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MiFID II 

Position limits 

01 December 2011

Impact Red traffic light High/medium impact, depending on the use of the powers in practice

Other areas to consider

Commodities, OTC derivatives; Powers and sanctions

Current MiFID rules

N/A

FSA rules

N/A

Proposed changes
Draft Directive
Articles 59, 60 and 72

As a result of the growth in the size of the derivatives markets over the last few years, the Commission believes that there is a case for stronger and more consistent powers for regulators to oversee derivatives positions, particularly in commodity derivatives.

Position limits

The draft Directive therefore requires that regulated markets, MTFs and OTFs impose limits on the number of commodity derivative contracts which any participant can enter into over a certain period of time, or put in place other arrangements with equivalent effect. These are to be imposed in order support liquidity, prevent market abuse, and support orderly pricing and settlement conditions. ESMA shall develop draft regulatory technical standards determining position limits as well as any exemptions.

Position reporting by categories of traders

Regulated Markets, MTFs and OTFs that admit to trading or trade commodity derivatives or emission allowances or derivatives thereof shall make public a weekly report on the aggregate positions held by different categories of traders for the different financial instruments and provide the regulator with a complete breakdown of positions of its members and participants, including any positions held on behalf of their clients, on request.

To enable the trading venue to make such reports, members and participants shall report to the respective trading venue details of their positions (including those of clients) in real time. ESMA will prepare technical standards specifying the format and content of reports to be prepared by trading venues.

Regulators shall also have the discretion to require any person that has provided such information to take steps to reduce the size of the position or exposure.

Regulators are also required to notify ESMA and other competent authorities of the details of any requests to reduce the size of a position or limits on the ability of a person to enter into an instrument.

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