How is the position limits regime applied to the various underlyings listed in Annex I, Section C(10) of MIFID II?

Answer 10

Section C(10) of Annex I of MIFID II covers a number of different types of commodity derivatives. For these instruments the following approaches should be taken:

Position limits should be applied to freight rate derivatives (wet and dry freight) based on the open interest both in the spot month and in the other months when the freight rate derivative contract qualifies as critical or significant under Article 57(1) of MiFID II.

Position limits should be applied to derivative contracts relating to indices qualifying as critical or significant under Article 57(1) of MiFID II if the underlying index is materially based on commodity underlyings as defined in Article 2 No. 6 of Commission Delegated Regulation (EU) 2017/565 of 25 April 2016. ESMA considers that the underlying index is materially based on commodities if such commodities have a weighting of more than 50% in the composition of the underlying index. The spot and the other months' limits should be based on open interest only, in accordance with Article 15(1) of RTS 21a, as no single measurable deliverable supply can be determined for the commodities contained within the index.