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Updated Position Limits Q+A issued by ESMA

ESMA yesterday issued a number of updated Questions and Answers documents relating to MiFID II, including one on Commodity Derivatives, which can be found here. Links to the other Q+As, which include one on venues such as OTFs and another on transparency can be found in the press release here. This follows the release of several other Q+As on MiFID II and also more information on the new EMIR reporting formats (see here).

The document does not provide any updates on the Ancillary Activity test as specified under RTS 20. There are 4 answers on Position Limits as outlined in RTS 21:

  • Question 10 (page 14) describes how limits will be set on C10 contracts, in particular freight derivatives, indices and differentials. Several types of C10 underlying will have no position limits set.
  • Question 11(page 15) states that hedge positions for which a hedge exemption has been granted may not be netted against speculative positions.
  • Question 12(page 15) states that a “single fungible pool of open interest” which is used as a criteria for defining equivalent on venue contracts includes contracts cleared by the same and inter operable CCPs and also those in energy which can be operationally netted.
  • Question 13 (page 15) describes how to establish whether a contract of high variability is regarded as being illiquid by having an open interest of under 10,000 lots.

There remain many unanswered questions on this topics of position limits and the ancillary activity test. it will be hoped by many that further Q+A updates will be issued soon.

The two topics and others will be examined in detail during a training course being run by ETR Advisory and Entrima on the 2nd May in London. The list of ETR courses can be found here.


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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