BaFin Workshop on „application process for hedge exemption“

    On 8 and 9 September 2020, BaFin will hold an online workshop on "application process for hedge exemption“ between 10.00 and 12.00 a.m. each day. The workshop will be held on September 8 in German language and on September 9 in English language. An additional registration is not required. During the workshops, BaFin experts will discuss how to submit an application and which requirements need to be met.

    Details you can find on the BaFin Website.

    MiFID II entered into force on 3 Jan 2018

    For information purposes only! The information on this website does not provide or substitute legal advice!

    MiFID II, the revision of MiFID I and a new regulation, MiFIR changes the rules for trading commodity derivatives. All derivatives contracts are effected by MiFID II and led to increased reporting requirements for trading participants. EEX Group built up a unique compliance service framework to meet MIFID II requirements with minimal effort.

    All traders exceeding the ancillary activity exemption threshold are categorised as an investment firm and are therefore inside the scope of MiFID II. Only traders with ancillary activities in trading commodity derivatives stay outside the scope of MiFID II.

    Every commodity derivative contract is subject to position limits (see more information in tables below) and trigger the obligation for market participants as well as trading venues to report positions.

    MiFID II Webinar
    Watch the full length video recording on important obligations here.

    MiFID II short code upload tutorial
    Learn more about MiFID II related changes to the trading system and how to upload short codes in our video tutorial.

    MiFID II Downloads
    2020-05-11 MiFID II/MiFIR Data Services Agreement Regulatory Reporting MiFID II / MiFIR Registration / Starter Kit pdf (618 KB)
    2018-10-17 Mandatory Market Making according to RTS – Spreads Regulatory Reporting MiFID II / MiFIR Overview xls (65 KB)
    2018-09-13 MiFID EEX overview short code mapping Regulatory Reporting MiFID II / MiFIR Overview pdf (736 KB)
    2018-06-20 Third Country Firms under MiFID II - German Banking act Regulatory Reporting MiFID II / MiFIR Overview pdf (113 KB)
    2018-06-07 MiFID II/MiFIR Data Services Description Regulatory Reporting MiFID II / MiFIR Registration / Starter Kit pdf (2 MB)
    2018-01-09 MiFID II Q&A Regulatory Reporting MiFID II / MiFIR Overview pdf (274 KB)
    2018-01-09 MiFID II Q&A Track Changes Regulatory Reporting MiFID II / MiFIR Overview pdf (651 KB)
    2017-10-27 2017-10-27 EEX-PEGAS Customer Information - OTF Transition Regulatory Reporting MiFID II / MiFIR Overview pdf (276 KB)
    2017-10-12 Third Country Firms under MiFID II (EEX Participants) Regulatory Reporting MiFID II / MiFIR Overview pdf (127 KB)

    Further Information

    Level

    Description

    Legal Basis

    Level 1

    Overarching framework legislation produced using standard co-decision procedure

    Directive (EU) No. 2014/65  of  15  May  2014

    on  markets  in  financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU, or simply the Markets in Financial Instruments Directive (MiFID II)  

    Regulation (EU)  No. 600/2014  of  15  May  2014

    on  markets  in  financial  instruments  and  amending  Regulation  (EU)  No  648/2012, or simply the Market in Financial Instruments Regulation (MiFIR).

    Level 2

    Secondary legislation containing additional definitions and matters of detail, which is produced separately by the European Commission in consultation with ESMA, following the Level 1 legislation.

    EC overview of Regulatory Technical Standards (RTSs) and Implementing Technical Standards (ITSs). Once published by the Official Journal, RTSs and ITSs are called Delegated and Implementing Regulations respectively.

    E.g.:

    Level 3

    Guidance designed to ensure that EU legislation is applied by the respective competent authorities in EU Member States as consistently as possible. It follows the Level 1 and Level 2 legislation.

    ESMA guidelines and Q&As

    Example: ESMA Q&A on MiFID II and MiFIR commodity derivative topics


    Pre-Trade Transparency

    Changes to the trade registration process for MiFIR pre-trade transparency requirements

    In order to ensure regulatory compliance with pre-trade transparency requirements for pre-arranged transactions (also commonly known as ‘block trades’ or ‘OTC-cleared transactions’), as laid down in Art. 8 of the Markets in Financial Instruments Regulation (MiFIR)[1], Commission Delegated Regulation 2017/583[2] and the ESMA Q&A on MiFID II and MiFIR transparency topics[3], EEX will adapt its trade registration procedures as of 1 January 2020

    The EEX solution was developed with a focus on minimizing the impact on the existing trade registration process on the member side, while at the same time meeting the regulatory requirements to provide transparency for pre-arranged transactions that can be acted upon by third parties before a trade is executed.

     

    What are the envisaged changes?

    For every pre-arranged transaction that does not benefit from a waiver (“Large In Scale” – for larger trades above specified thresholds – and “Illiquid Instruments”) or an exemption, EEX will ensure pre-trade transparency by redirecting automatically the respective trading interests of both counterparties to a new platform, where it will trigger a volume auction at the price of the pre-arranged transaction. Trading participants who intend to interact manually with the platform are able to apply for a respective access.

    Pre-Trade Tansparency Downloads
    2020-09-17 Large in Scale Parameters Documents MiFID II / MiFIR pdf (119 KB)
    2020-09-17 Archive Documents MiFID II / MiFIR zip (288 KB)
    2019-12-03 Questions & Answers Documents MiFID II / MiFIR pdf (271 KB)

    TR Transparency Platform

    More

    Position Limits

    As part of the implementation of the Markets in Financial Instruments Directive II (MiFID II), position limits for commodity derivatives were introduced on 3rd January 2018. This means that upper limits for holding derivatives whose underlying is a commodity are applicable. Neither individual undertakings nor groups of undertakings are allowed to hold positions that, in aggregate, exceed these thresholds. However, there is a possibility to take out positions from the limit calculation by making use of a hedging exemption for positions which are objectively measurable as reducing risks (see chapter “Hedging Exception” for further details).

    Emission allowances and derivatives on emission allowances are not commodity derivatives within the meaning of MiFID II, but they are subject to position reporting nevertheless.

    What are position limits for commodity derivatives?

    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%

    Who determines the position limits?

    Position limits of EEX are determined by BaFin as the competent authority.

    Overview of the current position limits for EEX products

    The position limit for the spot month and for other months is set at a fixed level of 2,500 lots for commodity derivatives with a total open interest until a threshold of 10,000 lots, respectively, is exceeded in at least 3 consecutive months. Contracts exceeding these thresholds should, where appropriate, be able to benefit from a higher limit in order to ensure that trading in such contracts is not unduly constrained.

    National regulator BaFin has decreed position limits for EEX contracts:

    Contract

    Venue

    Venue Product Code
    Future / Option

    Position limit for spot month

    Position limit for other months

    EEX German/Austrian Power Base Futures and Options

    European Energy Exchange AG (EEX)

    F1B / O1B

    46 000 381 MWh

    825 477 708 MWh

    EEX German/Austrian Power Peak Futures

    European Energy Exchange AG (EEX)

    F1P

    15 403 476 MWh

    19 600 000 MWh

    EEX French Power Base Futures and Options

    European Energy Exchange AG (EEX)

    F7B / O7B

    25 222 306 MWh

    119 518 652 MWh

    EEX French Power Peak Futures

    European Energy Exchange AG (EEX)

    F7P

    4 378 303 MWh

    1 552 656 MWh

    EEX Italian Power Base Futures and Options

    European Energy Exchange AG (EEX)

    FDB / ODB

    26 579 658 MWh

    125 074 460 MWh

    EEX Spanish Power Base Futures and Options

    European Energy Exchange AG (EEX)

    FEB / OEB

    12 814 389 MWh

    14 192 000 MWh

    EEX Swiss Power Base Futures

    European Energy Exchange AG (EEX)

    FC

    3 572 426 MWh

    2 870 000 MWh

    EEX-PXE Czech Power Base Futures

    European Energy Exchange AG (EEX)

    FX

    3 446 281 MWh

    4 176 845 MWh

    EEX German Power Base Futures and Options

    European Energy Exchange AG (EEX)

    DEB / O2B

    40 416 961 MWh

    209 747 820 MWh

    EEX German Power Peak Futures

    European Energy Exchange AG (EEX)

    DEP / O2P

    8 432 622 MWh

    4 621 611 MWh

    EEX German/Austrian OTF Future (Base)

    European Energy Exchange AG (EEX)

    N1B

    34 074 356 MWh

    15 606 156 MWh

    EEX-PXE Hungarian Power Base Future

    European Energy Exchange AG (EEX)

    F9BM

    2 219 844 MWh

    2 991 319 MWh

    EEX Dutch Power Base Futures

    European Energy Exchange AG (EEX)

    Q0B

    4 660 649 MWh

    3 078 107 MWh

    EEX Italian Power Peak Futures

    European Energy Exchange AG (EEX)

    FDP

    5 340 219 MWh

    1 045 510 MWh

    EEX Baltic Panamax 4TC Freight Future and Option

    European Energy Exchange AG (EEX)

    PTC / OPT

    13 099 Lots

    13 099 Lots

    EEX Baltic Capesize Freight Future and Option

    European Energy Exchange AG (EEX)

    CPT / OCP

    13 591 Lots

    13 591 Lots

    EEX Asia Baltic Capesize C7 Freight Future and Option European Energy Exchange AG (EEX) C7E 4 320 Lots 4 320 Lots
    EEX Baltic Supramax 10TC Freight Future and Option European Energy Exchange AG (EEX) SPT / OPS 4 138 Lots 4 138 Lots
    EEX NCG Natural Gas Futures European Energy Exchange AG (EEX) G0B 29 511 000 MWh 14 182 031 MWh
    EEX GPL Natural Gas Futures European Energy Exchange AG (EEX) G2B 36 842 518 MWh 5 625 774 MWh
    EEX TTF Natural Gas Futures and Option European Energy Exchange AG (EEX) G3B / O3B 52 466 250 MWh 112 196 688 MWh
    EEX PEG Natural Gas Futures European Energy Exchange AG (EEX) G5B 26 159 410 MWh 5 186 170 MWh
    EEX CEGH Natural Gas Futures European Energy Exchange AG (EEX) G8B 13 710 035 MWh 11 071 515 MWh
    EEX PSV Natural Gas Futures European Energy Exchange AG (EEX) GCB 31 387 743 MWh 3 468 279 MWh

    For more information, please visit the website of BaFin.

    Contracts listed at EEX Group but not shown in the table above are considered illiquid and not subject to bespoke limits. The default limit of 2,500 lots applies in this case.

    “Venue product codes” stands here for a group of products at EEX. E.q. “French Power Future and Option (Base)” with venue product code F7B or O7B stands for all baseload Day, Weekend, Week, Month, Quarter and Year contracts of the French Power Future/option products.  

    Hedging Exemption

    Non-financial entities may be exempt from considering the applicable position limit for positions in commodity derivatives if these positions are objectively measurable as reducing risks directly relating to their primary commercial activity. A company aiming to take advantage of the exemption has to fulfill the following preconditions:

    • By BaFin approved application for hedging exemption for a certain market (“venue product code” level)

    • Flagging of the relevant positions in the daily position reporting, either by:

      • set a default hedge flag at member level (use “MiFID II/MIFIR Data Services Agreement -> Service Agreement, chapter 2.1. page 5) or
      • set a default value at account level (also via the Service Agreement, chapter 2.1. page 5) or
      • adaption of the daily position reporting

    Once an exemption has been granted and positions are approved as risk-reducing and the position is flagged as “hedge”, those positions fall outside the position limit regime and can no longer be used to offset a speculative exposure.

    How to apply for an exemption?

    Exemptions have a positive effect if the non-financial entity concerned is expected to have a trading volume in the commodity derivative that moves along the lines of the actual position limit. EEX is supporting their members to identify this situation in context of weekly monitoring process.

    • Applicants can submit their applications via email to Positionslimits-MIFID@bafin.de. Alternatively, it is also possible to make use of a specialised procedure by BaFin's reporting and publishing platform (MVP Portal). Further details about the portal are published by BaFin here: "Position limits in commodity derivatives and reporting” 
    • BaFin will approve/reject the application within 21 calendar days, the latest. In practice, this procedure often takes less time.
    • Bafin provides all necessary information for hedging exemption application on their website including the relevant form here (link).
    • Please note, applicants should file the final application in the German language. Meaning, by making use of the German language version of the application form and entering all responses in German. For information purposes, there is an English language version of the application form available. All correspondence with BaFin prior to the final application can also be held in English.

    Hints for filling the exchange (EEX) related data fields in the application form:

    Chapter B3

    • Field 1: Market -> use the naming from the EEX list (link)
    • Field 2: MiFID venue code -> use the MiFID venue code from EEX list (link)
    • Field 3: choose “XEEE” (operational MIC code)
    • Field 4: automatically filled

    Example for French Power Future (Peak) market

    Chapter B4

    (commodity classification according (EU) 2017/585 annex/table 2 – see also link in the right sidebar)

    • Field 1: base product
    • Field 2: sub product
    • Field 3: further sub product

    Example for French Power Future (Peak) market

    Reports

    RTS 2 Pre-Trade Transparency

    EEX provides the pre-trade transparency data for trading via the respective market data system of the Deutsche Börse Group. More detailed information are published here: http://www.mds.deutsche-boerse.com/mds-en/data-services/real-time-market-data/mifid-ii-disaggregated-information-products.

    Please be aware that the quotation time is displayed in UTC.
     

    RTS27 Reports (Regulatory Technical Standards)

    The MiFID II regulation aims at achieving transparency over companies’ order execution modalities through a best execution scheme. As trading venues whose asset class has been identified by ESMA’s Regulatory Technical Standards (RTS27), EEX and Powernext are required to implement reporting and monitoring procedures to determine the best way to execute client orders, taking into consideration the regulation.

    Consequently, EEX and Powernext will publish quarterly 5 reports including the following information for each financial instrument, each trading day and each trading venue:

    • Transaction prices (simple and volume-weighted averages, highest and lowest, best bids and best asks, etc.)
    • Transaction volumes
    • Transaction timestamps
    • Trading systems
    • Trading modes
    • Number orders or request for quotes received
    • Etc.

    The reports will be published for EEX and Powernext for report table 1-4 and 6-8 on a daily, and for report table 5 on a quarterly basis on the respective websites:

    > Daily RTS 27 Report 

    > Quarterly RTS 27 Report
     

    RTS 21 Weekly Position Report

    For the purpose of the weekly reports referred to in Art 58(1)(a) of Directive 2014/65/EU and Art 83 of COMMISSION DELEGATED REGULATION (EU) 2017/565, EEX has to publish the weekly position report when both of the following two thresholds are met: (a) 20 open position holders exist in a given contract on a given trading venue; and (b) the absolute amount of the gross long or short volume of total open interest, expressed in the number of lots of the relevant commodity derivative, exceeds a level of four times the deliverable supply in the same commodity derivative, expressed in number of lots. In consequence EEX will provide the report only if the thresholds are met.

     

    Contact

    Do you have any questions? Please send us an e-mail.

    mifid@eex.com

    Questions on regulatory issues?

    Deutsche Börse provides an overview on regulatory topics on a dedicated website.

    visit Deutsche Börse

    FAQ

    > MiFID / MiFIR Outline

    more

    Newsroom

    > MiFID II / MiFIR News

    more

    Key Information Dokuments

    more

    MiFID II Webinar

    Need more information about the implementation of MiFID II? Make sure to watch the recording of our MiFID II webinar.

    more

    MiFID II/MiFIR Data Services Description

    This  document  aims at describing the  preconditions,  steps  and knowledge for the use of the  MiFID II /MiFIR Data Services.

    download

    MiFID II/MiFIR Data Services Agreement

      Please make sure to submit.

    download