The UK’s Financial Conduct Authority (FCA) has recently updated their MiFID Ii Commodity Derivatives page (see here). The page now contains a guide and step by step walk through for Non Financial Entities (NFEs) to apply for a hedge exemption from position limits under RTS 21. The guide can be found here and the step by step walk through here. The portal through which to submit hedge exemptions is expected to open in October. The portal is to be used to apply for exemptions relating the commodity derivative contracts on trading venues in the UK. Exemptions for contracts on other venues should be made to the National Competent Authority (NCA) of the jurisdiction in which the venue is found.
The MiFID II position limits rules, as specified in RTS 21, permit NFEs to apply for a hedge exemption on a contract basis. If accepted, the portion of a position which is a hedge will not contribute towards the limit’s utilisation. This will be monitored through position reporting as required by venues and investment firms. The FCA’s application process requires a full justification of the exemption, and also a statement on the current size of activity. NFEs are required to adjust their applications if the circumstances around the application change significantly.