POSITION LIMITS AND POSITION MANAGEMENT CONTROLS IN COMMODITY DERIVATIVES AND REPORTING REGULATIONS

DERIVATIVES AND REPORTING

SUBSIDIARY LEGISLATION 370.36

POSITION LIMITS AND POSITION MANAGEMENT

CONTROLS IN COMMODITY DERIVATIVES AND

REPORTING REGULATIONS

3rd January, 2018

LEGAL NOTICE 389 of 2017, as amended by Legal Notices 89 of 2022 and

219 of 2025.

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

C om m od it y De r i va t iv e s , P os i tion Ma nagement Controls in

Commodity Derivatives and Derivatives of Emission Allowances

Regulations.

(2) The purpose of these regulations is to implement Article

57(1), (2), (4) to (6), (8) to (11), (13) and (14), Article 58(1) to (4),

Article 69(2)(o) and (p) and Article 79(5) of MIFID as herein

defined, and they shall be interpreted and applied accordingly.

(1) In these regulations unless the context otherwise

requires

"the Acts" means the Financial Markets Act and the

Investment Services Act;

"Central competent authority" means the regulatory authority

of the trading venue where the largest volume of trading takes place;

"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;

"Directive 2009/65/EC" means Directive 2009/65/EC of the

European Parliament and of the Council of 13 July 2009 on the

coordination of laws, regulations and administrative provision

relating to undertakings for collective investment in transferable

securities (UCITS) as amended from time to time, and includes any

implementing measures that have been or may be issued thereunder;

"Directive 2011/61/EC" means Directive 2011/61/EU of the

European Parliament and of the Council of 8 June 2011 on

Alternative Investment Fund Managers, as amended from time to

time, and includes any implementing measures that have been or may

be issued thereunder;

"Directive 2009/138/EC" means Directive 2009/138/EC of the

DERIVATIVES AND REPORTING

European Parliament and of the Council of 25 November 2009 on the

taking-up and pursuit of the business of Insurance and Reinsurance

(Solvency II), as amended from time to time, and includes any

implementing measures that have been or may be issued thereunder;

"Directive 2003/41/EC" means Directive 2003/41/EC of the

European Parliament and of the Council of 3 June 2003 on the

activities and supervision of institutions for occupational retirement

provision, as amended from time to time, and includes any

implementing measures that have been or may be issued thereunder;

"Directive 2003/87/EC" means Directive 2003/87/EC of the

European Parliament and of the Council of 13 October 2003

establishing a scheme for greenhouse gas emission allowance trading

within the Community, as amended from time to time, and includes

any implementing measures that have been or may be issued

thereunder;

"ESMA" means the European Securities and Markets

Authority established by Regulation (EU) No 1095/2010 of the

European Parliament and of the Council of 24 November 2010;

"investment firm" means any legal person, other than persons

to whom MiFID does not apply in terms of Article 2 of the said

Directive, whose regular occupation or business is the provision of

any one or more investment services to third parties on a professional

basis;

"MiFID" means Directive 2014/65/EU of the European

Parliament and of the Council of 15 May 2014 on markets in

financial instruments and amending Directive 2002/92/EC and

Directive 2011/61/EU, as amended from time to time, and includes

any implementing measures that have been or may be issued

thereunder;

"MiFIR" means Regulation (EU) No 600/2014 of the

European Parliament and of the Council of 15 May 2014 on markets

in financial instruments, as amended from time to time;

"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;

"Regulation (EU) No 1095/2010" means Regulation (EU) No

1095/2010 of the European Parliament and of the Council of 24

November 2010 establishing a European Supervisory Authority

DERIVATIVES AND REPORTING

(European Securities and Markets Authority), as amended from time

to time;

"Regulation (EU) No 1227/2011" means Regulation (EU) No

1227/2011 of the European Parliament and of the Council of 25

October 2011 on wholesale energy market integrity and transparency,

as amended from time to time;

"Regulation (EC) 713/2009" means Regulation (EC) No 713/

2009 of the European Parliament and of the Council of 13 July 2009

establishing an Agency for the Cooperation of Energy Regulators, as

amended from time to time.

(2) Words and expressions used in the Acts shall, in these

regulations, have the same meaning as is assigned to them in the

Acts.

(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.

(2) The limits referred to in sub-regulation (1) 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

(a)

prevent market abuse;

(b)

support orderly pricing and settlement

conditions, including preventing market distorting positions,

and ensuring, in particular, convergence between prices of

derivatives in the delivery month and spot prices for the

underlying commodity, without prejudice to price discovery

on the market for the underlying commodity.

(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

DERIVATIVES AND REPORTING

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 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.

(4) Position limits shall specify clear quantitative thresholds

for the maximum size of a position in a commodity derivative that

persons can hold.

(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.

(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.

(7) The competent authority shall notify ESMA of the exact

position limits it intends to set in accordance with the methodology

for calculation as established by ESMA in the regulatory technical

standards issued for that purpose in accordance with Article 57(3) of

MiFID.

(8) The competent authority shall modify the position limits

in accordance with ESMA’s opinion or provide ESMA with

justification why the change is considered to be unnecessary

Provided that where the competent authority imposes

limits contrary to an ESMA opinion, it shall immediately publish on

its website a notice fully explaining its reasons for doing so.

DERIVATIVES AND REPORTING

(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.

(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.

DERIVATIVES AND REPORTING

(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.

(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.

(13) An investment firm or a market operator operating a trading

venue which trades in commodity derivatives or derivatives of

emission allowances 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

derivatives of emission allowances or positions held in

commodity derivatives that are based on the same

underlying and that share the same characteristics on

DERIVATIVES AND REPORTING

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.

(14) The position limits and position management controls

shall be transparent and non-discriminatory, specifying how they

apply to persons and taking account of the nature and composition of

market participants and of the use they make of the contracts

submitted to trading.

(15)

The Maltese investment firm or market operator

operating the trading venue shall inform the competent authority of

the details of position management controls. The competent authority

shall communicate the same information as well as the details of the

position limits it has established to ESMA.

(16) The competent authority shall not impose limits which

are more restrictive than those adopted pursuant to sub-regulations

(1) to (3) except in exceptional cases where they are objectively

justified and proportionate taking into account the liquidity of the

specific market and the orderly functioning of that market.

(17) The competent authority shall publish on its website the

details of the more restrictive position limits it decides to impose in

accordance with sub-regulation (18), which shall be valid for an

initial period not exceeding six months from the date of their

publication on the website. The more restrictive position limits may

be renewed for further periods not exceeding six months at a time if

the grounds for the restriction continue to be applicable. If not

renewed after that six-month period, they shall automatically expire.

(18) Where the competent authority decides to impose more

restrictive position limits, it shall notify ESMA. The notification shall

include a justification for the more restrictive position limits

Provided that where the competent authority imposes

limits contrary to an ESMA opinion, it shall immediately publish on

its website a notice fully explaining its reasons for doing so.

(19) The competent authority shall impose administrative

penalties and other administrative measures in terms of regulation 7

for the infringements of position limits set in accordance with this

regulation to

DERIVATIVES AND REPORTING

(a)

positions held by persons situated or operating

in Malta or abroad which exceed the limits on commodity

derivative contracts the competent authority has set in relation

to contracts on trading venues situated or operating in Malta or

economically equivalent OTC contracts;

(b)

positions held by persons situated or operating

in Malta which exceed the limits on commodity derivative

contracts set by European competent authorities in other

Member States or EEA States.

(20) Notwithstanding the provisions of any other law, the

provisions of this regulation shall also apply to persons as referred to

in regulation 3(1) (a), (d), (f), (g), (m), (p), (r) and (aa) to (ee) of the

Investment Services Act (Exemption) Regulations that are exempt

from the licensing requirement established under article 3 of the

Investment Services Act in accordance with the said regulation .

(1)

A Maltese investment firm or a market operator

operating a trading venue which trades in commodity derivatives or

in derivatives of emission allowances shall

(a)

make public

(i)

for trading venues where options are traded, two

(2) weekly reports, one of which is to exclude

options, with the aggregate positions held by the

different categories of persons for the different

commodity derivatives or derivatives of

emission allowances traded on their trading

venue, specifying the number of long and short

positions by such categories, changes thereto

since the previous report, the percentage of the

total open interest represented by each category,

and the number of persons holding a position in

each category in accordance with sub-regulation

(5);

(ii) for trading venues where options are not traded,

a weekly report on the elements established in

sub-paragraph (i); and

(b)

provide the competent authority with a

complete breakdown of the positions held by all persons,

including the members or participants and the clients thereof,

on that trading venue, at least on a daily basis.

(1a) An investment firm or a market operator operating a

trading venue which trades in commodity derivatives or in

derivatives of emission allowances shall communicate the reports

referred to in paragraph (a) of sub-regulation (1) to the competent

DERIVATIVES AND REPORTING

authority and to ESMA.

(2) The Maltese investment firm or market operator

operating a trading venue as referred to in sub-regulation (1) shall be

required to provide the competent authority with the information

referred to in sub-regulation (1)(b) only when both the number of

persons and their open positions exceed minimum thresholds

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 relate to a commodity or an underlying

asset as referred to in point 10 of the Second Schedule to the

Investment Services Act.

(3)

Maltese investment firms trading in commodity

derivatives or in derivatives of emission allowances 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 the derivatives of

emission allowances are traded;

with a complete breakdown of their positions taken in

economically equivalent OTC contracts 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 of the European Parliament and of the Council of 15 May

2014 on markets in financial instruments and amending Regulation

(EU) No 648/2012 and, where applicable, of Article 8 of

Regulation (EU) No 1227/2011.

(4) In order to enable monitoring of compliance with

regulation 3(1) to (3) of these regulations, members or participants of

regulated markets, MTFs and clients of OTFs shall report to the

investment firm or market operator operating that trading venue the

details of their own positions held through contracts traded on that

trading venue at least on a daily basis, as well as those of their clients

and the clients of those clients until the end client is reached.

(5) Persons holding positions in a commodity derivative or

in a derivative of emission allowance shall be classified by the

investment firm or market operator operating that trading venue

according to the nature of their main business, taking account of any

applicable authorisation, as either

(a)

investment firms or credit institutions;

DERIVATIVES AND REPORTING

(b)

investment funds, either an undertaking for

collective investments in transferable securities (UCITS) as

defined in Directive 2009/65/EC, or an alternative investment

fund manager as defined in Directive 2011/61/EC;

(c)

other financial institutions, including insurance

undertakings and reinsurance undertakings as defined in

Directive 2009/138/EC, and institutions for occupational

retirement provision as defined in Directive 2003/41/EC;

(d)

commercial undertakings;

(e)

in the case of derivatives of emission

allowances, the reporting shall not prejudice the compliance

obligations under Directive 2003/87/EC.

(6) The reports referred to in sub-regulation (1)(a) shall

specify the number of long and short positions by category of

persons, any changes thereto since the previous report, percent of

total open interest represented by each category, and the number of

persons in each category.

(7) The reports referred to in sub-regulation (1)(a) and the

breakdowns referred to in sub-regulation (3) shall differentiate

between

(a)

positions identified as positions which in an

objectively measurable way reduce risks directly relating to

commercial activities; and

(b)

other positions.

(8)

Notwithstanding the provisions of any other law, the

provisions of this regulation shall also apply to persons as referred to

in regulation 3(1) (a), (d), (f), (g), (m), (p), (r) and (aa) to (ee) of the

Investment Services Act (Exemption) Regulations that are exempt

from the licensing requirement established under article 3 of the

Investment Services Act in accordance with the said regulation.

The competent authority may

(a)

request any person to take steps to reduce the

size of the position or exposure; and

(b)

limit the ability of any person from entering

into a commodity derivative, including by introducing limits

on the size of a position any person can hold at all times in

accordance with regulation 4 of these regulations.

(1)

The competent authority shall notify ESMA

DERIVATIVES AND REPORTING

and other European regulatory authorities of the details of

(a)

any requests to reduce the size of a position or

exposure pursuant to regulation 5(a);

(b)

any limits on the ability of persons to enter into

a commodity derivative pursuant to regulation 5(b).

(2) The notification shall include, where relevant, the details

of the request or the demand pursuant to article 32 of the Financial

Markets Act, and article 13 of the Investment Services Act, including

the identity of the person or persons to whom it was addressed and

the reasons therefor, as well as the scope of the limits introduced

pursuant to regulation 5(b) including the person concerned, the

applicable financial instruments, any limits on the size of positions

the person can hold at all times, any exemptions granted thereto, and

the reasons therefor in accordance with regulation 3 and the reasons

therefor.

(3) The notifications referred to in sub-regulation (2) shall

be made not less than 24 hours before the actions or measures are

intended to take effect. In exceptional circumstances, the competent

authority may make the notification less than 24 hours before the

measure is intended to take effect where it is not possible to give 24

hours’ notice.

(4) Where the competent authority receives a notification

from another European regulatory authority pursuant to Article 79(5)

of MiFID, it may take measures in accordance with regulation 5(a) or

(b) where it is satisfied that the measure is necessary to achieve the

objective of the other European regulatory authority.

(5) Where the competent authority proposes to take

measures in accordance with regulation 5(a) or (b), it shall also give

notice in accordance with the provisions of this regulation.

(6) When an action under sub-regulation (1)(a) or (b) relates

to wholesale energy products, the competent authority shall also

notify the Agency Cooperation of Energy Regulators (ACER)

established under Regulation (EC) No 713/2009.

(1)

Where a person falling within the scope of

these regulations fails to comply with any provisions of such

regulations or any rules issued thereunder further implementing such

regulations, the competent authority may, by notice in writing and

without recourse to a court hearing, impose on such person an

administrative penalty and other administrative measures in

accordance with the provisions of the Financial Markets Act (MiFID

and MiFIR Administrative Penalties, Measures and Investigatory

Powers) Regulations, 2017 or the Investment Services Act and

Banking Act (MiFID and MiFIR Administrative Penalties, Measures

and Investigatory Powers) Regulations, 2017.

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(2) A right of appeal to the Financial Services Tribunal shall

lie from the decisions which the competent authority shall take under

these regulations and the provisions of Part VI of the Financial

Markets Act or article 19 of the Investment Services Act shall apply

mutatis mutandis.