Commodity derivatives: introduction of position limits and reporting regime

The position limits and reporting regime for commodity derivatives comes into force on 3 January 2018 (Articles 57 and 58 of MiFID II). The regime aims to prevent market abuse and support orderly pricing and settlement conditions by improving transparency and oversight of financial markets.

Position limits

A position limit is the maximum size of a position held by a person in any commodity derivative traded on a European Economic Area (EEA) trading venue and economically equivalent over the counter (EEOTC) contracts.

Position limit exemptions

Non-financial entities (NFEs), as defined in RTS 21 Article 2(1), can apply to us for a position limit exemption. If you are such an entity and wish to have such an exemption you will need to demonstrate your position in a particular commodity derivative is directly risk-reducing in relation to your commercial activity.

NFEs that have been granted exemptions will still have to have their positions reported but the exemption will be taken into account when the position limits are applied to the calculated positions.

The position limit exemptions timeframe and application process will be published here soon.

Reporting positions

Position reporting obligations apply to all trading venues in the UK that facilitate the trading of commodity derivatives, emission allowances and their derivatives, and to all investment firms trading EEOTC contracts on these financial instruments.

Trading venues and investment firms will be able to submit position reports through our new market data processor (MDP) system.

To start the MDP on-boarding process, you will need to fill in a confidentiality agreement form, receive our market interface specification and complete an on-boarding application form. You can download these forms on the links below:

MIS confidentiality agreement (DOCX)

MDP on-boarding application form (DOCX)

Trading venues and investment firms submitting position reports can find reporting instructions on the following links: 

Commodity position reports - reporting instructions (PDF)

XSD for commodity derivative position reports (XSD)

Position management controls

Trading venues in the UK facilitating the trading of commodity derivatives are required to have appropriate position management controls that, for example, allow them to monitor and access information about commodity derivative positions.        

Our role in implementing Articles 57 and 58 MiFID II

Under the regime, we are responsible for:

  • calculating and setting spot month and other months’ position limits for commodity derivatives traded on Trading Venues in the UK based on ESMA methodology
  • daily receipt of position reports
  • applying position limits
  • reviewing position limits where there are significant changes
  • cooperating with other National Competent Authorities where a same commodity derivative is traded in more than one country to ensure a single position limit is set and applied
  • notifying ESMA of the proposed position limits as set in accordance with the methodology
  • monitoring compliance with the position limits, and taking supervisory or enforcement actions where appropriate
  • reviewing applications for position limit exemptions

Queries

For any questions or queries please email commodity.derivatives@fca.org.uk.