EU Consultation on Amendments to Commodity Derivatives Technical Standards

The European Securities and Markets Authority has published a consultation paper on proposed changes to the rules for position management controls and position reporting. These proposals arise out of the MiFID Review, and the resulting changes to the Markets in Financial Instruments Regulation and Directive, which were published in March. MiFID II requires national regulators to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits apply to the size of a position that a person can hold, including any other positions held on behalf of that person by group entities. Trading venues are required to apply position management controls, including monitoring of open interest and obtaining information about the size and purpose of a position entered into, beneficial or underlying owners, concert arrangements, and any related assets or liabilities. Trading venues also have powers to require termination or reduction of positions and to require a person to provide liquidity back into the market at an agreed price and volume to mitigate the effect of a large or dominant position. The position reporting regime is intended to support the application and enforcement of position limits.

Following the MiFID Review, the provisions in the MiFID II Directive on position management controls have been extended to trading venues providing trading for derivatives of emission allowances, and the position reporting obligations are clarified so that they apply only to derivatives of emission allowances, and not to spot trading of emission allowances.

ESMA is consulting on changes to the regulatory technical standards on position management controls, the implementing technical standards on position reporting, and on position reporting in Commission Delegated Regulation 2017/565. ESMA invites feedback in particular on the extension of position management controls to emission allowances derivatives, the exclusion of emission allowances from position reporting and the introduction of one weekly position report (excluding options) in addition to the existing one (combining futures and options). Comments may be submitted until August 21, 2024. ESMA intends to publish a final report towards the end of 2024.

ESMA has also published today a consultation on amendments to the technical standards for Consolidated Tape Providers. On May 21, 2024, ESMA published its first MiFID Review consultation on draft regulatory technical standards covering transparency requirements, transaction reporting requirements, and the obligation to make trade data available on a "reasonable commercial basis."

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