AI Summary of Article 57 Position limits in commodity derivatives and position management controls in commodity derivatives and derivatives of emission allowances
This article mandates that Member States establish position limits on net holdings of commodity derivatives to prevent market abuse and ensure orderly pricing. Competent authorities must implement these limits based on criteria developed by ESMA, focusing on agricultural and significant commodity derivatives. Exceptions to these limits apply to positions that measurably mitigate commercial risks and those fulfilling liquidity obligations.
ESMA is tasked with crafting regulatory technical standards to establish a consistent methodology for these limits while monitoring their implementation across jurisdictions. Furthermore, competent authorities must collaborate and transparently communicate position management controls, ensuring compliance within the broader regulatory framework.
Article 57 Position limits in commodity derivatives and position management controls in commodity derivatives and derivatives of emission allowances
Article 57 Position limits in commodity derivatives and position management controls in commodity derivatives and derivatives of emission allowances
1. Member States shall ensure that competent authorities, in line with the calculation methodology determined by ESMA in the regulatory technical standards adopted in accordance with paragraph 3, set and apply limits on the size of a net position which a person can hold at all times in agricultural commodity derivatives and critical or significant commodity derivatives that are traded on trading venues, and in economically equivalent OTC contracts. Commodity derivatives shall be considered to be critical or significant where the sum of all net positions of end position holders constitutes the size of their open interest and is at a minimum of 300 000 lots on average over a one-year period. The limits shall be set based on all positions held by a person and those held on his or her behalf at an aggregate group level in order to:
(a) prevent market abuse;
(b) support orderly pricing and settlement conditions, including preventing market distorting positions, and ensuring, in particular, convergence between prices of derivatives in the delivery month and spot prices for the underlying commodity, without prejudice to price discovery on the market for the underlying commodity.
The position limits referred to in paragraph 1 shall not apply to:
(a) positions held by, or on behalf of, a non-financial entity, and which are objectively measurable as reducing risks directly relating to the commercial activity of that non-financial entity;