The European Commission’s new regulation package of MiFID II

The European Commission has taken important steps today to strengthen the regulation of commodities markets and curb price speculation. It also ensures that firms active on these markets are regulated appropriately.

Recent package consists of two Delegated Regulations are part of the MiFID II rulebook. In particular, the standards will define parameters for competent authorities to determine "position limits”, i.e. the maximum amount of commodity derivatives that can be held by a single trader, and which represent a tool to help to limit commodity speculation, support orderly pricing and prevent market abuse. The new rules also ensure that large non-financial firms trading a large amount of commodity derivatives are regulated under MiFID II, through the so called “ancillary activity test”. This “ancillary test” represents a ratio between (i) the capital that would need to be allocated under CRR for the firm to engage in speculative derivatives trading versus (ii) the capital employed to conduct a firm's main business. The technical standards on ancillary activities set the maximum amount of trading in commodity derivatives that non-financial firms (such as energy and agricultural firms) can engage in before they must seek a MIFID authorisation. With the today's adoption the Commission has put in place the two final pieces of the 28 regulatory standards that ensure the application of MiFID II as of 3 January 2018.

Source: European Commission