ESMA updates its Q&A on MiFID II commodity derivatives topics
27 March 2018 Paris
Image: Shutterstock
The European Securities and Markets Authority (ESMA) has today updated its questions and answers (Q&As) on the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) regarding commodity derivatives topics.
These Q&As provide clarification on issues related to the MiFID II/Markets in Financial Instruments Regulation (MiFIR) for commodity derivatives, including on position limits, position reporting, and ancillary activity.
New or revised answers are provided on position limits stating the Q&A clarifies the circumstances under which less liquid contracts may receive bespoke position limits established by the relevant national competent authority (NCA).
ESMA stated that this also introduces a tailored approach to the development and application of commodity position limits for spread contracts—spread positions are disaggregated, and the subsequent individual constituent positions are added to the relevant overall position for the relevant contract.
On position reporting ESMA’s Q&A clarifies to which NCA positions in an over-the-counter (OTC) commodity derivative contract, which is economically equivalent to more than one EU exchange-traded derivative (ETD) contract, must be reported when the ETD contracts are not the same contract.
According to ESMA, “the purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provide responses to questions raised by market participants in relation to the practical application of the provisions relating to commodity derivative issues”.
ESMA said it will continue to develop these Q&As in the coming months and will review and update them where required.
These Q&As provide clarification on issues related to the MiFID II/Markets in Financial Instruments Regulation (MiFIR) for commodity derivatives, including on position limits, position reporting, and ancillary activity.
New or revised answers are provided on position limits stating the Q&A clarifies the circumstances under which less liquid contracts may receive bespoke position limits established by the relevant national competent authority (NCA).
ESMA stated that this also introduces a tailored approach to the development and application of commodity position limits for spread contracts—spread positions are disaggregated, and the subsequent individual constituent positions are added to the relevant overall position for the relevant contract.
On position reporting ESMA’s Q&A clarifies to which NCA positions in an over-the-counter (OTC) commodity derivative contract, which is economically equivalent to more than one EU exchange-traded derivative (ETD) contract, must be reported when the ETD contracts are not the same contract.
According to ESMA, “the purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provide responses to questions raised by market participants in relation to the practical application of the provisions relating to commodity derivative issues”.
ESMA said it will continue to develop these Q&As in the coming months and will review and update them where required.
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