Erscheinung:16.04.2021 | Topic OTC derivatives Position limits on commodity derivatives: ESMA specifies priorities regarding the supervisory actions of national competent authorities
When applying position limits, national competent authorities should, in future, prioritise agricultural commodity derivatives and significant commodity derivatives contracts with a net open interest of at least 300,000 lots. The European Securities and Markets Authority (ESMA) expressed this expectation in a Forbearance-Note of 19 March 2021. BaFin is taking this forbearance note into account in its supervisory practice. Open interest refers to the total number of outstanding futures or options contracts.
Previously, national competent authorities such as BaFin treated all commodity derivatives in the same way. In accordance with this forbearance note, which BaFin has applied since 19 March, only agricultural contracts listed on German trading venues and the Phelix DE Base contracts listed on the European Energy Exchange (EEX) are currently subject to position limits in Germany.
Furthermore, ESMA expects national competent authorities to not prioritise their supervisory actions towards positions that are objectively measurable as resulting from transactions entered into to fulfil obligations to provide liquidity on a trading venue. BaFin also agrees with this approach.
This forbearance note is based on Directive (EU) 2021/338, known as the “Covid quick fix”. The directive is to be transposed into national law by no later than the end of March 2022. Until then, existing position limits will remain in effect under current legislation, at least formally. National competent authorities can, however, amend them as required.
