SECTION 1 — Determination of baseline figures
Methodology for determining the baseline figure for spot month limits
1. Competent authorities shall determine a baseline figure for the spot month position limit in an agricultural commodity derivative or a critical or significant commodity derivative by calculating 25 % of the deliverable supply for that commodity derivative. Where the deliverable supply is substantially higher than the total open interest, competent authorities shall determine the baseline figure for the spot month limit by calculating 25 % of the open interest in that commodity derivative.
That baseline figure shall be specified in lots.
2. Where a competent authority establishes different position limits for different times within the spot month period, those position limits shall decrease on an incremental basis towards the maturity of the commodity derivative and shall take into account the position management arrangements of the trading venue.
3. By way of derogation from paragraph 1, competent authorities shall determine the baseline figure for the spot month position limit for any commodity derivative with an underlying that qualifies as food intended for human consumption with a total combined open interest in spot month and other months’ contracts exceeding 50 000 lots over a consecutive 3-month period by calculating 20 % of the deliverable supply in that commodity derivative. Where deliverable supply is substantially higher than total open interest, competent authorities shall determine the baseline figure for the spot month limit for such a commodity derivative by calculating 20 % of the open interest in that commodity derivative.
Deliverable supply
1. Competent authorities shall calculate the deliverable supply for an agricultural commodity derivative or a critical or significant commodity derivative by identifying the quantity of the underlying commodity that can be used to fulfil the delivery requirements of the commodity derivative.
2. Competent authorities shall determine the deliverable supply for a commodity derivative referred to in paragraph 1 by reference to the average monthly amount of the underlying commodity available for delivery based on the most recent available data covering:
(a)
a 1-year period immediately preceding the determination for a critical or significant commodity derivative;
(b)
a 1 to 5-year period immediately preceding the determination for an agricultural commodity derivative.
3. In order to identify the quantity of the underlying commodity meeting the conditions of paragraph 1, competent authorities shall take into account the following criteria:
(a)
the storage arrangements for the underlying commodity;
(b)
the factors that may affect the supply of the underlying commodity.
Methodology for determining the baseline figure for other months’ limits
1. Competent authorities shall determine a baseline figure for the other months’ position limit in an agricultural commodity derivative or a critical or significant commodity derivative by calculating 25 % of the open interest in that commodity derivative.
2. That baseline shall be specified in lots.
Open interest
1. Competent authorities shall calculate the net open interest in an agricultural commodity derivative or a critical or significant commodity derivative by aggregating the number of lots of that commodity derivative that are outstanding on trading venues and reported positions in economically equivalent OTC contracts over a representative period of time. Competent authorities shall calculate the net open interest in that commodity derivative based on position reporting data.
2. By way of derogation from paragraph 1, when trading in a commodity derivative is transferred from one Union trading venue to another, or a third country trading venue to a Union trading venue, following a merger, business transfer or other corporate event or from one or more existing commodity derivatives to a commodity derivative newly admitted to trading on the same trading venue or in other similar circumstances, the competent authority shall calculate the open interest in that commodity derivative by taking into account the open interest on the former venue or in the former commodity derivatives. After a 6-month period, the competent authority shall calculate the open interest in accordance with paragraph 1.
Methodology for determining the baseline figure in respect of certain commodity derivatives
1. By way of derogation from Article 11, competent authorities shall determine the baseline figure for the spot month position limits for critical or significant cash settled spot month commodity derivatives which are included under Section C, point (10), of Annex I to Directive 2014/65/EU and which have no measurable deliverable supply of their underlying commodities by calculating 25 % of the open interest in those commodity derivatives.
2. By way of derogation from Articles 11 and 13, where a commodity derivative provides that the underlying is delivered constantly over a specified period of time, the baseline figures calculated pursuant to Articles 11 and 13 shall apply to related commodity derivatives for the same underlying to the extent that their delivery periods overlap. The baseline figure shall be specified in units of the underlying.
SECTION 2 — Factors relevant for the calculation of position limits
Assessment of factors
Competent authorities shall set the spot month and other months’ position limits for an agricultural commodity derivative or a critical or significant commodity derivative by taking the baseline figure determined in accordance with Articles 11, 13 and 15 and adjusting it according to the potential impact of the factors referred to in Articles 18 to 21 on the integrity of the market for that derivative and for its underlying commodity to either of the following limits:
(a)
between 5 % and 35 %;
(b)
between 2,5 % and 35 %, for any derivative contract with an underlying that qualifies as food intended for human consumption with a total combined open interest in spot month and other months’ contracts exceeding 50 000 lots over a consecutive 3-month period.
New and less liquid agricultural commodity derivatives
1. By way of derogation from Article 16, for agricultural commodity derivatives traded on a trading venue with a total combined open interest in spot month and other months’ contracts not exceeding 20 000 lots over a consecutive 3-month period, competent authorities shall set the spot month and other months’ limit of positions held in those commodity derivatives at 10 000 lots.
2. The trading venue shall notify the competent authority when the total open interest of any commodity derivative referred to in paragraph 1 reaches 20 000 lots over a consecutive 3-month period. Competent authorities shall review the position limit upon receiving such notifications.
Deliverable supply in the underlying commodity
Where the deliverable supply in the underlying commodity can be restricted or controlled or if the level of deliverable supply is low relative to the amount required for orderly settlement, competent authorities shall adjust the spot month position limit downwards. Competent authorities shall assess the extent to which that deliverable supply is used also as the deliverable supply for other commodity derivatives.
The overall open interest
1. Where there is a large volume of overall open interest, competent authorities shall adjust the position limit downwards.
2. Where the open interest is significantly higher than the deliverable supply, competent authorities shall adjust the other months’ position limit downwards.
3. Where the open interest is significantly lower than the deliverable supply, competent authorities shall adjust the other months’ position limit upwards and, except where the baseline figure for the spot month limit is based on the open interest, shall adjust the spot month position limit downwards.
The number of market participants
1. Where the daily average number of market participants holding a position in the commodity derivative over a period of one year is high, the competent authority shall adjust the position limit downwards.
2. By way of derogation from Article 16, competent authorities shall adjust the position limit upwards and set the spot month and other months’ position limit between 5 % and 50 % of the reference amount if:
(a)
the average number of market participants holding a position in the commodity derivative in the period leading up to the setting of the position limit is lower than 10; or
(b)
where the commodity derivative is an agricultural commodity derivative with a net open interest below 300 000 lots, the number of investment firms acting as a market maker in accordance with Article 4(1), point (7), of Directive 2014/65/EU in the commodity derivative at the time the position limit is set or reviewed is lower than three.
For the purposes of the first subparagraph, competent authorities may establish different position limits for different times within the spot month period, the other months’ period or for both periods.
Characteristics of the underlying commodity market
1. Competent authorities shall take into account how the characteristics of the underlying commodity market impact on the functioning and trading of the commodity derivative and on the size of the positions held by market participants, including having regard to the ease and speed of access which market participants have to the underlying commodity.
2. The assessment of the underlying commodity market referred to in paragraph 1 shall take into account the following criteria:
(a)
whether there are restrictions on the supply of the commodity, including the perishability of the deliverable commodity;
(b)
the method of transportation and delivery of the physical commodity, including the following:
(i)
whether the commodity can be delivered to specified delivery points only;
(ii)
the capacity constraints of specified delivery points;
(c)
the structure, organisation and the operation of the market, including the seasonality present in extractive and agricultural commodity markets whereby physical supply fluctuates over the calendar year;
(d)
the composition and role of market participants in the underlying commodity market, including consideration of the number of market participants which provide specific services that enable the functioning of the underlying commodity market such as risk management, delivery, storage, or settlement services;
(e)
macroeconomic or other related factors that influence the operation of the underlying commodity market including the delivery, storage, and settlement of the commodity;
(f)
the characteristics, physical properties and lifecycles of the underlying commodity.
Repeal
Delegated Regulation (EU) 2017/591 is repealed.
References to Delegated Regulation (EU) 2017/591 shall be construed as references to this Regulation and shall be read in accordance with the correlation table in the Annex to this Regulation.
Entry into force and application
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
