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Mifid

ESMA issues position limits opinion document – agrees with FCA

ESMA has issued this opinion document  on the ICE Low Sulphur Gasoil 1st Line contract, following opinion documents issued previously (see here). The document agrees with the limits proposed by the FCA (see here), in setting the spot month limit at 25% of deliverable supply and the other months at 27%. ESMA has also agreed to the aggregation method employed by the FCA, where different delivery months and other related contracts are combined under the one limit.

The view is expressed that “there is scope to lower the spot month limit without constraining
market activity given that it is well above the positions held by market participants”. However, the document continues that the limits: “overall appear to achieve a reasonable balance between the need to prevent market abuse and to ensure an orderly market and orderly settlement while ensuring that the development of commercial activities in the underlying Low Sulphur Gasoil market and the liquidity of the ICE Low Sulphur Gasoil 1st line Futures contracts are not hampered“.

There is a proviso: “However, to help ensure that the risk of not achieving the objectives set out in Article 57(1) of MiFID II does not materialise, ESMA considers that trading patterns in the ICE Low Sulphur Gasoil 1st line Futures should be carefully monitored by the competent authority in particular during the spot month and that the spot month limit should be reviewed on a timely basis.“.

ESMA has also updated the central list of bespoke position limits, which can be found here. There are still many opinion documents to follow.

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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