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ESMA updates on Investor Protection and Commodity Derivatives under MiFID II

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The European Securities and Markets Authority (ESMA) has issued several updates regarding Investor Protection and Commodity Derivatives under MiFID II today.

The first statement refers to its Questions and Answers (Q&As) on the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) regarding commodity derivatives topics. These Q&As provide clarification on issues related to the MiFIDII/MiFIR regime for commodity derivatives, including on position limits, position reporting, and ancillary activity.

New or revised answers are provided on the following topics:

  • Position limits: the Q&A clarifies the circumstances under which less liquid contracts may receive bespoke position limits established by the relevant national competent authority (NCA); and it introduces a tailored approach to the development and application of commodity position limits for spread contracts (i.e. spread positions are disaggregated, and the subsequent individual constituent positions are added to the relevant overall position for the relevant contract).
  • Position reporting: the Q&A clarifies to which NCA positions in an OTC commodity derivative contract, which is economically equivalent to more than one EU exchange-traded derivative (ETD) contract, must be reported when the ETD contracts are not the same contract as defined in Article 5(1) of RTS 21.

The purpose of these Q&As is to promote common supervisory approaches and practices in the application of MiFID II and MiFIR. They provide responses to questions raised by market participants in relation to the practical application of the provisions relating to commodity derivative issues.

ESMA will continue to develop these Q&As in the coming months and will review and update them where required.

The second statement is in regard to 7 new or updated items in its Questions and Answers (Q&A) document on the implementation of investor protection topics under the Market in Financial Instruments Directive and Regulation (MiFID II/ MiFIR).

The updated Q&As are on the topics of inducements (research) and information on costs and charges. The other four Q&As are new and relate to the topics of inducements, post-sale reporting and other issues


The overall MiFID II Q&A provide clarifications on the following topics:

  • Best execution
  • Suitability and appropriateness
  • Recording of telephone conversations and electronic communications
  • Post-sale reporting
  • Record keeping
  • Investment advice on an independent basis
  • Inducements (research)
  • Information on charges and costs
  • Underwriting and placement of a financial instrument
  • Client categorisation
  • Inducements
  • Provision of investment services and activities by third country firms
  • Application of MiFID II after 3 January 2018, including issues of ‘late transposition’
  • Other issues

MiFID II applies from 3 January 2018 and will strengthen the protection of investors by both introducing new requirements and reinforcing existing ones. The purpose of this Q&A is to promote common supervisory approaches and practices in the application of MiFID II/MiFIR for investor protection topics.

ESMA will continue to develop this Q&A on investor protection topics under MiFID II in the coming months, both adding questions and answers to the topics already covered and introducing new sections for other MiFID II investor protection areas not yet addressed in this Q&A.

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