, of Annex I to the markets in financial instruments directive, or

(c)

a market operator is providing the investment service specified in paragraph 8 of Section A of Annex I to the markets in financial instruments directive.

(5)

Expressions used in paragraphs (1)(e), (2) and (3) and in the markets in financial instruments directive have the same meaning as in that directive.”.