The European Parliament rejected three motions for
resolutions which aimed to object to the Commission Delegated
Regulation of 1 December 2016 supplementing Directive
2014/65/EU of the European Parliament and of the Council with
regard to regulatory technical standards for the application of
position limits to commodity derivatives.
As a reminder, Directive 2014/65/EU of the European
Parliament and of the Council introduces a new harmonised position
limits regime for derivative contracts in relation to
commodities.
Directive 2014/65/EU empowers the European Securities
and Markets Authority (ESMA) to develop draft regulatory technical
standards, and delegates power to the Commission to adopt such
standards, in order to determine the methodology for calculation
that competent authorities are to apply in establishing the spot
month position limits and other months’ position limits for
physically settled and cash settled commodity derivatives based on
the nature of the relevant derivative.
Commission Delegated Regulation of 1 December 2016
supplementing Directive 2014/65/EU of the European Parliament and
of the Council sets out the methodology for calculating position
limits. This methodology sets a baseline figure for the spot month
position limit in a commodity derivative of 25 % of the
deliverable supply for that commodity derivative, and for other
months a position limit of 25 % of open interest in that
commodity derivative.
The methodology includes a derogation for any
derivative contract with an underlying that qualifies as food
intended for human consumption with a total combined open interest
in spot and other months’ contracts exceeding 50 000 lots
over a consecutive three-month period. For these contracts the
baseline figure for spot month position limits is proposed at
20 %, with a baseline within the 2.5 % to 35 %
range.
In a first motion for a resolution (tabled by the S&D group and rejected by 339 votes
to 339, with 12 abstentions), Members noted that in comparison with
the position limits regime in place in the USA, in which 25 %
is the upper limit rather than the baseline and average position
limits are 10-15 %, the proposed methodology for EU position
limits is very permissive.
Members stated that for the most sensitive and highly
liquid food contracts, a baseline of 20 % does not fulfil the
objective stated in Directive 2014/65/EU of preventing market abuse
and supporting orderly pricing and settlement conditions, and
therefore does not amount to the EU meeting the commitments
signed up to by G20 leaders in 2009.
In a second motion for a resolution (tabled by the Greens/EFA group), Members made the
same remarks on the baseline figure of 20 %.
They added that the final baseline and overall range
for other contracts (5 % to 35 %) which are deemed to be
liquid was already assessed to be too broad, bearing in mind that
an even more flexible special regime is provided for contracts
deemed to be illiquid (5 % to 40 %) and that the
definition of an ‘illiquid’ contract is also potentially
too broad. They noted that despite Parliament’s negotiating
team’s explicit request, volatility has not been included
as a factor to be taken into account when setting position
limits at the same level as other relevant factors.
Members at the origin of the two motions for
resolutions stated that Parliament’s negotiating team made
clear that it had significant concerns regarding the draft
Regulatory Technical Standards as produced by ESMA, with regard to
the baseline figure and a number of other areas and that Parliament
acknowledged that some of these concerns have been addressed, but
not sufficiently for the Delegated Regulation to be considered to
meet the ambitious objectives of the original
legislation.
They noted that it should be possible for the
Commission to make additional amendments to the draft Delegated
Regulation in order to allay the concerns set out in
Parliament’s letter. It the Commission were to make such
changes, Parliament, without foregoing its scrutiny role, would
consider the possibility of accelerating the approval procedure for
an amended text. They called on the Commission to submit a new
delegated act which takes account of the above concerns.
In a third motion for a resolution (tabled by the GUE/NGL group), Members called on the
Commission to submit a new delegated act which takes into account
the aforementioned concerns and especially to include the following
recommendations:
- reduce the ‘baseline’ position limit for the
most sensitive and highly liquid food contracts to a maximum
15%,
- broaden the scope of contracts covered by reduced
limits to at least all commodities with indirect effects on the
prices of food for human consumption,
- redefine volatility so that it becomes a mandatory
parameter in the methodology of setting the position
limits.