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Mifid

ESMA issues updated MiFID II commodity derivative Q+A

ESMA has updated the questions and answers document on commodity derivatives issues under MiFID II. The updated document can be found here.  There are 3 new questions and 1 updated one:

Position Limits

  • Q10 – p19 (Updated)- Limits on “C10” derivatives – Should be set on freight derivatives and indices using open interest.
  • Q16 – p21 – What happens if a limit is both illiquid/new (and therefore has a limit of 2,500 lots) AND has a small number of market makers ( so the limit can go up to 50%)? – The NCA can choose where the combined spot month and other moths limit is over 5,000 lots, using the criteria specified in RTS 21.
  • Q17 – p22 – How are limits set on spread contracts? – If the constituent contracts that comprise the spread have a limit, then the position should be disaggregated to those limits. Otherwise the spread contract itself will receive a limit using the open interest of spot month and other months.

Position Reporting

  • Q21 – p37  – Where should EEOTC positions that have more than open contract as equivalent where the underlying are run by different NCAs be reported (for investment firms) ?  – the investment firm should make a choice and report to one of the NCAs only.

There has not been an updated for some months (see here for the previous version).

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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