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MiFID II - Position limits for commodity derivatives

Any person based in or residing in the Netherlands is prohibited to maintain a net position in a commodity derivative that exceeds the position limit. This also applies to parties that are not subject to a licence obligation.

Determining position limits

The AFM must determine position limits for all commodity derivatives that are primarily (i.e. largest trading volume) traded in the Netherlands. The limits apply to commodity derivatives that are traded on trading venues and to economically equivalent OTC contracts. When the position limit threatens to be exceeded, the AFM can oblige a person not to conclude any new contracts or to reduce the size of the position.

The AFM will set the position limits in the fall of 2017. ESMA has determined the bandwidth within which the position limits are to be set in level-2 regulations.

Determining position limits exceptions

Position limits do not apply for positions that are held by or for the account of a non-financial entity and of which it can be determined objectively that this is for hedging purposes. This means positions that are held to reduce the risks that are directly related to the non-financial entity's commercial activities. Parties can apply for an exemption at the AFM for this. The information that has to be provided in connection with such an application can be found in Article 8 delegated regulation 2017/591. See also the Q&As about position limits on esma.europa.eu.

Position limits also do not apply for positions that are the consequence of transactions on a trading venue that is on the list in the annex to this ESMA opinion (link to opinion). This opinion also provides a description of the conditions that a trading venue must satisfy in order to be placed on the list.

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