How is the position of a person in a commodity derivative determined?

To determine the position of a person in a commodity derivative, the positions it holds are aggregated in accordance with Article 3 of Commission Delegated Regulation (EU) 2017/591. For this purpose,

• positions held in that commodity derivative traded on a trading venue,
• positions held in derivative contracts on multiple trading venues, provided that this involves the same commodity derivative within the meaning of Article 5(1) of Commission Delegated Regulation (EU) 2017/591, and
• positions in economically equivalent OTC contracts as referred to in Article 6 of Commission Delegated Regulation (EU) 2017/591

are aggregated. This does not apply to positions for which the approved exemptions under Article 57 (1) of Directive 2014/65/EU (MiFID II) in conjunction with Articles 7 and 8 of Commission Delegated Regulation (EU) 2017/591 are claimed.

The absolute value of the net position is crucial for assessing whether the position of a person in a commodity derivative has exceeded the position limit set by the competent authority. The net position itself is determined by netting long and short positions.

How are hedge positions counted towards the position limits?

Only non-financial position holders may be exempt from the applicable position limit for positions in commodity derivatives if they are objectively measurable as reducing risks directly relating to their primary commercial activity. Evidence of this is to be provided as part of an application submitted by the non-financial entity pursuant to Article (57) (1) of Directive 2014/65/EU (MiFID II) in conjunction with Articles 7 and 8 of Commission Delegated Regulation (EU) 2017/591 to the competent authority which sets the position limit for that commodity derivative. If BaFin does not set a position limit for a commodity derivative, applicants must contact the authorities in other Member States.

Article 8 of Commission Delegated Regulation (EU) 2017/591 lays down the requirements for competent authorities approving such an exemption and specifies the information and/or evidence required in order for the application to be made. If the application is approved, the non-financial entity must notify the competent authority without delay if there is a significant change to the nature or value of the non-financial entity's commercial activities or its trading activities in commodity derivatives.

If the exemption is approved for a commodity derivative and the position has been identified as reducing risks in the reporting form, this position will, however, no longer be included in the aggregation of the total position in accordance with Article 3 (3) of Delegated Regulation (EU) 2017/591. This applies at individual level and group level.

How is a distinction made between the different maturities of commodity derivative contracts when calculating the size of a position?

As a distinction is made between the maturities of commodity derivatives (i.e. spot month contracts and other months' contracts) and separate limits are applicable, a person determines separately the position it holds in a commodity derivative for both of the maturity categories pursuant to Article 3 (4) of Commission Delegated Regulation (EU) 2017/591.

How is the size of a position determined at group level or at the level of the parent undertaking?

In accordance with Article 57 (1) of Directive 2014/65/EU (MiFID II) in conjunction with Article 4 of Commission Delegated Regulation (EU) 2017/591, a parent undertaking or group determines its net position by aggregating its own net position and the net positions of each of its subsidiary undertakings. In doing so, opposite long and short positions are netted within the group of undertakings.

What are position management controls and who applies them?

Those operating a trading venue which trades commodity derivatives are required, in accordance with Article 57 (8) and (9) of Directive 2014/65/EU (MiFID II) in conjunction with section 54 (6) of the new version of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), to set up procedures to monitor compliance with the position limits that have been established. These procedures are referred to as "position management controls", are to be set up by trade venue operators and must be transparent and non-discriminatory. The position management controls include, in particular, the powers for the trading venue to monitor the open interest positions of persons, request additional information from persons or require a person to terminate or reduce a position, on a temporary or permanent basis as the specific case may require.

What consequences could exceeding a position limit entail?

Exceeding a position limit set by BaFin constitutes an administrative offence under section 120 (8) nos. 4 and 5 of the new version of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) and a fine may be imposed in accordance with section 120 (20) of the new version of the WpHG. However, if the position limits set by the competent authority of another EU Member State are exceeded, the relevant provisions that are applicable there will apply. Where the person exceeding the specified position limit is established is irrelevant.