2004/383/EC:Commission Recommendation of 27 April 2004 on the use of financial derivative instruments for undertakings for collective investment in transferable securities (UCITS)(Text with EEA relevance)(notified under document number C(2004) 1541/1)
Date: 2004-04-27
Institutions: European Commission
Subjects: application of EU law, approximation of laws, financial instrument, investment company, securities

30.4.2004

EN 

Official Journal of the European Union

L 144/33 

COMMISSION RECOMMENDATION 

of 27 April 2004 

on the use of financial derivative instruments for undertakings for collective investment 
in transferable securities (UCITS) 

(notified under document number C(2004) 1541/1) 

(Text with EEA relevance) 

(2004/383/EC) 

THE COMMISSION OF THE EUROPEAN COMMUNITIES, 

Having regard to  the  Treaty  establishing  the European Community, and in particular Article 
211, second indent, thereof, 

Whereas 

(1)

(2)

One of the aims of the amendments to Council Directive 85/611/EEC of 20 December 
1985 on the coordination of laws, regulations and administrative provisions relating to 
undertakings for collective investment in transferable securities (UCITS)1, introduced 
by Directive 2001/108/EC, was to widen the scope of financial instruments in which a 
UCITS can invest and to enable UCITS to make use of modern investment techniques. 
This  extension  of  permissible  investments  does  not  only  include  money  market 
instruments,  bank  deposits,  units  of  UCITS  and  other  collective  investments 
undertakings:  UCITS  are  now  also  permitted  to  employ  financial  derivative 
instruments as part of their general investment policy, and not only for the purposes of 
hedging positions. 

Another  aim  of  those  amendments  was  to  ensure  investor  protection.  Directive 
85/611/EEC, as amended, therefore establishes an extensive system of risk-limitation: 
In order to ensure that the risks related to the new classes of financial instruments, in 
particularly  regarding  derivatives,  are  duly  and  accurately  monitored,  measured  and 
managed,  management  companies  or  investment  companies  are  required  to  apply 
sound risk measurement processes under the supervision of the competent authorities. 
In  particular,  these  risk  measurement  processes  should  enable  them  to  monitor, 
measure and manage at any time the risks of the positions and their contribution to the 
overall risk-profile of the portfolio. Management or investment companies have also to 
employ  processes  for  the  accurate  and  independent  assessment  of  the  value  of  over-
requirements  of  Directive 
instruments.  These 
the-counter 

(OTC)-derivative 

1 OJ L 375, 31.12.1985, p. 3; Directive as last amended by Directive 2001/108/EC of the European Parliament 

and of the Council( OJ L 41, 13.2.2002, p. 35).  

L 144/34 

EN 

Official Journal of the European Union

30.4.2004 

85/611/EEC  call  for  the  establishment  of  an  adequate  framework  for  the  risk-
measurement  and  -management  of  a  UCITS  by  Member  States.  In  order  to  facilitate 
the  development  of  such  a  framework  and  to  ensure  a  harmonised  approach,  it  is 
desirable to recommend some common basic principles for risk-measurement. 

(3)

Agreement  was  reached  in  the  UCITS  Contact  Committee  on  the  benefits  of 
formulating  basic  principles,  which  should  be  taken  into  account  by  Member  States. 
Those  principles  should  help  Member  States  to  ensure  an  equivalent  and  effective 
protection  of  investors  throughout  the  Community  and  level  the  playing  field  for 
UCITS operators and products regulated under different jurisdictions. 

(4) With  regard  to  the  limit  to  global  exposure  relating  to  derivatives  set  out  in  the  first 
subparagraph  of  Article  21(3)  of  Directive  85/611/EEC  and  the  maximum  limit  to 
borrowing transactions laid down in Article 36(2) of that Directive, it should be made 
clear which maximum exposure in total may be incurred by a UCITS. 

(5)

(6)

(7)

(8)

The total exposure of a UCITS needs to be assessed on the basis of both default risk of 
the  UCITS  and  leverage  produced  by  the  use  of  financial  derivative  instruments.  It 
should therefore be ensured that the market risk of a UCITS is adequately measured. It 
is therefore necessary to recommend possible approaches of market risk measurement, 
by  clarifying  the  conditions  for  the  use  of  the  following  types  of  methodologies:  the 
commitment approach; the Value-at-risk approach (VaR-approach) and stress tests. 

For  the  same  reasons  it  is  useful  to  recommend  some  elements  for  the  method  of 
assessing  the  leverage  of  a  UCITS  portfolio  produced  by  the  use  of  financial 
derivative instruments. 

Pursuant  to  the  second  subparagraph  of  Article  21(3)  of  Directive  85/611/EEC,  the 
exposure of a UCITS must be calculated taking into account not only the current value 
of the underlying assets, but also the counterparty risk, future market movements and 
the  time  available  to  liquidate  the  positions.  As  regards  counterparty  risk  related  to 
OTC-derivatives,  specific  requirements  are  laid  down  in  the  second  subparagraph  of 
Article 22(1) of that Directive. In view of these requirements it is desirable to clarify 
the  method  of  calculating  the  counterparty  risk  associated  with  financial  derivative 
instruments and the way in which it relates to the methods and criteria provided for in 
Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  of  20  March 
2000 relating to the taking up and pursuit of the business of credit institutions2. 

Pursuant  to  the  third  subparagraph  of  Article  21(3)  of  Directive  85/611/EEC,  the 
exposure  to  the  underlying  of  the  financial  derivative  instrument  has  to  be  included 
into  the  calculation  of  the  issuer  concentration  limits  laid  down in  Article  22  of that 
Directive.  According  to  that  same  provision,  Member  States  may  allow  that,  when a 
UCITS  invests  in  index-based  derivatives,  these  investments  do  not  have  to  be 
combined  to  the  issuer  concentration  limits  laid  down  in  Article  22.  It  is  therefore 
appropriate to recommend standards for the application of issuer concentration limits 
with regard to financial derivative instruments. 

2 OJ L 126, 26.5.2000, p.1 

30.4.2004

EN 

Official Journal of the European Union

L 144/35 

(9)

(10)

(11)

Uncovered  sales  are  all  transactions  in  which  the  UCITS  is  exposed  to  the  risk  of 
having  to  buy  securities  at  a  higher  price  than  the  price  at  which  the  securities  are 
delivered  and  thus  making  a  loss  and  the  risk  of  not  being  able  to  deliver  the 
underlying  financial  instrument  for  settlement  at  the  time  of  the  maturity  of  the 
transaction. These risks are always relevant for those operations in which the UCITS is 
forced to buy securities in the market to meet its obligations. In those cases the UCITS 
is  exposed  to  the  risk  that  it  cannot  meet  all  or  a  part  of  its  commitments  under  the 
terms  of  a  financial  derivatives  operation.  Article  42  of  Directive  85/611/EEC 
therefore generally prohibits the execution of uncovered sales in order to avoid heavy 
losses  for  UCITS.  However,  in  the  context  of  an  operation  with  financial  derivative 
instruments  having  the  financial  profile  of  an  uncovered  sale,  the  risks  typically 
associated  with  uncovered  sales  may  not  always  have  the  same  relevance.  It  is 
therefore appropriate to clarify the concept of uncovered sales with regard to financial 
derivative  instruments  and  to  recommend  criteria  applicable  to  the  cover  of  a 
derivatives transaction in order to facilitate compliance with Article 42. 

This  Recommendation  is  a  first  step  towards  a  uniform  understanding  of  risk 
measurement  methodologies 
the  UCITS  area.  However,  risk-measurement 
methodologies are submitted to a permanent progress. Further steps may therefore be 
necessary taking into account further developments such as the Basle Capital Accord 
(Basel II) and the future corresponding Community Directive on capital requirements 
for banks and investment firms. 

in 

This  Recommendation  provides  some  basic  elements  which  should  be  taken  into 
consideration by Member States for their implementation of Directive 85/611/EEC as 
amended  by  Directive  2001/108/EC.  It  should  be  noted  that  this  Recommendation  is 
not  intended  to  provide  exhaustive  guidelines  on  the  use  of  financial  derivative 
instruments for UCITS but to outline some principles which can be considered as an 
essential basis of a common risk-measurement approach for UCITS, 

HEREBY RECOMMENDS: 

In  the  framework  of  implementing  Directive  85/611/EEC  Member  States  should  apply  the 
following: 

1. Risk-measurement systems adapted to the relevant risk-profile of the UCITS

In  applying  Article  21(1)  of  Directive  85/611/EEC,  Member  States  are  recommended  to 
ensure  that  management  or  investment  companies  employ  risk  measurement  systems  which 
are adapted to the relevant risk-profile of a UCITS in order to make sure that they accurately 
measure  all  material  risks  related  to  the  UCITS  under  the  supervision  of  the  competent 
authorities.

2. A harmonised interpretation of limitations to the UCITS’ risk- exposure

2.1 Limitation to a UCITS’ global exposure on derivatives and overall risk exposure

Member  States  are  recommended  to  ensure  that  the  global  exposure  relating  to  financial 
derivative instruments may not exceed 100% of the UCITS’ net asset value (NAV), and hence 
that  the  UCITS’  overall  risk  exposure  may  not  exceed  200%  of  the  NAV  on  a  permanent 
basis. 

L 144/36 

EN 

Official Journal of the European Union

30.4.2004 

2.2 Limitation to possible temporary borrowing

Member States are recommended to ensure that the UCITS’ overall risk exposure may not be 
increased  by  more  than  10%  by  means  of  temporary  borrowing,  so  that  the  UCITS’  overall 
risk exposure may not exceed 210% of the NAV under any circumstances. 

2.3 Joint application of points 3 and 4

For the application of the 100% global exposure limit relating to derivatives, Member States 
are recommended to ensure that both points 3 and 4 are respected. 

3. Appropriately calibrated standards to measure market risk

3.1 Adaptation of risk-measurement methodologies to the risk-profile of a UCITS

In  conformity  with  the  overarching  principle  mentioned  under  point  1  and  established  in 
Article  21(1)  of  Directive  85/611/EEC,  Member  States  are  recommended  to  allow  a 
differentiated  methodological  approach  for  the  respective  categories  of  “non-sophisticated 
UCITS”,  which  have  overall  less  and  simpler  derivative  positions  by  using  e.g.  a  few  plain 
vanilla options, and “sophisticated UCITS”. The distinction between, and exact definition of, 
these  categories  requires  further  work  in  accordance  with  point  3.4.  Pending  completion  of 
such  work,  Member  States  should  move  towards  a  more  calibrated  approach  for  measuring 
market risk in accordance with points 3.2 and 3.3. 

3.2 Non-sophisticated UCITS

3.2.1 Use of the commitment approach

Member States are recommended to request their competent authorities to ensure that, in the 
case of non-sophisticated UCITS, they are satisfied that market risk is adequately assessed by 
using the commitment approach, whereby the derivative positions of a UCITS are converted 
into  the  equivalent  position  in  the  underlying  assets  embedded  in  those  derivatives.  For  the 
application  of  the  commitment  approach,  Member  States’  competent  authorities  should  also 
take into account criteria such as the UCITS’ overall exposure deriving from the employment 
of  financial  derivative  instruments,  the  nature,  aim,  number  and  frequency  of  the  contracts 
entered into by the UCITS and the management techniques adopted.  

3.2.2 Technical precisions

In the case of options, Member States are recommended to allow the application of the delta 
approach, which is derived from the sensitivity of the change in the option's price to marginal 
changes  in  the  price  of  the  underlying  financial  instruments.  The  conversion  of  forwards, 
futures and swaps positions should depend on the precise nature of the underlying contracts. 
In  the  case  of  simple  contracts,  the  marked-to-market  value  of  the  contracts  will  usually  be 
relevant. 

3.2.3 Invitation to consider further additional safeguards

Member  States  are  required  to  consider  whether  additional  safeguards  are  requested  in  the 
context  of  the  use  of  the  commitment  approach,  such  as  an  appropriate  cap  to  the  global 
exposure  relating  to  financial  derivative  instruments  below  100%  of  NAV  for  non-
sophisticated UCITS. 

30.4.2004

EN 

Official Journal of the European Union

L 144/37 

3.3 Sophisticated UCITS

3.3.1 Standard use of Value-at-Risk (VaR) approach with stress tests

In  the  case  of  “sophisticated  UCITS”,  Member  States  are  recommended  to  require 
management  or  investment  companies  to  apply  regularly  VaR  approaches.  In  the  VaR-
approaches, the maximum potential loss that a UCITS portfolio could suffer within a certain 
time  horizon  and  a  certain  degree  of  confidence  is  estimated.  Member  States  are 
recommended  to  require  management  or  investment  companies  also  to  apply  stress  tests  in 
order  to  help  manage  risks  related  to  possible  abnormal  market  movements.  Stress  tests 
measure  how  extreme  financial  or  economic  events  affect  the  value  of  the  portfolio  at  a 
specific point of time. 

3.3.2 Invitation to develop common reference standards as a further step

For the application of VaR-approaches, Member States are recommended to require the use of 
appropriate  standards  in  conformity  with  point  3.1.  For  this  purpose, Member States  should 
consider,  as  a  possible  reference  the  following  parameters:  a  99%  confidence  interval,  a 
holding  period  of  one  month  and  “recent”  volatilities,  i.e.  no  more  than  one  year  from  the 
calculation  date  without  prejudice  to  further  testing  by  the  competent  authorities.  Once 
common  standards  have  been  developed  by  further  work  undertaken  by  Member  States  in 
accordance  with  point  3.4,  Member  States  should  allow  management  or  investment 
companies  to  deviate  from  these  standards  only  on  a  case-by-case  basis,  subject  to  the 
appropriate examination of the competent authorities in accordance with what is provided for 
in point 3.3.3. 

3.3.3 Internal risk-measurement models

Member  States  are  recommended  to  accept  only  those  internal  risk-measurement  models 
proposed  by  a  management  or  investment  company  which  are  subject  to  appropriate 
safeguards, including those set out in this recommendation. The models concerned should be 
subject to appropriate examination by the competent national authorities. Member States are 
also  recommended  to  disclose  a  list  of  models  recognised  by  the  competent  national 
authorities, and make them publicly available by appropriate means. 

3.4 Recommendation to carry out further work

Considering  that  these  risk-measurement  methodologies  need  further  refinement,  Member 
States  are  recommended  to  encourage  their  competent  authorities  to  undertake  further  work 
with a view to  elaborating more advanced and elaborated methods of risk-measurement and 
thus develop a convergent Community-wide approach. This concerns in particular: 

" a) 
" b) 

the criteria to identify sophisticated and non-sophisticated UCITS; 
the  conversion  of  financial  derivative  instruments  into  equivalent  underlying  assets
and the netting of positions underlying the financial derivative instruments in case of
the application of the commitment approach; 

" c)  best practices in the area of VaR and stress tests; 
" d) 

the standards which internal models must meet in order to be used by UCITS. 

4. Appropriately calibrated standards to assess leverage

L 144/38 

EN 

Official Journal of the European Union

30.4.2004 

4.1 Use of the commitment approach

In the absence of the advanced methodologies mentioned under point 4.2, Member States are 
recommended to request the use of the commitment approach to assess a UCITS’ leverage, in 
combination  with  the  VaR-approaches  and  the  stress-tests  required  for  the  purpose  of 
measuring market risk exposure of sophisticated UCITS under point 3.3.  

Member States are also recommended to allow management or investment companies which 
use  the  commitment  approach  according  to  point  3.2  to  also  employ  the  commitment 
approach for the assessment of leverage. 

4.2 Invitation to allow the use of further advanced methodologies

In the case of sophisticated UCITS under point 3.3, provided that the supervisory authorities 
are  fully convinced that  a given management or investment company has already developed 
and tested an appropriate method of assessing leverage by the means of VaR-approaches and 
stress  tests  and  provided  that  this  method  is  duly  documented  by  the  management  or 
investment  company,  Member  States  should  consider  recognising  it  for  the  assessment  of 
leverage.  For  this  purpose,  Member  States  are  specifically  recommended  to  consider 
approaches  relying  on  a  standard  of  comparison  such  as  the  VaR/stress  test  value  of  an 
appropriate reference portfolio which complies with the investment policy of a UCITS or the 
VaR/stress test value of an adequate benchmark.  

4.3 Recommendation to carry out further work

Member  States  are  recommended  to  take  into  account  that  the  methods  for  assessing  the 
leverage  of  a  UCITS  need  further  refinement,  in  particular  with  respect  to  the  maximum 
VaR/stress-test  value  corresponding  to  a  total  exposure  of  200%  of  a  UCITS’  NAV. 
Therefore  they  should  encourage  their  competent  national  authorities  to  undertake  further 
work to develop more advanced and sophisticated methods of assessing leverage aiming at the 
development of a convergent Community-wide approach.

5.  Applying  appropriate  standards  and  recognised  risk-mitigation  techniques  to  limit
counterparty risk

5.1 Criteria for the limitation of counterparty risk exposure to OTC derivatives

Member  States  are  recommended  to  ensure  that  all  the  derivatives  transactions  which  are 
deemed to be free of counterparty risk are performed on an exchange where the clearinghouse 
meets the following conditions: it is backed by an appropriate performance guarantee, and is 
characterised  by  a  daily  mark-to-market  valuation  of  the  derivative  positions  and  an  at  least 
daily margining.  

5.2 Recommendation to use maximum potential loss

Member  States  are  recommended  to  require  the  exposure  per  counterparty  on  an  OTC-
derivative transaction to be measured on the maximum potential loss incurred by the UCITS 
if the counterparty defaults and not on the basis of the notional value of the OTC contract. 

5.3 Invitation to use the standards laid down in Directive 2000/12/EC as a first reference

30.4.2004

EN 

Official Journal of the European Union

L 144/39 

In  compliance  with  the  fixed  quantitative  prudential  limits  already  imposed  by  Directive 
2001/108/EC, Member States are recommended to require the assessment of counterparty risk 
with regard to OTC-derivatives in accordance with the marking-to-market method laid down 
in Directive 2000/12/EC of the European Parliament and of the Council3, notwithstanding the 
need  of  appropriate  pricing  models  when  the  market  price  is  not  available.  Member  States 
should  also  require  the  use  of  the  full  credit  equivalent  approach  laid  down  in  Directive 
2000/12/EC, including an add-on methodology to reflect the potential future exposure. 

5.4  Recognition  of  collateral  for  the  purpose  of  assessing  a  UCITS’  counterparty  risk 
exposure

5.4.1 General criteria

Member States are recommended to allow for the recognition of collateral in order to reduce a 
UCITS’ counterparty risk provided that, in accordance with the prudential rules laid down in 
Directive 2000/12/EC and taking into account further developments, the collateral:  

" a) 
" b) 

" c) 

is marked-to-market on a daily basis and exceeds the value of the amount at risk; 
is  exposed  only  to  negligible  risks  (e.g.  government  bonds  of  first  credit  rating  or
cash) and is liquid; 
is held by a third part custodian not related to the provider or is legally secured from 

the consequences of a failure of a related party; 
" d)  can be fully enforced by the UCITS at any time. 

5.4.2 Risk concentration limits

In accordance with the general principle of risk-spreading, Member States are recommended 
to  ensure  that  the  exposure  to  counterparty  risk  on  a  given  entity,  respectively  group,  after 
taking into account any collateral received from that entity, or group, may not be higher than 
the 20% limit laid down in Directive 85/611/EEC, both at individual level, under the second 
sub-paragraph of Article 22(2) and at group level, under Article 22(5) of that Directive. 

5.5 Recognition of netting

Member States are recommended to allow UCITS to net their OTC-derivative positions vis-à-
vis  the  same  counterparty,  provided  that  the  netting  procedures  comply  with  the  conditions 
laid down in Directive 2000/12/EC and that they are based on legally binding agreements. 

6. Using adequate methodologies when applying limitations to issuer risk

6.1 Adaptation of the risk-measurement methodologies to the derivatives typology

Considering that the fourth subparagraph of Article 21(3) of Directive 85/611/EEC provides 
that,  in  order  to  include  financial  derivative  instruments  into  the  issuer  concentration  limits 
foreseen  by  Article  22,  they  should  be  converted  into  equivalent  underlying  positions, 
Member States are recommended to require the use of methodologies adequate to the type of 
instrument considered. For example, Member States may allow the use of the delta approach 
for options. In cases where this approach is not relevant or technically impossible, due to the 
complexity  of  the  concerned financial derivative instrument, Member States may then allow 

3 OJ L 126, 26.5.2000, p.1 

L 144/40 

EN 

Official Journal of the European Union

30.4.2004 

the  use  of  an  approach  based  on  the  maximum  potential  loss  linked  to  that  derivative  as  a 
maximum threshold assessment of the solvency risk. 

6.2 Case of index-based derivatives

Member States are advised, in the use of their discretionary powers for the application of the 
option  foreseen by the  third  subparagraph of Article 21(3) of Directive 85/611/EEC, to take 
into  account  whether  the  underlying  index  of  a  financial  derivative  instrument  meets  the 
requirements of Article 22a of that Directive. For the application of Article 21(2) and the third 
subparagraph of Article 21(3) of that Directive, Member States are recommended to consider 
that,  a  management  or  investment  company  should  generally  be  prevented  from  using 
financial derivative instruments based on a self-composed index with the intent to circumvent 
the  issuer  concentration  limits  of  Article  22.  Member  States  are  also  recommended  to 
consider that a management or investment company should be prevented from using financial 
derivative instruments based on indices which do not comply with the concentration limits set 
by Article 22a of Directive 85/611/EEC. 

6.3 Risk-concentration limits

Member States are recommended to require management companies or investment companies 
to  cumulate  counterparty  risk  with  issuer  risk  versus  the  same  entity  or  group  for  the 
application  of  the  20%  NAV-limit  pursuant  to  the  second  subparagraph  of  Article  22(2)and 
Article 22(5) of Directive 85/611/EEC. 

7.  Applying  relevant  cover  rules  to  transactions  with  both  listed,  and  OTC, financial 
derivative instruments

7.1 Appropriate cover in the absence of cash-settlement

When  the  financial  derivative  instrument  provides  for,  either  automatically  or  at  the 
counterpart’s choice,  physical  delivery  of the  underlying financial  instrument  on  maturity or 
exercise,  and  provided  that  physical  delivery  is  common  practice  on  the  considered 
instrument,  Member  States  are  recommended  to  require  UCITS  to  hold  this  underlying 
financial instrument as cover in their investment portfolios.  

7.2  Exceptional  substitution  with  an  alternative  underlying  cover  in  the  absence  of  cash 
settlement

In  cases  where  the  risks  of  the  underlying  financial  instrument  of  a  derivative  can  be 
appropriately  represented  by  another  underlying  financial  instrument  and  the  underlying 
financial instrument is highly liquid, Member States should consider allowing UCITS to hold 
exceptionally  other  liquid  assets  as  cover  provided  that  they  can  be  used  at  any  time  to 
purchase  the  underlying  financial  instrument  to  be  delivered  and  that  the  additional  market 
risk which is associated with that type of transaction is adequately measured. 

7.3 Substitution with an alternative underlying cover in the case of cash-settlement

Where  the  financial  derivative  instrument  is  cash-settled  automatically  or  at  the  UCITS 
discretion,  Member  States  should  consider  allowing  the  UCITS  not  to  hold  the  specific 
underlying instrument as cover. In this case, Member States are recommended to consider the 
following categories as acceptable cover: 

30.4.2004

EN 

Official Journal of the European Union

L 144/41 

– 

– 

– 

a) 

b) 

Cash; 

Liquid  debt  instruments  (e.g.  government  bonds  of  first  credit  rating)  with
appropriate safeguards (in particular, haircuts); 

c)  Other  highly  liquid  assets  which  are  recognised  by  the  competent  authorities
considering  their  correlation  with  the  underlying  of  the  financial  derivative
instruments, subject to appropriate safeguards (e.g. haircuts where relevant). 

In the context of the application of Article 42 of Directive 85/611/EEC, Member States should 
consider  as  “liquid”  those  instruments  which  can  be  converted  into  cash  in  no  more  than 
seven business days at a price closely corresponding to the current valuation of the financial 
instrument on its own market. Member States are recommended to ensure that the respective 
cash amount be at the UCITS’ disposal at the maturity/expiry or exercise date of the financial 
derivative instrument.  

7.4 Calculation of the level of cover

Member States are recommended to require the level of cover to be calculated in line with the 
commitment approach. 

7.5 Nature of the underlying financial instrument

Member  States  are  recommended  to  require  that  the  underlying  financial  instrument  of 
financial  derivative  instruments,  whether  they  provide  for  cash-settlement  or  physical 
delivery,  as  well  as  the  financial  instruments  held  for  cover  have  to  be  compliant  with  the 
Directive and the individual investment policy of the UCITS.  

7.6 Recommendation to undertake further common work

As  regards  cover  of  transactions  with  financial  derivative  instruments,  Member  States  are 
recommended  to  encourage  their  competent  authorities  to  identify  a  common  typology  of 
transactions  with  financial  derivative  instruments  in  which  the  risk  profile  of  an  uncovered 
sale may be identified. 

8.  The  Member  States  are  requested  to  inform  the  Commission,  insofar  as  possible,  by  30 
September  2004  of  any  measures  they  have  taken  further  to  this  Recommendation  and  to 
inform it of the first results of its implementation, in as far as they are able, no later than 28 
February 2005. 

9. This Recommendation is addressed to the Member States. 

Done at Brussels, 27 April 2004. 

For the Commission 
Frederik BOLKESTEIN 
Member of the Commission