Under Article 57 (2) of MiFID II, position limits specify clear quantitative thresholds for the maximum size of a position in a commodity derivative held by one person or group of undertakings. This position is generally the netted position on position holder level in one commodity derivative. Position holders in this sense are the first non-investment member in the chain.
What types of position limits are existent?
Regulation makes a distinction between spot month and other months.
Spot month contract means the commodity derivative contract in relation to a particular underlying commodity whose maturity is the next to expire in accordance with the rules set by the trading venue (Spot for physical delivered products = all instruments with delivery in the remaining current plus the next (full) month; Spot for financial delivered products = all instruments with delivery in the current month). The standard baseline for the spot month position limit for both physically and cash settled commodity derivatives should therefore be computed as a percentage of the deliverable supply estimate.
The other months` position limit is applied across all maturities other than the spot month. The standard baseline for the other months' position limits for both physically and cash settled commodity derivatives should be computed as a percentage of the total open interest.
|Baseline for spot months||Baseline for all other months|
|25% of deliveravle supply (DS)||25% of total open interest (OI)|
NCA can adjust all baselines: Range 5%-35%
In order to protect the development of illiquid contracts, the position limit for the spot month and for other months is set at a fixed level of 2,500 lots for commodity derivatives until they exceed 10,000 lots of open interest during at least 3 consecutive months.
Who determines the position limits?
Position limits of EEX are determined by BaFin as the competent authority.