Derivatives and Reporting (Amendment) Regulations, 2022

Suppliment tal-Gazzetta tal-Gvern ta’ Malta Nru. 20,787, 18 ta’ Frar, 2022 B 483

L.N. 89 of 2022

FINANCIAL MARKETS ACT

(CAP. 345)

INVESTMENT SERVICES ACT

(CAP. 370)

Position Limits and Position Management Controls in Commodity

Derivatives and Reporting (Amendment) Regulations, 2022

IN EXERCISE of the powers conferred by article 49 of the

Financial Markets Act and article 12 of the Investment Services Act,

the Minister responsible for the regulation of Financial Services,

acting on the advice of the Malta Financial Services Authority, has

made the following regulations

(1) The title of these regulations is the Position Limits Citation and

and Position Management Controls in Commodity Derivatives and scope.

Reporting (Amendment) Regulations, 2022, and these regulations S.L. 345.19.

shall be read and construed as one with the Position Limits and S.L. 370.36.

Position Management Controls in Commodity Derivatives and

Reporting Regulations, hereinafter referred to as "the principal

regulations".

(2) The scope of these regulations is to transpose Article 1 (2),

(10) and (11) of Directive (EU) 2021/338 of the European Parliament

and of the Council of 16 February 2021 amending Directive 2014/65/

EU as regards information requirements, product governance and

position limits, and Directives 2013/36/EU and (EU) 2019/878 as

regards their application to investment firms, to help the recovery from

the COVID-19 crisis.

Sub-article (1) of regulation 2 of the principal regulations Amends

regulation 2 of

shall be amended as follows

the principal

regulations.

(a) immediately before the definition "Central competent

authority", there shall be added the following new definition

""agricultural commodity derivatives"

means

derivative contracts relating to products listed in

(i) Article 1 of Regulation (EU) No 1308/

2013 of the European Parliament and of the Council;

(ii)

Parts I to XX and XXIV/1 of Annex I to

the Treaties of the European Union; and

(iii) Annex I to Regulation (EU) No 1379/

2013 of the European Parliament and of the

Council;";

(b) immediately after the definition "MIFIR", there shall

be added the following new definition

""predominantly commercial group" means any

group of which the main business is not the provision of

investment services within the meaning of the First

Schedule to the Investment Services Act, or the

performance of any activity listed in Annex I to Directive

2013/36/EU as transposed in the First Schedule to the

Banking Act, or acting as a market maker in relation to

commodity derivatives;";

(1) Regulation 3 of the principal regulations shall be

amended as follows

(a) sub-regulation (1) of regulation 3 shall be substituted

by the following

" (1) The competent authority shall, in line with the

calculation methodology determined by ESMA in the

regulatory technical standards adopted in accordance with

Article 57(3) of MiFID, set and apply limits on the size of a

net position which a person can hold at all times in

agricultural commodity derivatives and critical or

significant commodity derivatives that are traded on

trading venues, and in economically equivalent OTC

contracts

Provided that commodity derivatives shall be

considered to be critical or significant where the sum of all

net positions of end position holders constitutes the size of

their open interest and is at a minimum of 300,000 lots on

average over a one-year period.";

(b) in sub-regulation (2) of regulation 3, for the words

"shall be set on the basis of all positions held by a person and

those held on its behalf at an aggregate group level in order to:",

there shall be substituted the words "shall be set based on all

positions held by a person and those held on his or her behalf at

an aggregate group level in order to:";

(c)

sub-regulation (3) of regulation 3 shall be substituted

by the following

" (3) The position limits referred to in sub-regulation

(1) shall not apply to

(a) positions held by, or on behalf of, a non-

financial entity, and which are objectively measurable

as reducing risks directly relating to the commercial

activity of that non-financial entity;

(b) positions held by, or on behalf of, a

financial entity that is part of a predominantly

commercial group and is acting on behalf of a non-

financial entity of the predominantly commercial

group, where those positions are objectively

measurable as reducing risks directly relating to the

commercial activity of that non-financial entity;

(c) positions held by financial and non-

financial counterparties for positions that are

objectively measurable as resulting from transactions

entered into to fulfil obligations to provide liquidity

on a trading venue as referred to in point (c) of the

fourth sub-paragraph of Article 2(4) of MiFID;

(d) any other securities as referred to in point

(c) of point 1 to the Second Schedule of the Cap. 370.

Investment Services Act which relate to a commodity

or an underlying asset as referred to in point 10 of the

Second Schedule to the Investment Services Act.";

(d) sub-regulation (5) of regulation 3 shall be substituted

by the following

" (5) The competent authority shall set position

limits for critical or significant commodity derivatives and

agricultural commodity derivatives that are traded on

trading venues, based on the calculation methodology laid

down in the regulatory technical standards adopted by the

European Commission pursuant to Article 57(3) of MiFID.

Such position limits shall include economically equivalent

OTC contracts.";

(e) sub-regulation (6) of regulation 3 shall be substituted

by the following

" (6) The competent authority shall review the

position limits referred to in sub-regulation (1) where there

is a significant change on the market, including a

significant change in deliverable supply or open interest,

based on its determination of deliverable supply and open

interest, and reset those position limits in accordance with

the calculation methodology laid down in the regulatory

technical standards adopted by the European Commission

pursuant to Article 57(3) of MiFID.";

(f) sub-regulation (9) of regulation 3 shall be substituted

by the following

"(9) Where

(i) agricultural commodity derivatives based

on the same underlying product and sharing the same

characteristics are traded in significant volumes on

trading venues in more than one jurisdiction; or

(ii) critical

or

significant

commodity

derivatives based on the same underlying commodity

and sharing the same characteristics are traded on

trading venues in more than one jurisdiction;

and the largest volume of trading takes place in

Malta, the competent authority (as the central competent

authority) shall set the single position limit to be applied on

all trading in those derivatives. The competent authority

shall consult the European regulatory authorities of other

trading venues on which those agricultural commodity

derivatives are traded in significant volumes or on which

those critical or significant commodity derivatives are

traded, on the single position limit to be applied and any

revisions to that single position limit

Provided that where the competent authority

and the European regulatory authorities of the other trading

venues do not agree, they shall state in writing the full and

detailed reasons why they consider that the requirements

prescribed in sub-regulations (1) to (3) are not met. ESMA

will settle any dispute arising from a disagreement between

competent authorities in accordance with its powers under

Article 19 of Regulation (EU) No 1095/2010.";

(g) sub-regulation (10)

of

regulation

shall

be

substituted by the following

" (10) Where

(i) agricultural commodity derivatives based

on the same underlying product and sharing the same

characteristics are traded in significant volumes on

trading venues in more than one jurisdiction; or

(ii) critical

or

significant

commodity

derivatives based on the same underlying commodity

and sharing the same characteristics are traded on

trading venues in more than one jurisdiction;

and the largest volume of trading does not take

place in Malta, and the competent authority disagrees

with the setting of the single position limit by a

European regulatory authority which qualifies as a

central competent authority, it shall state in writing

the full and detailed reasons why it considers that the

requirements laid down in sub-regulation (1) to (3)

are not met

Provided that ESMA shall settle any

dispute arising from a disagreement between

competent authorities in accordance with its powers

under Article 19 of Regulation (EU) No 1095/2010.";

(h) sub-regulation (11)

of

regulation

shall

be

substituted by the following

" (11) Where the MFSA is the competent authority of

the trading venues in the case of

(i) agricultural commodity derivatives that

are based on the same underlying product and that

share the same characteristics are traded in significant

volumes; or

(ii) critical

or

significant

commodity

derivatives that are based on the same underlying

commodity and that share the same characteristics;

are traded, it shall put in place cooperation

agreements with the European regulatory authorities

of the position holders in the derivatives mentioned in

points (i) or (ii), which shall include the exchange of

relevant data, in order to enable the monitoring and

enforcement of the single position limit.";

(i) sub-regulation (12)

of

regulation

shall

be

substituted by the following

"(12) Where the MFSA is the competent authority of

the position holders in

(i) agricultural commodity derivatives that

are based on the same underlying product and that

share the same characteristics are traded in significant

volumes; or

(ii) critical

or

significant

commodity

derivatives that are based on the same underlying

commodity and that share the same characteristics;

which are traded on a trading venue, it shall put

in place cooperation agreements with the European

regulatory authorities of such trading venues where

the derivatives mentioned in points (i) or (ii) are

being traded, which shall include the exchange of

relevant data, in order to enable the monitoring and

enforcement of the single position limit."; and

(j) sub-regulation (13)

of

regulation

shall

be

substituted by the following

"(13) An investment firm or a market operator

operating a trading venue which trades commodity

derivatives shall apply position management controls,

including powers for the trading venue to

(a)

monitor the open interest positions of

persons;

(b) obtain information, including all relevant

documentation, from persons about the size and

purpose of a position or exposure entered into,

information about beneficial or underlying owners,

any concert arrangements, and any related assets or

liabilities in the underlying market, including, where

appropriate, positions held in commodity derivatives

that are based on the same underlying commodity and

that share the same characteristics on other trading

venues and in economically equivalent OTC

contracts through members and participants;

(c)

request a person to terminate or reduce a

position, on a temporary or permanent basis, and to

unilaterally take action to ensure the termination or

reduction of the position where the person does not

comply with such request; and

(d) require a person to provide, on a

temporary basis, liquidity back into the market at an

agreed price and volume with the express intent of

mitigating the effects of a large or dominant

position.".

Regulation 4 of the principal regulations shall be amended Amends

regulation 4 of

the principal

regulations.

(a) in sub-regulation 2 of regulation 4, for the words

"exceed minimum thresholds.", there shall be substituted the

words "exceed minimum thresholds:" and, immediately

thereafter, there shall be added the following new proviso

"Provided that position reporting as required in

sub-regulation (1) shall not be applicable to any other

securities as referred to in point (c) of point 1 to the

Second Schedule of the Investment Services Act that Cap. 370.

relate to a commodity or an underlying asset as referred to

in point 10 of the Second Schedule to the Investment

Services Act."

(b) sub-regulation 3 of regulation 4 shall be substituted

by the following

" (3) Maltese investment firms trading in commodity

derivatives or emission allowances or derivatives thereof

outside a trading venue shall provide, at least on a daily

basis

(a) the competent authority, in line with its

role as central competent authority in terms of

Regulation 3(9); or,

(b) if there is no central competent authority,

the competent authority of the trading venue where

the commodity derivatives or emission allowances or

derivatives thereof are traded;

with a complete breakdown of their positions

taken in economically equivalent OTC contracts and,

when relevant, in commodity derivatives or emission

allowances or derivatives thereof traded on a trading

venue, as well as of those of their clients and the

respective clients of those clients until the end client

is reached, in accordance with Article 26 of

Regulation (EU) No 600/2014 and, where applicable,

of Article 8 of Regulation (EU) No 1227/2011.".

€0.36