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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.

Proposed position limits

As the Markets in Financial Instruments Directive of 2014 (MIFID II) applies from 3 January 2018, the AFM is required to set position limits for all commodity derivatives traded on a trading platform located or managed in the Netherlands. These limits also apply to economically equivalent OTC contracts (EEOTC). The proposed position limits apply to the positions held by a person and the positions that are held on his behalf at a group level.

If a position limit is (about to be) exceeded, the AFM may force a person not to enter into new agreements with regard to a commodity derivative to which that position limit applies or to reduce the volume of the position within a reasonable period set by the AFM.

The AFM intends to set the position limits for commodity derivatives as stated in the table below. The AFM has informed ESMA about the proposed position limits in accordance with Article 57, paragraph 5, MIFID II. ESMA has indicated in a public statement that it will not be possible for them to finalize and publish all opinions on position limits for liquid commodity derivatives before the end of this year. It is likely that ESMA's opinions will not deviate from the proposed position limits below. However, the possibility still exists.

The proposed position limits will be monitored by the AFM as of 3 January 2018, subject to the section below entitled 'Notes applicable to specific contracts'.

Notes applicable to specific contracts

This list contains liquid commodity derivative contracts that are currently identified as being traded on a trading platform in the Netherlands. From 3 January 2018, a proposed position limit will apply to these derivatives, as outlined in the table below. This is a complete list, however it is possible that in the future the list will be extended to include new position limits for other commodity derivatives.

Each commodity derivative contract has a separate proposed limit for the spot month and for the other months’ periods. The total net position in the commodity derivative has to be calculated by aggregating all positions that the person holds in the commodity derivative and in economically equivalent OTC derivative contracts based on Article 5: 89b of the Wft (new). The specific contracts to be aggregated are identified in the table below with their Venue Product Codes (VPC).The new and illiquid commodity derivatives which are traded on a trading platform in the Netherlands and which are not listed in the table with their Venue Product Codes have a limit of 2,500 lots based on Article 15, first paragraph, under the delegated regulation (EU) 2017/591, unless the position limit has been set by another competent authority in any other member state.

The AFM can set other position limits than the proposed position limits in response to the forthcoming ESMA opinion. After the AFM has set a position limit, that position limit may be changed if the deliverable stock or the total open interest has changed substantially or in case of another significant change on the market (Article 5: 89a, third paragraph, Wft) (new)). After a change, the details of the new limit and the start date will be presented in the table below.

Commodity Derivative Name  Venue Market Identifier code (MIC) Name of Trading Venue Venue Product Codes (VPC) Spot month single limit Other months’ limit  Unit of measurement 
Dutch power Physical Base Futures NDEX ICE Endex DPB, DPW 6.171.725 (24%) 8.938.159 (35%) MWh
Dutch power Physical Peak Futures NDEX  ICE Endex DPA 2.262.967 (24%) 1.329.621 (40%) MWh
Belgian power Physical Base Futures NDEX ICE Endex BPB 4.218.480 (25%) 3.244.326 (40%) MWh
Dutch TTF Gas NDEX  ICE Endex TFM, TFE 39.216.420 (25%) 164.372.396   (30%) MWh

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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