GERMANY: Eurex MiFID II Position Reporting and Position Limits Document

Friday June 16 2017

Eurex Exchange has published a document providing an overview of the products that are tradable on the Eurex Exchanges that fall under MiFID II, the reporting infrastructure that will be used for position reporting and what exchange participants need to prepare to ensure regulatory compliance.

The regulatory changes of the revised Markets in Financial Instruments Directive (MiFID II) entering into force on 3 January 2018 introduce position limits and position reporting for commodity derivatives and emission allowances and derivatives thereof. In the document provided by Eurex, the reporting obligations for exchange participants as well as the structure and scope of position limits are described.

The Deutsche Börse Regulatory Reporting Hub (“RRH”) will act as the central hub to receive position reports from exchange participants admitted to trading at Eurex Deutschland and to distribute reports to the competent authorities. Position limits will be imposed and enforced by the German national competent authority Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in cooperation with ESMA and other European authorities. In addition, the Trading Surveillance Office of Eurex Deutschland, in cooperation with the Management Board of Eurex Deutschland, will introduce position management controls as additional safeguards.

All commodity derivatives in scope for the position limit and position reporting regulations that are tradable on Eurex Deutschland will be grouped in a newly created, separate product group “Eurex Commodity Derivatives MiFID2” that exclusively contains the relevant products, with effective date January 3, 2018.

Position Limits

Art. 57(1) MiFID II sets the legal basis for competent authorities to establish and apply position limits for commodity derivatives.

Art. 57(8) MiFID II foresees that market operators apply position management controls, which shall include at least the powers for the trading venue to:

• Monitor the open interest of persons;
• Access information from persons about relevant positions;
• Require a person to terminate or reduce a position and to take appropriate actions if the person does not comply;
• Require a person to provide liquidity back to the market.

Position Reporting

Under Art. 58(1) MiFID II Eurex Deutschland as a regulated market is required to provide BaFin with daily reports on the positions held by their clients (and the clients of the clients up to the end client) in listed commodity derivatives, emission allowances and derivatives thereof.

To enable Eurex Deutschland to fulfil its reporting obligation, exchange participants have to comply with Art. 58(3) MiFID II and provide breakdowns of their positions and positions of their clients (on end-customer level) in listed commodity derivatives to that trading venue (i.e. Eurex Deutschland) on a daily basis (t+1) until 3pm CET/CEST the latest.

Additionally, Art. 58(2) MiFID II requires investment firms to provide the competent authority at least daily reports on the positions of commodity derivatives traded outside a Regulated Market, MTF or OTF, until the end client is reached.

Reporting Guidelines

Although no official reporting guidelines are currently available, Eurex Exchange assumes the following reporting framework to apply:

• Net Positions, not transactions must be reported.
• Net positions are to be reported on end-client level (per position holder).
• Netting of long and short positions is done on the level of tradable instruments, i.e. for one tradable instrument, no long and short position can be submitted for the same position holder on the same day to RRH for positions held at the Eurex Exchanges.
• Complex instruments (e.g. calendar spreads) have to be broken down into their single legs, whereas each leg corresponds to a long or short position in an existing simple tradeable instrument and has to reported accordingly; i.e. the ISIN codes of the simple instruments must be used in the reports; such “leg positions” must be netted with (or added to) corresponding positions in the respective simple instruments.
• The “Spot Month” is always the next contract to expire, all other contracts to be reported as “Other Months” position, no netting of positions across multiple instruments that fall into the “other months” category.
• Position is end-of day position on trading day t; to be reported per t+1, i.e. no intraday activities to be reported. T+1 is the next exchange trading day.
• Deadline for reporting is at 3.00pm CET/CEST on t+1.
• For each position, a position report has to be delivered for each trading day, even if the position has not changed.
• When all position reports have been submitted on a given trading day, the exchange participant has to send (prior to the deadline) a confirmation message that the submitted report set is complete. All members admitted to the product group “Eurex Commodity Derivatives MiFID2” are required to send such confirmation message, even if no positions exist on that given trading day. If position records have been submitted, such confirmation message complements the position record submission.
• After closing a position (i.e. for the first trading day where the reportable end of day position size is “0”), one final report with position quantity “0” has to be sent (on t+1) to confirm the closing of that position.

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