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ESMA updates its Q&A on MiFID II commodity derivatives topics

27 March 2018

The European Securities and Markets Authority (ESMA) has today updated its Questions and Answers (Q&As) on the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) regarding commodity derivatives topics.

These Q&As provide clarification on issues related to the MiFIDII/MiFIR regime for commodity derivatives, including on position limits, position reporting, and ancillary activity.

New or revised answers are provided on the following topics:

  • Position limits: the Q&A clarifies the circumstances under which less liquid contracts may receive bespoke position limits established by the relevant national competent authority (NCA); and it introduces a tailored approach to the development and application of commodity position limits for spread contracts (i.e. spread positions are disaggregated, and the subsequent individual constituent positions are added to the relevant overall position for the relevant contract).
  • Position reporting: the Q&A clarifies to which NCA positions in an OTC commodity derivative contract, which is economically equivalent to more than one EU exchange-traded derivative (ETD) contract, must be reported when the ETD contracts are not the same contract as defined in Article 5(1) of RTS 21.

The purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provide responses to questions raised by market participants in relation to the practical application of the provisions relating to commodity derivative issues.

ESMA will continue to develop these Q&As in the coming months and will review and update them where required.