EU Plan for Waiver and Position Limits to be in Place by January 3, 2018

The European Securities and Markets Authority has made a public statement on the joint work plan of ESMA and national regulators for opinions on pre-trade transparency waivers and position limits under the revised Markets in Financial Instruments package. MiFID II will apply from January 3, 2018.

MiFID II introduces a new position limit regime for commodity derivatives. National regulators will be required to establish and apply position limits on the size of a net position in commodity derivatives traded on trading venues and economically equivalent OTC contracts. The limits will apply to the size of a position that a person can hold. Position limits set by a national regulator must be confirmed in an opinion issued by ESMA.

The pre-trade transparency obligations require market operators and investment firms operating a trading venue to make public current bid and offer prices and the depth of trading interests at those prices which are advertised through their systems for equity and non-equity financial instruments.

National regulators are able to waive the pre-trade transparency obligations, subject to certain conditions being met. Where a national regulator intends to grant a waiver, it must notify other national regulators and ESMA. ESMA must then issue a non-binding opinion on compliance of the waiver with the MiFID II requirements.

It is anticipated that just under 1000 opinions will need to be issued by ESMA. The workplan is intended to ensure that waivers are in place as of January 3, 2018 pending the issuance of opinions by ESMA. ESMA intends to issue all pre-trade transparency equity waivers before the end of 2017 and will also aim to issue as many as possible for non-equity instruments by that time. According to the workplan, position limits published by national regulators without any ESMA opinions will come into effect on January 3, 2018 but may be changed subsequently on the issue of an opinion by ESMA.

The UK Financial Conduct Authority confirmed in a statement issued on the same day that it would respond to applications for pre-transparency non-equity waivers before ESMA has issued an opinion and that any waiver granted by the FCA on this basis will come into effect on January 3, 2018. The FCA highlighted that any waiver granted may be reviewed in light of an opinion issued by ESMA at a later date. Pre-trade transparency equity waivers will not be granted by the FCA until an opinion has been issued by ESMA.

The FCA also confirmed that it intends to start publishing in October position limits on commodity derivatives contracts traded on UK trading venues. These position limits will come into effect on January 3, 2018 but are subject to change pending an ESMA opinion.

View ESMA's statement.

View the FCA's statement.