MiFID II Commodities Positions Reporting webinar

FAQs - MiFID II Commodities Positions Reporting

Q:

If a firm is an exchange member and we also trade OTC who do we report to?

A:

If you are both an exchange member and an investment firm trading commodity OTC, then you need to report your EEOTC and ETD positions to National Competent Authorities, and your ETD positions to venues.


Q:

Is it only for members of an EEA venue?

A:

The requirement to report to venues is only for members of EEA venues.


Q:

As per the regulation, it is said that firms need to be within limits at all time. Does this mean we would need to report to do real-time reporting?

A:

There is no requirement for any firm that is not a market operator to do real-time reporting of commodities positions in neither MiFID II Article 58(2) nor anywhere else in MiFID II.


Q:

For the NCA reports, do firms need to report only the EEOTC position along with the ETD positions or all the OTC position?

A:

As per Article 58(2) of MiFID II, you need to report both EEOTC and ETD positions to NCAs.


Q:

Do investment firms have to report OTC commodity derivatives to the NCA?

A:

Yes, where these OTC commodity derivatives are economically equivalent to an ETD, as per the below definition:

An OTC derivative shall be considered economically equivalent to a commodity derivative traded on a trading venue where it has identical contractual specifications, terms and conditions, excluding different lot size specifications, delivery dates diverging by less than one calendar day and different post trade risk management arrangements. --- Article 6, draft MiFID II RTS 21


Q:

The FCA consultation suggests that position reports be sent either to a trading venue or the relevant Competent Authority. Do firms require to 'look through' their immediate counterparty to determine if the position taken up in a commodity derivative was executed on a trading venue, and report to that venue?

A:

It is unclear how this would work - we would recommend sending position reports on ETDs to the venue, and position reports on ETD and EEOTC to the NCAs for both yourselves and your clients.


Q:

Are inflation rates swaps out of scope?

A:

These are out of scope.


Q:

If a firm's client is a MiFID regulated firm, do they also have a position reporting obligation?

A:

They do, if they trade commodity derivatives OTC.


Q:

How confident is Unavista on sticking to its development timelines?

A:

We are committed to having a production system in place by 3rd January 2018. Our timelines for UAT and pre-production have not yet been finalised, as we are waiting on some technical detail from the NCAs in order to estimate development effort.


Q:

What about the other reporting obligation: weekly Commitment of Trader?

A:

Weekly "commitment of trader" reports are only required to be made by venues operators - see Article 58 (1a) of MiFID II for more detail.


Q:

Is the LBMA and LPPM regarded as a trading venue?

A:

It's worth asking them - venues in scope are regulated markets, MTFs, and OTFs where commodity derivatives are traded or admitted to trading.


Q:

Are LME trades classified as OTC or listed?

A:

You would need to find out if the trades you are executing are in listed commodity derivatives on the LME.


Q:

For investment firms trading ETD only, will all the responsibility falls on our clearing broker?

A:

If you are an investment firm trading ETD only, you do not need to report to NCAs. However, if you are a member of a venue, you need to report to that venue.


Q:

Do interdealer brokers need to report as we will not be holding any positions overnight?

A:

If you hold no positions overnight for neither yourselves nor your counterparties, then you have no positions to report for daily reporting to NCAs.


Q:

Two companies trade EEOTC bilaterally over the phone, how those EEOTC position are supposed to be reported to the relevant NCAs?

A:

If one or more of them is an investment firm, then the EEOTC positions get reported. If not, they don't get reported.


Q:

Would you consider commodity derivative with physical delivery (e.g. NBP options) as EEOTC and therefore as "in scope" of Mifid position limits monitoring?

A:

Cash-settled and physically-settled derivatives are treated exactly the same for the scope of this regulation.


Q:

Can UnaVista build the position report from MiFIR transaction reports?

A:

The data points required are very different (the majority of the CPR fields are in neither the EMIR nor the MiFIR position report). This means that in order to use either of this, a number of additional (potentially repeating) fields would need to be added to the MiFIR or EMIR report. The reports themselves are made at different levels – for CPR, these are at position holder level, and differentiated between long and short, risk reducing and non-risk reducing). UnaVista would be required to receive seeding data on initial positions


Q:

Does UnaVista offer routing to venues as well and how will you decide which ?

A:

We will be offering routing of position reports to venues as well, and are planning on offering this to those venues for which we receive client demand and who are happy for us to provide this service. This service will be provided at no additional cost for those venues who consent to receive the data in a standardised format.


Q:

What will you charge for this service?

A:

This will be charged for on an annual license fee, to incorporate the following:

  • Connectivity to the National Competent Authorities
  • Full validation to ensure data quality
  • Automatic eligibility checking
  • Processing of response files from NCAs, and an intuitive resubmission process (options for both manual and automatic) for when NCAs reject the reports
  • Connectivity to all venues that consent receiving it in a standard format

Q:

We trade on different venues across Europe – can we just report to the FCA if we’re based in London?

A:

Unfortunately, you can’t – firms trading OTC commodity derivatives are required to report their exchange-traded derivatives and economically equivalent over-the-counter derivatives to the national competent authority of the venue on which the exchange-traded derivative is traded. However, UnaVista will be connecting to all the NCAs for both MiFIR transaction reporting and for commodity positions reporting, and UnaVista clients only need a single connectivity channel to UnaVista in order to make use of this.


Q:

Who will receive the emails from the regulators telling them to reduce their position?

A:

Our understanding following conversations with the Financial Conduct Authority is that the email address will be one or both of the email addresses identified in the position report itself (Email address of position holder, Email address of ultimate parent entity).


Q:

Can you confirm your view that there is no requirement for firms to monitor positions vs the limits themselves?

A:

This is based on the fact that there is no requirement in neither MiFID II, nor RTS 21 nor ITS 4 to monitor positions versus the limits internally. Furthermore, given the sheer number of in-scope contracts (estimates put this at over 100,000 contracts, with 2 limits for each contract), combined with the fact that there is no requirement in the regulation nor RTS for regulators to make the limits available to the firms affected in a machine-readable format means that implementing an automatic monitoring system would be difficult, given the need to have a reliable source of data on what the limits are which just doesn’t exist.


Q:

My company is not an investment firm – does this mean that I’m out of scope?

A:

If you are not an investment firm nor a member of an venue on which commodities are traded, you are not in scope for the reporting requirement. However, this does not mean that you are out of scope for the limits regime, since entities that you trade with who are in scope for the reporting requirement will have to submit position reports on your behalf. This means that you are still subject to the limits regime, even though you have no direct reporting requirement.


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