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ACER Recommendation on MiFID Annex I Section C6

Following many discussions, a consultation and technical advice run by ESMA on MiFID Annex I Section C, ACER have just issued a recommendation, which can be found here.

As a brief background, Section C defines the trades that are defined as “financial instruments”. This is of particular interest to those who trade physical commodities, since some of section C defines when a physical forward is defined as a financial instrument. This is covered by paragraphs 6, 7 and 10.

The issue revolves around both where a trade is executed (i.e. the venue type, MTF, OTF etc.) and also whether it must be physically settled, or can be physically settled.

ACER’s recommendation revolves around the definition of “must be physically¬†settled”. They are asking for a tighter definition of “must be physically settled” trades. In particular:

  • A tightening of the definition of the capability to take physical delivery (to specifically include the ability to nominate, for example).
  • That if a contract cannot be settled in cash, then it “must be physically settled”.
  • That contracts which “must be physically settled” do not fall under Section C6.

The recommendation is now submitted to the European Commission.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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