Question 7 Are securitized derivatives considered to be commodity derivatives under MIFID II? How does ESMA differentiate between ETCs and securitized derivatives? [Last update: 23/09/2022]
Art. 4(1)(44)(c) and Annex I of MiFID II Art. 2(1)(30) of MiFIR
Are securitised derivatives considered to be commodity derivatives under MiFID II? How does ESMA differentiate between ETCs and securitised derivatives?
Answer 7
"Securitised derivatives" are transferable securities whose value is based upon underlying assets. However, neither MiFID I (incl. level 2 thereof), nor MiFID II/MiFIR contain a specific definition of these instruments.
Where the underlying asset of securitised derivatives is one or more commodities, these instruments are caught by the definition of "transferable securities" in Article 4(1)(44)(c) of MIFID II and are commodity derivatives under Article 2(1)(30) of MiFIR.
Exchange traded commodities (ETCs) are debt instruments which are within the scope of Article 4(1)(44)(b) of MiFID II and are classified as such in RTS 2. Therefore, they are outside the definition of commodity derivatives in Article 2(1)(30) of MiFIR and the position limits regime does not apply to them.
ESMA is aware that market practices in differentiating between ETCs and securitised derivatives are neither clear nor uniform and presents the following guidance to allow for a correct classification of instruments in practice.