ESMA updates commodities Q&A under MiFID2

Published: 19 December 2017

The European Securities and Markets Authority (ESMA) has updated its Questions and Answers document covering commodities issues under MiFID2.

The changes include on:

  • position limits – confirming that the spot month for a particular contract where there are other variants (i.e., daily, weekly quarterly), as well as monthly versions of the same contract, should be made by the national competent authority on the basis of the contract specification and characteristics of the market for that particular derivative. When shorter contracts exist than monthly, positions to be included in the spot month period and position limit include positions in contracts referencing days or weeks which fall entirely inside the spot month; and
  • position reporting  - when there is a chain of investment firms subject to the reporting obligations, ESMA confirms that each has an obligation to report a complete breakdown of positions held by all persons down the chain, to the end client, as per Article 58 of MiFIDII. However, ESMA also notes that duplicative reporting should be avoided. Without giving a solution, ESMA notes that there is a possibility to outsource reporting process (not responsibility) e.g., by arranging that the first investment firm in a chain will report to the relevant trading venue. ESMA also notes that investment firms should rely on clients to determine whether a transaction on behalf of a client is for hedging or speculative purposes – ESMA states that responsibility ultimately falls upon clients to ensure that their position is accurately described in their position report. Other position reporting issues covered by the update include: the reporting of quantities where delivery is over different periods of time, with ESMA noting that the reported quantity should be expressed in units of underlying; and that positions in daily or weekly contracts subsumed in the spot month should be reported as SPOT, or OTHR if the delivery period straddles the spot and another month.

If members have any questions, please contact Adam Jacobs-Dean, Oliver Robinson or Adele Rentsch.