Europex response to ESMA consultation paper on MiFID II review report on position limits and position management

Brussels, 6 January 2020 | Europex, the Association of European Energy Exchanges, welcomes the opportunity to contribute to the ESMA consultation paper on the MiFID II review report on position limits and position management in commodity derivatives. Europex has actively participated in previous MiFID related consultations, such as the call for evidence on position limits that took place last summer. While the review fulfils a legal obligation under MiFID II, this exercise is also a vital opportunity to assess the impact of position limits and position management on commodity derivatives markets and to ensure the regime is working in practice to fulfil its policy objectives.

Against this backdrop, Europex supports ESMA’s assessment of the issues to be addressed in the upcoming review, the two most important being the current regime’s negative impact on new and illiquid commodity derivatives and the lack of level playing field between exchanges offering liquid contracts with the same physical underlying. We firmly believe that the appropriate solution is to move towards a more proportionate and efficient position limit regime by focusing the application of the MiFID II position limit regime on a more limited set of important, critical commodity derivative contracts. This approach would help to foster the development of new and nascent contracts, while at the same time, it would better fulfil the overall objective of MiFID II to “improve the functioning and transparency of commodity markets and address excessive commodity price volatility”.

Well established position management controls that exchanges already have in place will ensure that contracts that are not assessed as ‘critical’ will continue to be controlled. The application of weekly position reporting to a wider set of contracts will also improve transparency.

Please download the full response below.