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The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017,
PART 3
is up to date with all changes known to be in force on or before 19 August 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations.
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16.—(1) The FCA must, by giving directions, establish position limits in respect of commodity derivatives traded on trading venues in the United Kingdom and economically equivalent over the counter contracts.
(2) The FCA must establish position limits under paragraph (1) on the basis of all positions held by a person in the contract to which the limit relates and those held on the person's behalf at an aggregate group level in order to—
(a)prevent market abuse; and
(b)support orderly pricing and settlement conditions, which includes, but is not restricted to—
(i)preventing market distorting positions; and
(ii)ensuring convergence between prices of commodity derivatives in the delivery month and spot prices for the underlying commodity without prejudice to price discovery on the market for the underlying commodity.
(3) The FCA must determine if a position is held at an aggregate group level for the purpose of paragraph (2) in accordance with the relevant methods.
(4) Position limits established by the FCA under this regulation must be published in a manner the FCA considers appropriate.
(5) In this regulation—
“group” has the meaning given by Article 4.1.34 (definitions) of the markets in financial instruments directive; and
“the relevant methods” means the methods determined by regulatory technical standards referred to in sub-paragraph (b) of Article 57.12 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article.
17.—(1) The calculation of the size of a position a person holds for the purposes of regulation 16(2) must not include a position which is—
(a)held by or on behalf of a non-financial entity;
(b)objectively measurable as reducing risks directly relating to the commercial activity of that non-financial entity; and
(c)approved by the FCA in accordance with—
(i)the relevant criteria and methods; and
(ii)the relevant procedure.
(2) An application to the FCA for approval under paragraph (1)(c) must—
(a)be made in such manner as the FCA may direct; and
(b)contain or be accompanied by such information as the FCA may reasonably require for the purpose of determining the application.
(3) At any time after receiving an application and before determining it the FCA may require the applicant to provide the FCA with such further information as the FCA reasonably considers necessary to enable the FCA to determine the application.
(4) The FCA may give different directions, and may impose different requirements, in relation to different applications.
(5) In this regulation—
“the relevant criteria and methods” means the criteria and methods determined by regulatory technical standards referred to in sub-paragraph (a) of Article 57.12 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article; and
“the relevant procedure” means the procedure determined by regulatory technical standards referred to in sub-paragraph (f) of Article 57.12 of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article.
18. A position limit established by the FCA under regulation 16 must specify clear quantitative thresholds for the maximum size of a position in a commodity derivative that a person can hold.
19.—(1) The FCA must, unless regulation 25 applies, establish position limits under regulation 16 in accordance with the ESMA methodology.
(2) The FCA must review a position limit it has established under regulation 16 where there is—
(a)a significant change in deliverable supply or open interest; or
(b)any other significant change on the market, based on the FCA's determination of deliverable supply or open interest.
(3) Where following a review the FCA believes that the position limit should be reset it must establish a new position limit under regulation 16.
20.—(1) The FCA must notify ESMA of any position limit it intends to establish under regulation 16.
(2) If the establishment of the position limit would be, or is, incompatible with an opinion issued by ESMA in respect of the position limit the FCA must—
(a)modify the position limit in accordance with ESMA's opinion; or
(b)notify ESMA of the reasons why it considers that amending the established limit is unnecessary in light of the opinion.
(3) The FCA must publish a notice on the FCA's official website explaining the reasons for its decision where it does not modify a position limit following an ESMA opinion recommending that it should.
(4) In this regulation an “opinion issued by ESMA” means an opinion issued by ESMA for the purposes of Article 57.5 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive.
21.—(1) Where the same commodity derivative is traded in significant volumes on trading venues in more than one jurisdiction in the EEA the FCA must only establish a position limit under regulation 16 in respect of that commodity derivative or any economically equivalent over the counter contract if the FCA is the competent authority of the trading venue where the largest volume of trading takes place.
(2) The volume of trading in a commodity derivative on a trading venue is to be determined for the purposes of paragraph (1) using the relevant method for calculation.
(3) The FCA must consult the competent authority of a trading venue in another EEA State on—
(a)a position limit to be established under regulation 16; or
(b)any revision to such a position limit,
if the position limit would be, or is, in respect of a commodity derivative traded in significant volumes on that trading venue or any economically equivalent over the counter contract.
(4) If the FCA and the competent authority of an EEA State other than the United Kingdom (“EEA competent authority”) disagree on a decision by—
(a)the competent authority concerning the establishment or revision of an EEA position limit in respect of a commodity derivative traded in significant volumes on a trading venue for which the FCA is the competent authority; or
(b)the FCA concerning the establishment or revision of a position limit under regulation 16 in respect of a commodity derivative traded in significant volumes on a trading venue for which the competent authority of the other EEA State is responsible,
the FCA must state in writing to the competent authority of the other EEA State the full and detailed reasons why the FCA considers that the requirements laid down in Article 57.1 of the markets in financial instruments directive are, or are not, met in respect of that position limit.
(5) The FCA may bring any disagreement mentioned in paragraph (4) to ESMA's attention for consideration in accordance with Article 19 (settlement of disagreements between competent authorities in cross-border situations) of Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority) M1.
(6) In this regulation—
“the relevant method for calculation” means the method determined by regulatory technical standards referred to in sub-paragraph (g) of Article 57.12 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article;
“the same commodity derivative” has the meaning given by regulatory technical standards referred to in sub-paragraph (d) of Article 57.12 of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article; and
“significant volumes” has the meaning given by regulatory technical standards referred to in sub-paragraph (d) of Article 57.12 of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article.
Marginal Citations
M1OJ L331, 15/12/2010, p.84.
22.—(1) If the FCA establishes a position limit under regulation 16 that affects a trading venue in another EEA State the FCA must put in place cooperation arrangements in order to enable the monitoring and enforcement of the position limit with—
(a)the competent authority of that trading venue; and
(b)any competent authority of another EEA State which is the competent authority of a person affected by the position limit.
(2) If the competent authority of another EEA State establishes an EEA position limit the FCA must put in place cooperation arrangements with that competent authority in order to enable the monitoring and enforcement of the EEA position limit if—
(a)the EEA position limit affects a trading venue in the United Kingdom; or
(b)the FCA is the competent authority of any person holding a position in a commodity derivative or economically equivalent over the counter contract subject to which the position limit applies.
(3) A cooperation arrangement put in place under paragraph (1) or (2) must include arrangements for the exchange of data relevant to the cooperation arrangement.
(4) In this regulation a position limit affects a trading venue or a person if—
(a)it is in respect of a commodity derivative traded in significant volumes on that trading venue or any economically equivalent over the counter contract; or
(b)that person holds a position in a commodity derivative or economically equivalent over the counter contract subject to the position limit.
23. Position limits established by the FCA under regulation 16 must be—
(a)transparent and non-discriminatory;
(b)specify how they apply to persons; and
(c)take account of the nature and composition of market participants and of the use those market participants make of the contracts admitted to trading.
24.—(1) The FCA must inform ESMA of the details of any position limit it has established under regulation 16.
(2) The FCA must inform ESMA of the details of any position management controls that have been imposed on a trading venue which trades commodity derivatives by the operator of that trading venue if—
(a)the operator of the trading venue is an investment firm, credit institution, or recognised investment exchange;
(b)the FCA is the competent authority of the operator of the trading venue; and
(c)the operator of the trading venue has informed the FCA it has imposed those position management controls.
(3) In paragraph (2) “position management controls” means the position management controls referred to in Article 57.8 of the markets in financial instruments directive.
25.—(1) The FCA may establish a position limit under regulation 16 which is more restrictive than would be permitted by the ESMA methodology mentioned in regulation 19(1) (“a more restrictive position limit”) in exceptional cases, if the position limit is objectively justified and proportionate taking into account—
(a)the liquidity of the specific market; and
(b)the orderly functioning of that market.
(2) Where the FCA establishes a more restrictive position limit the FCA must publish that position limit on its website.
(3) The FCA must not impose a more restrictive position limit for a period of more than six months from the day it is published under paragraph (2).
(4) But the FCA may impose the more restrictive position limit for further periods of no more than six months each if the position limit continues to be objectively justified and proportionate taking into account the matters mentioned in paragraph (1)(a) and (b).
(5) The FCA must notify ESMA if it establishes a more restrictive position limit and the notification must include a justification for establishing a more restrictive position limit.
(6) If the FCA establishes, or continues to apply a more restrictive position limit that is incompatible with an opinion issued by ESMA the FCA must publish a notice without undue delay on the FCA's official website a notice explaining its reasons for doing so.
(7) In this regulation “opinion issued by ESMA” means an opinion issued by ESMA for the purposes of Article 57.13 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive stating that it considers a more restrictive position limit is not necessary to address an exceptional case.
26.—(1) A person must not hold a position which is in excess of a position limit established under regulation 16, regardless as to whether the person is in the United Kingdom or not.
(2) A person situated or operating in the United Kingdom must not hold a position which is in excess of an EEA position limit.
27.—(1) The FCA may, in such manner as it may direct, require a person to provide information on, or concerning—
(a)a position the person holds in a relevant commodity derivative or over the counter contract; or
(b)trades a person has undertaken, or intends to undertake, in a relevant commodity derivative or over the counter contract.
(2) The FCA may, in such manner as it may direct, require the operator of a trading venue to provide information on, or concerning, trades a person has undertaken, or intends to undertake in a relevant commodity derivative or over the counter contract.
(3) In this regulation a commodity derivative or over the counter contract is relevant if the FCA—
(a)has established a position limit under regulation 16 in respect of that derivative or contract; or
(b)is considering whether it is required to establish or modify a position limit in respect of that derivative or contract under regulation 16.
28.—(1) If the FCA considers it necessary for the purpose of the exercise by the FCA of functions under the markets in financial instruments directive or the markets in financial instruments regulation the FCA may—
(a)limit the ability of a person to enter into a contract for a commodity derivative;
(b)restrict the size of a position a person may hold; or
(c)require a person to reduce the size of a position held.
(2) The FCA may exercise the power under paragraph (1) notwithstanding that the limitation, restriction, or reduction would be more restrictive than a position limit established by the FCA under regulation 16 or an EEA position limit relating to the commodity derivative.
(3) Paragraph (1) applies regardless as to whether the person is in the United Kingdom or not where the position relates to a commodity derivative traded on a trading venue established in the United Kingdom or an economically equivalent over the counter contract.
(4) If the FCA imposes a limitation, restriction, or requirement under paragraph (1) it must issue a notice to the person.
(5) A person on whom a limitation, restriction or reduction has been imposed under paragraph (1) may refer that matter to the Tribunal.
29.—(1) In this Part an over the counter contract is economically equivalent to a commodity derivative if it satisfies the criteria set out in regulatory technical standards referred to in sub-paragraph (c) of Article 57.12 (position limits and position management controls in commodity derivatives) of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article.
(2) In this Part—
“EEA position limit” means a position limit established by a competent authority of an EEA State other than the United Kingdom for the purposes of Article 57 of the markets in financial instruments directive;
“the ESMA methodology” means the methodology determined by ESMA under Article 57.3 of the markets in financial instruments directive;
“position” means a net position in a commodity derivative traded on a trading venue in an EEA State and any economically equivalent over the counter contract that has been calculated in accordance with the methodology determined by regulatory technical standards referred to in sub-paragraph (e) of Article 57.12 of the markets in financial instruments directive and adopted by the Commission under the last paragraph of that Article;
“position limit” means a limit on the maximum size of a position which a person may hold at any time; and
“trading venue” has the meaning given in regulation 2 but also includes a facility mentioned in—
paragraph (b) of the definition of “multilateral trading facility” in article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 M2; or
paragraph (b) of the definition of “organised trading facility” in that article.
Marginal Citations
M2S.I. 2001/544; article 3(1) was amended by S.I. 2006/3384, there are other amendments but none is relevant.
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