[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR34.2]

[Page 405]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 34_REGULATION OF HYBRID INSTRUMENTS--Table of Contents
 
Sec.  34.2  Definitions.

    (a) Hybrid instruments. Hybrid instrument means an equity or debt 
security or depository instrument as defined in Sec.  34.3(a)(1) with 
one or more commodity-dependent components that have payment features 
similar to commodity futures or commodity option contracts or 
combinations thereof.
    (b) Commodity-independent component. Commodity-independent component 
means the component of a hybrid instrument, the payments of which do not 
result from indexing to, or calculation by reference to, the price of a 
commodity.
    (c) Commodity-independent value. Commodity-independent value means 
the present value of the payments attributable to the commodity-
independent component calculated as of the time of issuance of the 
hybrid instrument.
    (d) Commodity-dependent component. A commodity-dependent component 
means a component of a hybrid instrument, the payment of which results 
from indexing to, or calculation by reference to, the price of a 
commodity.
    (e) Commodity-dependent value. For purposes of application of Rule 
34.3(a)(2), a commodity-dependent value means the value of a commodity 
dependent-component, which when decomposed into an option payout or 
payouts, is measured by the absolute net value of the put option premia 
with strike prices less than or equal to the reference price plus the 
absolute net value of the call option premia with strike prices greater 
than or equal to the reference price, calculated as of the time of 
issuance of the hybrid instrument.
    (f) Option premium. Option premium means the value of an option on 
the referenced commodity of the hybrid instrument, and calculated using 
the same method as that used to determine the issue price of the 
instrument, or where such premia are not explicitly calculated in 
determining the issue price of the instrument, the value of such options 
calculated using a commercially reasonable method appropriate to the 
instrument being priced.
    (g) Reference price. A reference price means a price nearest the 
current spot or forward price, whichever is used to price instrument, at 
which a commodity-dependent payment becomes non-zero, or, in the case 
where two potential reference prices exist, the price that results in 
the greatest commodity-dependent value.