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    2025-07-06

MAR 10.2 Position limit requirements

Establishing, applying and resetting position limits

MAR 10.2.1 G RP
  1. (1)

    1The following provisions of the MiFI Regulations regulate the establishment, application and resetting of position limits:

    1. (a)

      Regulation 16(1) imposes an obligation on the FCA to establish position limits in respect of commodity derivatives traded on trading venues in the United Kingdom and economically equivalent OTC contracts;

    2. (b)

      Regulation 16(2) imposes an obligation on the FCA to establish position limits on the basis of all positions held by a person in the contract to which the limit relates and those held on the person’s behalf at an aggregate group level;

    3. (c)

      Regulation 16(4) imposes an obligation on the FCA to publish the position limits it establishes in a manner which the FCA considers appropriate;

    4. (d)

      Regulation 18 imposes an obligation on the FCA to ensure that each position limit established by it specifies clear quantitative thresholds for the maximum size of a position in a commodity derivative that a person can hold;

    5. (e)

      Regulation 19(1) imposes an obligation on the FCA to establish position limits in accordance with ESMA’s methodology, unless an exceptional case exists under Regulation 25 of the MiFI Regulations;

    6. (f)

      Regulation 19(2) imposes an obligation on the FCA to review position limits it has established in the presence of certain factors;

    7. (g)

      Regulation 19(3) imposes an obligation on the FCA to establish a new position limit following its review if it believes that the limit should be reset;

    8. (h)

      [deleted]2

    9. (i)

      [deleted]2

    10. (j)

      Regulation 23 imposes general obligations on the FCA in respect of the position limits it establishes, so that the limits must be transparent and non-discriminatory, specify how they apply to persons, and take account of the nature and composition of market participants and of the use they make of the contracts admitted to trading;

    11. (k)

      Regulation 25(1) prohibits the FCA from establishing position limits which are more restrictive than permitted under MiFID RTS 212 unless in exceptional cases where more restrictive position limits are objectively justified and proportionate;

    12. (l)

      Regulation 25(2) to Regulation 25(5) impose obligations on the FCA where it establishes position limits which are more restrictive than permitted under MiFID RTS 212in accordance with Regulation 25(1) of the MiFI Regulations. The obligations are that the FCA must publish that position limit on its website, and2 not apply that position limit for more than six months from the date of publication unless further subsequent six-month application periods for that limit are objectively justified and proportionate; and2

    13. (m)

      [deleted]2

    14. (n)

      Regulation 27 empowers the FCA to require a person to provide information on, or concerning, a position the person holds, or trades the person has undertaken, or intends to undertake, in a contract to which a position limit relates.

  2. (2)

    MiFID RTS 21 provides a methodology for the calculation of position limits on commodity derivatives, and rules for the calculation of the net position held by a person in a commodity derivative.

  3. (3)

    MiFID RTS 21 provides that the FCA can establish different position limits for different times within the spot month period or other months’ period of a commodity derivative, and for the spot month period, those position limits shall decrease towards the maturity of the commodity derivative, and shall take into account the position management controls of trading venues.

[Note: article 57 of MiFID]

Application of position limits

MAR 10.2.2 D RP
  1. (1)

    1A person must comply at all times with commodity derivative position limits established by the FCA, published at www.fca.org.uk.

  2. (2)

    A direction made under (1) applies where a commodity derivative is traded on a trading venue in the United Kingdom.2

  3. (3)

    Position limits established under (1) shall apply to the positions held by a person together with those held on its behalf at an aggregate group level (subject to the non-financial entity exemption in regulation 17(1) of the MiFI Regulations).

  4. (4)

    Position limits established under (1) shall apply regardless of the location of the person at the time of entering into the position.

  5. (5)

    Position limits established under (1) prior to 3 January 2018, will apply from 3 January 2018.

[Note: articles 57(1) and 57(14) of MiFID; and MiFID RTS 21 in respect of ESMA’s methodology for competent authorities to calculate position limits]

Non-financial entity exemption

MAR 10.2.3 G RP
  1. (1)

    1Regulation 17 of the MiFI Regulations regulates the position limit exemption applicable to positions in a commodity derivative held by or on behalf of a non-financial entity which are objectively measurable as reducing risks directly relating to the commercial activity of that non-financial entity, and which is approved by the FCA in accordance with the relevant criteria and procedures. Regulation 17(1) imposes an obligation on the FCA to disregard such positions, when calculating the position held by such entities in respect of a commodity derivative to which a position limit applies.

  2. (2)

    Regulation 17(2) of the MiFI Regulations enables the FCA to receive applications from non-financial entities for the purposes of obtaining an exemption from the position limits which it sets and in such form as the FCA may direct.

  3. (3)

    MiFID RTS 21 stipulates detail on positions qualifying as reducing risks directly related to commercial activities, and the application for the exemption from position limits.

  4. (4)

    MiFID RTS 21 clarifies that a non-financial entity shall notify the FCA if there is a significant change to the nature or value of that non-financial entity’s commercial activities, or its trading activities in commodity derivatives. The obligation arises where the change is relevant to the description of the nature and value of the non-financial entity’s trading and positions held in commodity derivatives and their economically equivalent OTC contracts in a position limit exemption application it has already submitted. In this case, a non-financial entity must submit a new application if it intends to continue to make use of the exemption.

[Note: article 57(1) of MiFID]

MAR 10.2.3A G

3A trading venue operator can receive applications from non-financial entities and financial entities for the purposes of obtaining an exemption from the position limits it sets. The different types of exemptions and relevant criteria and procedures are set out in MAR 10.2.6R to MAR 10.2.28G.

Non-financial entity exemption application

MAR 10.2.4 D RP

[deleted]3

1
MAR 10.2.5 G RP

[deleted]2

1
MAR 10.2.6 R

3A trading venue operator may determine that a non-financial entity’s position for the purposes of a position limit does not include a position it holds, or one held on its behalf, which is:

  1. (1)

    objectively measurable as reducing risks directly relating to its commercial activity; and

  2. (2)

    approved by the trading venue operator setting the position limit in accordance with:

    1. (a)

      the relevant criteria and methods in MAR 10.2.7R; and

    2. (b)

      the relevant procedure in MAR 10.2.9R to MAR 10.2.10R.

MAR 10.2.7 R

3A trading venue operator may make the determination in MAR 10.2.6R where it is satisfied that the following criteria are met:

  1. (1)

    a position held by a non-financial entity:

    1. (a)

      reduces the risks arising from the potential change in the value of assets, services, inputs, products, commodities or liabilities that the non-financial entity or its group owns, produces, manufactures, processes, provides, purchases, merchandises, leases, sells, or incurs or reasonably anticipates owning, producing, manufacturing, processing, providing, purchasing, merchandising, leasing, selling or incurring in the normal course of its business; or

    2. (b)

      qualifies as a hedging contract pursuant to UK-adopted IFRS; and

  2. (2)

    the position held by the non-financial entity is capable of being unwound in an orderly way.

MAR 10.2.8 G

3For the purposes of discharging the obligation in MAR 10.2.7R(2), a trading venue operator should consider its own rules and appropriate metrics, such as the size of the position relative to the open interest in the relevant market and market conditions, including liquidity.

MAR 10.2.9 R

3When making a determination in accordance with MAR 10.2.6R, a trading venue operator must require a non-financial entity to submit to it at least the following information, at the time of its application and in relation to the following 12 months, which demonstrates how the position reduces risks directly relating to the non-financial entity’s commercial activity:

  1. (1)

    a description of the nature and value of the non-financial entity’s commercial activities in the commodity underlying the commodity derivative for which an exemption is sought;

  2. (2)

    a description of the nature and value of the non-financial entity’s activities in the trading of and positions held in the relevant commodity derivatives traded on trading venues and in related OTC contracts;

  3. (3)

    a description of the nature and size of the exposures and risks in the commodity which the non-financial entity has or expects to have as a result of its commercial activities and which are or would be mitigated by the use of commodity derivatives; and

  4. (4)

    an explanation of how the non-financial entity’s use of commodity derivatives directly reduces its exposure and risks in its commercial activities.

MAR 10.2.10 R

3A qualifying risk-reducing position taken on its own or in combination with other derivatives is one, for the purposes of MAR 10.2.6R, for which the non-financial entity:

  1. (1)

    describes the following in its internal policies:

    1. (a)

      the types of commodity derivative contract included in the portfolios used to reduce risks directly relating to commercial activity and their eligibility criteria;

    2. (b)

      the link between the portfolio and the risks that the portfolio is mitigating; and

    3. (c)

      the measures adopted to ensure that the positions concerning those contracts serve no other purpose than covering risks directly related to the commercial activities of the non-financial entity, and that any position serving a different purpose can be clearly identified; and

  2. (2)

    is able to provide a sufficiently disaggregated view of the portfolios in terms of class of commodity derivative, underlying commodity, time horizon and any other relevant factors.

MAR 10.2.11 R

3A trading venue operator must require a non-financial entity to notify it:

  1. (1)

    promptly if there is a significant change to the nature or value of the non-financial entity’s commercial activities or its trading activities in commodity derivatives, and the change is relevant to the information required in MAR 10.2.9R;

  2. (2)

    promptly of a breach of any condition relating to an exemption; and

  3. (3)

    in any event, on an annual basis, of its intention to rely on the exemption or otherwise, and supplying any changes to the information previously submitted in accordance with MAR 10.2.9R.

MAR 10.2.12 R

3A trading venue operator must notify the FCA:

  1. (1)

    promptly of an exemption granted to a non-financial entity in accordance with MAR 10.2.6R, including any conditions such as an exemption ceiling attached to the exemption; and

  2. (2)

    on an annual basis of all exemptions from position limits, granted by it to non-financial entities, including:

    1. (a)

      any exemption ceilings;

    2. (b)

      positions that exceeded those exemption ceilings; and

    3. (c)

      steps taken to address resulting risks.

MAR 10.2.13 R

3A trading venue operator must review exemptions from position limits granted to non-financial entities:

  1. (1)

    at least on an annual basis; and

  2. (2)

    whenever it receives a notification as described in MAR 10.2.11R.

Pass-through hedging exemption

MAR 10.2.14 R

3A trading venue operator may determine that a financial entity’s position for the purposes of a position limit does not include a position it holds or one held on its behalf for the purposes of enabling a non-financial entity to benefit from the hedging exemption.

MAR 10.2.15 R

3A trading venue operator may determine that a financial entity’s (A’s) position for the purposes of a position limit does not include a position it holds or one held on its behalf when it:

  1. (1)

    arises under a commodity derivative traded on a trading venue; and

  2. (2)

    is entered into by A on a trading venue for the purpose of off-setting the risk arising from a contract with a non-financial entity (B) facilitating hedging activity by B.

MAR 10.2.16 G

3Positions for the purposes of MAR 10.2.14R may include a position in a contract a financial entity (A) enters into on a trading venue with a non-financial entity (B) to enable B to benefit from the hedging exemption. For the purposes of MAR 10.2.15R, they may also include a position in a contract entered into on a trading venue by A to offset an OTC position it has entered into with B, when B conducts hedging activity.

MAR 10.2.17 R

3A trading venue operator may only make the determination with regard to MAR 10.2.15R when a financial entity has obtained written confirmation from a non-financial entity that the position entered into facilitates hedging activity.

MAR 10.2.18 R

3When making a determination in accordance with MAR 10.2.14R or MAR 10.2.15R, a trading venue operator must require a financial entity to submit to it at least the following information at the time of its application and where possible in relation to the following 12 months:

  1. (1)

    a description of the financial entity’s risk-mitigation services in the commodity underlying the commodity derivative for which an exemption is applied; and

  2. (2)

    a description of the financial entity’s trading activity and positions in commodity derivatives for which an exemption is applied, including in OTC commodity derivatives that relate to providing risk-mitigation services.

MAR 10.2.19 R

3A trading venue operator must require a financial entity to notify it:

  1. (1)

    promptly if there is a significant change relevant to the information set out in MAR 10.2.18R; and

  2. (2)

    on an annual basis of its intention to rely on the exemption or otherwise, and supplying any changes to the information previously submitted in accordance with MAR 10.2.18R, including information relating to the period for the next 12 months.

MAR 10.2.20 R

3A trading venue operator must notify the FCA:

  1. (1)

    promptly of an exemption granted to a financial entity in accordance with MAR 10.2.14R or MAR 10.2.15R, including any conditions such as an exemption ceiling attached to the exemption; and

  2. (2)

    on an annual basis of all exemptions from position limits granted by it to financial entities, including:

    1. (a)

      exemption ceilings;

    2. (b)

      positions that exceeded those exemption ceilings; and

    3. (c)

      steps taken to address resulting risks.

MAR 10.2.21 R

3A trading venue operator must review all exemptions from position limits granted to financial entities:

  1. (1)

    at least on an annual basis; and

  2. (2)

    whenever it receives a notification as described in MAR 10.2.19R(1).

Liquidity provider exemption

MAR 10.2.22 R

3A trading venue operator may determine that a position limit does not apply to a position held by a person for a position that is objectively measurable as resulting from a transaction consistent with obligations to provide liquidity on a trading venue.

MAR 10.2.23 R

3A trading venue operator may make the determination in MAR 10.2.22R where:

  1. (1)

    it receives an application from a person for these purposes;

  2. (2)

    the obligations to provide liquidity are clearly defined and relate to observable metrics of market quality, including depth and tightness of the spread;

  3. (3)

    the position arises from discharge of the person’s obligation as a liquidity provider; and

  4. (4)

    the exemption is temporary in duration and the person reduces its position as soon as reasonably practicable prior to the expiry of the contract.

MAR 10.2.24 R

3A trading venue operator must ensure that an application for the purposes of MAR 10.2.22R provide as a minimum a description of the liquidity the applicant provides in respect of the commodity derivatives for which an exemption from a position limit is being requested.

MAR 10.2.25 R

3A trading venue operator must notify the FCA;

  1. (1)

    promptly of an exemption granted to it in accordance with MAR 10.2.22R, including any conditions such as an exemption ceiling attached to the exemption; and

  2. (2)

    on an annual basis of all exemptions from position limits granted by it to in accordance with MAR 10.2.22R, including:

    1. (a)

      any exemption ceilings;

    2. (b)

      positions that exceeded those exemption ceilings; and

    3. (c)

      steps taken to address resulting risks.

All exemptions

MAR 10.2.26 R

3A trading venue operator must:

  1. (1)

    provide the FCA, upon request, with such information as the FCA may reasonably require to enable a fuller understanding of the basis for granting an exemption to which MAR 10.2 applies;

  2. (2)

    store information in an easily retrievable way that is accessible for future reference by the FCA for the purposes of (1); and

  3. (3)

    ensure that its systems can identify:

    1. (a)

      when an exemption under MAR 10.2 is being used in relation to a market participant’s position in a commodity derivative; and

    2. (b)

      which exemption is being used.

MAR 10.2.27 R
  1. (1)

    3A trading venue operator may establish an exemption ceiling for the purposes of any of the exemptions in MAR 10.2 where to do so would mitigate the risk that large positions otherwise pose to the orderly pricing and settlement of a critical contract.

  2. (2)

    A trading venue operator must explain in its rules how it will apply and determine an exemption ceiling, including how and when it may be amended.

MAR 10.2.28 G

3The use of an exemption ceiling can enable a trading venue operator to ensure that exempt positions are subject to appropriate management and oversight, to mitigate risks to orderly trading and settlement.