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.

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.

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 3^rd 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?

National regulator BaFin has decreed position limits for EEX contracts:

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.

Hedging Exemption

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:

> to the RTS27 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.