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ESMA updates opinion on position limits with respect to third country positions

Last week ESMA updated the opinion document on determining third-country trading venues for the purpose of position limits under MiFID II. The new document can be found here.

The document relates to whether positions on third country venues (i.e. outside the EU) contribute to position limits under MiFID II. This could occur if the position on the third country venue is considered to be an “Economically Equivalent OTC” position (EEOTC), i.e. it represents a position that is considered the same as a contract in the EU on which a MiFID II position limit has been placed. If the third country position is an EEOTC it will contribute to the “base” EU contract’s limit utilisation.

In 2017, ESMA issued its first opinion document on this topic (see here).  In it, ESMA gave the opinion that in order for a third country position to be considered “EEOTC”, the position must be considered “Over The Counter” (i.e. OTC). It then went on to say that provided the third country venue was recognised under this, rule, the position would be “on venue” and hence not “OTC”. As a result, the position cannot be “EEOTC”.

This update to the opinion reiterates this view, and lists the third country venues which are currently recognised under this rule.

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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