IRELAND: Position Limits and Position Management Controls in Commodity Derivatives

Monday September 4 2017

Ireland has transposed MiFID II Regulations through the European Union (Markets in Financial Instruments) Regulations 2017 (S.I. 375/2017), which were signed into law on 10^th August 2017.

Part 8 of the Regulation provides for position limits and position management controls in commodity derivatives and reporting. The Central Bank shall, in line with the methodology for calculation determined by ESMA in accordance with Article 57(3) of the Directive, establish and apply position limits that specify clear quantitative thresholds for the maximum size of a net position which a person can hold at all times in commodity derivatives traded on trading venues and economically equivalent OTC contracts.

Position limits shall be set on the basis of all positions held either by a person or on the person’s behalf at aggregate group level in order to:

• prevent market abuse, or
• support orderly pricing and settlement conditions, including preventing market distorting positions and ensuring, in particular, convergence between prices of derivatives in the delivery month and spot prices for the underlying commodity, without prejudice to price discovery on the market for the underlying commodity

The Central Bank has further stated that where the Bank has decided to impose more restrictive position limits, it shall publish on its website the details of the more restrictive position limits it has decided to impose, which:

• shall be valid for an initial period not exceeding six months from the date of their publication on the website, and
• may be renewed for further periods not exceeding six months at a time if the grounds for the restriction continue to be applicable.

If the more restrictive position limits are not renewed after that six-month period, they shall automatically expire.

The Regulations will enter into operation on 3^rd January 2018.