1. For the purposes of paragraphs 6 and 7 of Part 1 of Schedule 2 to the Regulated Activities Order, a wholesale energy product must be physically settled where all the following conditions are satisfied:
(a) it contains provisions which ensure that parties to the contract have proportionate arrangements in place to be able to make or take delivery of the underlying commodity; a balancing agreement with the Transmission System Operator in the area of electricity and gas shall be considered a proportionate arrangement where the parties to the agreement have to ensure physical delivery of electricity or gas.
(b) it establishes unconditional, unrestricted and enforceable obligations of the parties to the contract to deliver and take delivery of the underlying commodity;
(c) it does not allow either party to replace physical delivery with cash settlement;
(d) the obligations under the contract cannot be offset against obligations from other contracts between the parties concerned, without
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