Setting position limits

Position limits are determined by the competent authority of the Member State in which the trading venue the commodity derivative is predominantly traded on is established. Under sections 54 et seq. of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG), BaFin is the competent authority for Germany.

Under section 54 (1) of the WpHG, the application of position limits is now restricted to agricultural commodity derivatives and critical or significant commodity derivatives with an open interest, i.e. the total number of all outstanding positions in a contract, of at least 300,000 lots on average. Commodity certificates are excluded from the application of position limits in general.

ESMA opinions on position limits

Under Article 57(5) of MiFID II, national competent authorities (NCAs) have to notify the European Securities and Markets Authority (ESMA) of the position limits for commodity derivatives they intend to set before issuing them. ESMA must subsequently issue an opinion, within two months, to the NCA concerned assessing the compatibility of the position limits with statutory provisions. The NCA may then modify its position limits accordingly or issue limits contrary to the ESMA opinion provided that the authority publishes on its website its reasons for doing so.

Position limits in force

BaFin has set the following position limits by means of a general administrative act (only available in German). Where applicable, the respective position limit shall apply to both futures and options. Options are weighted on the basis of their delta according to ESMA's "Questions & Answers on MiFID II and MiFIR commodity derivatives topics" in the "Position limits" section.

BaFin wishes to point out that it has the power to revoke a position limit, in accordance with section 54 (5) of the WpHG, in order to be able to flexibly react to new circumstances that justify or necessitate an adjustment to the position limit.

Based on the information currently available, BaFin considers all agricultural commodity derivatives that are listed below and traded on German trading venues and thus subject to a position limit set by BaFin to be illiquid. In such cases, a position limit of 10,000 lots shall apply at all times, for the spot month and for all other months.

At present, the only significant commodity derivatives contract is the THE Natural Gas Future on the EEX, which is therefore subject to BaFin’s position limits (see below). The TTF Natural Gas Future traded on the EEX and economically equivalent over-the-counter contracts are subject to position limits of the Dutch Authority for the Financial Markets (see BaFin’s announcement of 25 June 2024).

This list is not exhaustive and will be extended to include additional contracts that are listed on German trading venues as soon as they are to be categorised as liquid agricultural commodity derivatives or as critical or significant commodity derivatives and BaFin becomes the competent authority. Every adoption of a position limit is preceded by a hearing during which those concerned are given the opportunity to state their positions.