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Mifid, Uncategorized

FCA Hedge Exemption application guide and form

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.

 

 

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on energy and commodity regulation. He has more than 20 years of experience in energy and commodity trading, credit, risk and financial technology. He has delivered a series of trading, credit and risk solutions to a wide variety of oil majors, power and gas companies and investment banks. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy 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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