Commodity derivatives: position limits, reporting regime and commitment of trader reports (2024)

The position limit exemptions application gateway is open for market participants. We ask for a minimum amount of data to understand your business so that we can process applications efficiently.

Position limits

A position limit is the maximum size of a net position held by a person in any commodity derivative traded on a UK trading venue and in economically equivalent over-the-counter (EEOTC) contracts.

We establish and apply position limits in line with the methodology set out in UK RTS 21). For certain new and illiquid contracts, a distinct approach is taken with the application of fixed position limits below certain liquidity thresholds.

Position limits apply to all commodity derivatives; both futures, and options on a delta-equivalent basis.

The FCA does not publish a list of EEOTC contracts– it is the responsibility of the firm that enters into an OTC transaction to determine whether it is an EEOTC contract for the purpose of position limits.

All separate positions in different maturities outside the spot month period ('Other Months'contracts) for a commodity derivative should be summed or netted.

Position limits will not be set on derivatives where the underlying is not a commodity.

Monitoring and notifications

Trading venues must notify us by email when the total open interest of any commodity derivative reaches the amountof lots specified by Article 15(1) of UK RTS 21, over a consecutive 3-monthperiod.

You can email notifications to[emailprotected].

Position limit exemptions

Non-financial entities (NFEs), as defined in UK RTS 21, can apply to us for a position limit exemption for 1 or more contracts. If you are such an entity and wish to have such an exemption you will need to show that your position in a particular commodity derivative is directly risk-reducing in relation to your commercial activity.

The position limit exemption should be applied for and will be assessed on a commodity derivative contract basis.

NFEs that have been granted exemptions will still have their positions reported in accordance with MAR 10 but the exemption will be taken into account when the position limits are applied.

You can complete the position limit exemptions application on Connect.

Please see the current version of the position limit exemption form (PDF) and read our guide to completing the commodity position limit exemption application (PDF).

Position limit exemptions for risk-reducing positions are not restricted to a fixed quantity of the specific contract. This allows for future variation in commercial needs. However, if there is a significant change in the nature or value of the NFE’s commercial or trading activities the NFE must submit a new application.

Firms are not required to monitor the position limit compliance of their clients. Compliance is the responsibility of the position holder.

We also do not publicly list exemptions granted.

Any position limit exemption will cover all risk-reducing positions held in the specific primary commodity derivative, and in any associated mini, Balmo (Balance of Month), mini-Balmo or other contracts such as those where the same commodity is traded in contracts denominated in different units where we have determined that the contracts should be aggregated.

The aggregation is identifiable in the table published with the position limits. An exemption application for aggregated contracts should list each Venue Product Code (VPC) on a trading venue that is to be included in the exemption. For example, the ICE Brent 1st Line Mini Future (VPC IMM) will be aggregated with the Brent 1st Line Future (VPC I). You need to apply for an exemption on both VPCs (I and IMM) if you are applying for an exemption on this commodity. The second exemption may, however, refer to the previous one in sections 2.2 to 2.6 rather than repeat all information.

For any questions or support in completing the application, please email[emailprotected].

Reporting positions

Position reporting obligations apply to:

• all trading venues in the UK that facilitate the trading of commodity derivatives, emission allowances and their derivatives
• all investment firms trading EEOTC contracts on these financial instruments

An investment firm must report the position of its non-investment firm client which is its ‘end-client’ together with the positions that such ‘end-client’ holds on behalf of third parties.

Emission allowances classified as C(11) financial instruments for the purposes of the UK definition must be reported, but they will not have a position limit.

Contract categorisation in position reporting is driven by the date of expiry of a position, not its execution date.

Trading venues and investment firms should submit position reports through the FCA’s market data processor (MDP) system.

Corrections to position reporting can be made for up to 5 years after the trading day to which the report relates. Any revising report should contain data in all the relevant fields including the amended data. The submitting entity should resend the report with a Report Status of CANC, NEW or AMND as required.

A firm can delegate the operational function of submitting the reports to a third-party technology provider but the responsibility remains with the firm subject to the reporting requirement who must complete a MDP on-boarding application and pay the relevant connection fee (MAR 10.4.11 G).

To start the MDP on-boarding process, you will need to fill in a confidentiality agreement form, receive our market interface specification and complete an on-boarding application form.

Trading venues and investment firms submitting position reports should use the following reporting instructions:

Commodity position reports - reporting instructions (PDF)

XSD for commodity derivative position reports (XSD)

Position management controls

Trading venues in the UK facilitating the trading of commodity derivatives are required to have appropriate position management controls. This allows them to monitor and access information about commodity derivative positions.

Our role in the position limit and reporting regime

Under the regime, we are responsible for:

• calculating and setting spot month and other months’ position limits for commodity derivatives traded on trading venues in the UK based on the methodology set out in UK RTS 21
• daily receipt of position reports
• applying position limits
• reviewing position limits where there are significant changes
• monitoring compliance with the position limits, and taking supervisory or enforcement actions where appropriate
• reviewing and approving applications for position limit exemptions

Ancillary activity exemption

Firms or individuals that trade in commodity derivatives, emission allowances and derivatives on emission allowances on a professional basis, may under the Regulated Activities Order be able to make use of an exemption from authorisation. This is through an assessment of their trading activities in accordance with tests in UK RTS 20.

Any natural or legal person who makes use of the ancillary activity exemption has to notify us annually that they make use of this exemption (PERG Q44B).

Those firms or individuals that rely on this exemption from authorisation must notify us through Connect. The notification form is on the Connect landing page. Use our notification user guide for help.

Your notification must be renewed before the end of that period using Connect.

Commitment of trader reports

Under paragraph 7BB(5) of the Schedule to the Recognition Requirements Regulations and MAR 10.4.3R, trading venues have an obligation to make public a weekly report with the aggregate positions held by the different categories of persons for the various commodity derivatives traded on the trading venue. The FCA publishes the commitment of trader reports it receives by providing links to the respective venues’ websites, as follows:

Commitment of trader reports - ICE

Commitment of trader reports - LME

Contact us

If you have any questions or queries, please email [emailprotected].