The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017

PART 3U.K.Position limits and position management controls in commodity derivatives

[F1FCA rules relating to position limitsU.K.

15A.—(1) The FCA may by rules require relevant persons to establish and apply—

(a)position limits in respect of specified commodity derivatives, or commodity derivatives of a specified class, that are traded on a trading venue, and

(b)position management controls in relation to the trading of commodity derivatives.

(2) The power to make rules under paragraph (1) is exercisable only if the FCA considers that the rules are necessary or expedient for the purpose of advancing one or more of its operational objectives referred to in section 1B(3) of the Act.

(3) In making rules under paragraph (1) the FCA must have regard to its competitiveness and growth objective in section 1EB of the Act.

(4) Rules under paragraph (1) may provide for matters that relevant persons must have regard to when establishing position limits, or position management controls, under requirements imposed by the rules.

(5) Rules under paragraph (1) may provide for exemptions from the requirements imposed by the rules to such extent, and in such cases, as the rules may specify.

(6) The reference in paragraph (1)(b) to position management controls includes (for example) arrangements under which—

(a)the open interest positions of persons can be monitored;

(b)information and documentation can be obtained from persons about the size of positions entered into;

(c)requirements can be imposed on persons to terminate or reduce positions or to provide liquidity.

(7) The following provisions of Part 9A of the Act (rules and guidance) apply in relation to rules made by the FCA under this regulation as they apply in relation to rules made by the FCA under that Part of the Act, subject to the modification in paragraph (8)—

(a)section 137T (general supplementary powers);

(b)Chapter 2 (modification, waiver, contravention and procedural provisions), with the exception of sections 138D (actions for damages) and 138EA (matters to consider when making rules);

(c)section 141A (power to make consequential amendments of references to rules etc).

(8) Section 137T applies as if the reference to authorised persons were a reference to relevant persons to whom rules under this regulation apply.

(9) A requirement imposed by rules under this regulation is, for the purposes of section 296 of the Act (regulator’s power to give directions), to be treated as an obligation imposed under the Act.

(10) In this Part “relevant persons” means market operators and investment firms operating a trading venue.]

Textual Amendments

F1Reg. 15A inserted (29.10.2024 for specified purposes) by Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 45 (with s. 2(3)); S.I. 2024/1071, reg. 3(c)(ii)

FCA duty to establish position limitsU.K.

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—

[F2“ group ” means a parent undertaking and all its subsidiary undertakings, and for these purposes, “parent undertaking” and “subsidiary undertaking” have the same meanings as in section 420 of the Act;]

“the relevant methods” means the methods determined by [F3Article 4 of Regulation (EU) 2017/591.]

Textual Amendments

Exemption for non-financial entitiesU.K.

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 [F4Article 7 of Regulation (EU) 2017/591; and]

“the relevant procedure” means the procedure determined by [F5Article 8 of Regulation (EU) 2017/591.]

Textual Amendments

Content of position limitsU.K.

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.

FCA duty to use [F6Regulation (EU) 2017/591] to establish position limits and to review if market changesU.K.

19.—(1) The FCA must, unless regulation 25 applies, establish position limits under regulation 16 in accordance with [F7Regulation (EU) 2017/591].

(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.

Textual Amendments

ESMA opinions on position limitsU.K.

F820.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Position limits affecting multiple EEA jurisdictionsU.K.

F821.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Cooperation with other competent authorities regarding position limits affecting multiple EEA jurisdictionsU.K.

F822.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

General requirements for position limitsU.K.

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.

FCA duty to notify ESMA of established position limits and position management controlsU.K.

F924.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Procedure in exceptional casesU.K.

25.—(1) The FCA may establish a position limit under regulation 16 which is more restrictive than would be permitted by [F10Regulation (EU) 2017/591] (“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).

F11(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F11(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Effect of position limits established by the FCA F12...U.K.

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.

F13(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

FCA power to require informationU.K.

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.

FCA power to interveneU.K.

28.—(1) If the FCA considers it necessary for the purpose of the exercise by the FCA of functions under [F14these Regulations] 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 F15...

(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.

Textual Amendments

Cooperation with ESMA and other competent authorities in respect of interventions to restrict, reduce, or limit positionsU.K.

F1628A.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Interpretation of Part 3U.K.

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 [F17Article 6 of Regulation (EU) 2017/591.]

(2) In this Part—

F18...

F19...

[F20“market operator” has the same meaning as in the markets in financial instruments regulation;]

“position” means a net position in a commodity derivative traded on a trading venue in [F21the United Kingdom] and any economically equivalent over the counter contract that has been calculated in accordance with the methodology determined by [F22Articles 3 and 4 of Regulation (EU) 2017/591;]

“position limit” means a limit on the maximum size of a position which a person may hold at any time; and

[F23“relevant person” has the meaning given by regulation 15A(10)]

[F24“significant volumes” has the meaning given by [F25Article 5 of Regulation (EU) 2017/591].]

“trading venue” has the meaning given in regulation 2 but also includes a facility mentioned in—

(a)

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 M1; or

(b)

paragraph (b) of the definition of “organised trading facility” in that article.

Textual Amendments

F20Words in reg. 29(2) inserted (29.10.2024 for specified purposes) by Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 49(a) (with s. 2(3)); S.I. 2024/1071, reg. 3(c)(iii)

F23Words in reg. 29(2) inserted (29.10.2024 for specified purposes) by Financial Services and Markets Act 2023 (c. 29), s. 86(3), Sch. 2 para. 49(b) (with s. 2(3)); S.I. 2024/1071, reg. 3(c)(iii)

Marginal Citations

M1S.I. 2001/544; article 3(1) was amended by S.I. 2006/3384, there are other amendments but none is relevant.