• ESMA policy statement clarified application of position limits pending MiFID II change.
• Follows EP and EU CNCL Dec. 2021 Dir 2021/338 amending MIFID II.

Overview

• Statement aimed to clarify application of position limits, coordinate supervisory actions of national competent authorities (NCAs), pending legislative change in MiFID II.
• Recovery package for commodity derivatives, which will be applicable in early 2022.

Position Limits

• Under the amended version of MIFID II, position limits will only continue to apply to agricultural commodity derivatives and critical or significant commodity derivatives.
• Positions objectively measurable as resulting from transactions entered into to fulfil obligations to provide liquidity on a trading venue to be exempted from position limits.
• ESMA said position limits, which co-legislators decided to delete to help the Covid-19 recovery, may restrain development of commodity derivative markets in the EU.

ESMA Expectations

• Considering upcoming legislative change, ESMA said NCAs should not prioritize supervisory actions towards entities holding positions in commodity derivatives, other than agricultural commodity derivatives, with a net open interest below 300,000 lots.
• NCAs should also not prioritize supervisory actions towards positions resulting from transactions entered into to provide liquidity on a trading venue as per MiFID II.