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E.U. – ESMA Commodity Limits FAQ

Comments:

On 19 December, ESMA issued FAQs on commodity derivatives per MiFID.

  • ESMA also updated liquid commodity derivative contracts list, re limits.
  • List now include position limits, ESMA opinion in relation to ICE Brent Crude contract.
  • Position limits Q:15, on how spot month should be defined for contracts where there
    are daily, weekly, quarterly or calendar as well as monthly variants of same contract.
  • Spot month determination for the application of the spot month position limit should
    be made by NCA, on basis of contract specification, the characteristics of the market.
  • Position reporting Q:17 on who has to report to the trading venue, NCA where chain
    investment firms, that have to comply with commodity position reporting obligations.
  • Position reporting Q:18 on how investment firm clients should inform intermediaries
    of the nature of each of their positions (hedge or speculation), i.e. for each position?
  • Or should clients indicate all positions be deemed for hedging, non-hedging purpose?
  • Position reporting Q:19 on how the position quantity field is reported for the contract
    which relate to the delivery of the same underlying over the different periods of time.
  • Position quantity held in contract reported same unit used by CA to set position limit.
  • Position reporting Q:20 positions in daily or weekly contracts whose delivery period is
    completely included in spot month should be reported as spot month positions, SPOT.
  • Positions in weekly contract whose delivery period not completely included in the spot
    month, ie contracts that straddle months, reported as other months’ positions, OTHR.
  • Positions in quarterly and annual contracts whose delivery periods straddles the spot
    month, and other months, should also be reported as other months’ positions, OTHR.