MiFID II-MiFIR incorporates provisions aimed at improving the regulation, operation and transparency of the financial and commodity markets, in order to avoid excessive volatility in their respective prices, whose effects transcend the real economy.

From a subjective point of view, MiFID II-MiFIR establishes that trading on own account in commodity derivatives is an activity subject to authorisation when this activity is not considered to be carried out on an ancillary basis.

From an objective point of view, the new regulation introduces a system relating position limits and position management control and positions reporting in commodity derivatives, emission allowances and derivatives thereof.

Position limits for commodity derivatives

The amount of the net position that a person may hold in commodity derivatives traded on a trading venue or in economically equivalent OTC contracts shall be subject to a limit established and applied by the competent authority in accordance with the calculation methodology approved by ESMA.

Scope of the position limits for commodity derivatives

The limitation does not apply to the positions of non-financial institutions if they objectively reduce the risks directly related to the commercial activity of that non-financial institution.

Controls on management of position limits for commodity derivatives

Trading venue operators where commodity derivatives are traded must implement controls on the management of positions which must include, inter alia, the ability of the trading venue to access all information relating to the position or to require the termination or reduction of the position in the derivatives concerned.

Reporting of positions in commodity derivatives, emission allowances and emission allowance derivatives

The IFs or the trading venue operators where commodity derivatives, emission allowances or emission allowance derivatives are traded shall be required to:

  • Send to the competent authority on a daily basis the breakdown of the positions held by members or market participants or their clients in the trading venue; and
  • Only when the positions exceed the minimum thresholds, publish a weekly report with the aggregate positions held by the different categories of persons, which will be sent to the competent authority and to ESMA, the latter being responsible for publishing the centralised information. Commodity warrants positions are excluded from this weekly report, but not from the daily report.

In addition, IFs that trade OTC commodity derivatives, emission allowances or emission allowance derivatives shall send a daily report to the competent authority of the trading venue where the instruments are traded, giving a full breakdown of the positions assumed in the trading venue and on an OTC basis, as well as those of their clients and, in turn, of their clients, up to the last client.