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Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.

CHAPTER III METHODOLOGY FOR THE COMPETENT AUTHORITY TO CALCULATE POSITION LIMITS

SECTION 1 Determination of baseline figures

Article 9 Methodology for determining the baseline figure for spot month limits(Article 57(4) of Directive 2014/65/EU)

  1. (1)

    The competent authority shall determine a baseline figure for the spot month position limit in a commodity derivative by calculating 25 % of the deliverable supply for that commodity derivative.

  2. (2)

    The baseline figure shall be specified in lots which shall be the unit of trading used by the trading venue on which the commodity derivative trades representing a standardised quantity of the underlying commodity.

  3. (3)

    Where a competent authority establishes different position limits for different times within the spot month period, those position limits shall decrease on an incremental basis towards the maturity of the commodity derivative and shall take into account the position management arrangements of the trading venue.

  4. (4)

    By way of derogation to paragraph 1, competent authority shall determine the baseline figure for the spot month position limit 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 50000 lots over a consecutive three month period by calculating 20 % of the deliverable supply in that commodity derivative.

Article 10 Deliverable supply(Article 57(3) of Directive 2014/65/EU)

  1. (1)

    The competent authority shall calculate the deliverable supply for a commodity derivative by identifying the quantity of the underlying commodity that can be used to fulfil the delivery requirements of the commodity derivative.

  2. (2)

    The competent authority shall determine the deliverable supply for a commodity derivative referred to in paragraph 1 by reference to the average monthly amount of the underlying commodity available for delivery over the one year period immediately preceding the determination.

  3. (3)

    In order to identify the quantity of the underlying commodity meeting the conditions of paragraph 1, competent authority shall take into account the following criteria:

    1. (a)

      the storage arrangements for the underlying commodity;

    2. (b)

      the factors that may affect the supply of the underlying commodity.

Article 11 Methodology for determining the baseline figure for other months' limits(Article 57(4) of Directive 2014/65/EU)

  1. (1)

    The competent authority shall determine a baseline figure for the other months' position limit in a commodity derivative by calculating 25 % of the open interest in that commodity derivative.

  2. (2)

    The baseline figure shall be specified in lots which shall be the unit of trading used by the trading venue on which the commodity derivative trades representing a standardised quantity of the underlying commodity.

Article 12 Open interest(Article 57(3) of Directive 2014/65/EU)

The competent authority shall calculate the open interest in a commodity derivative by aggregating the number of lots of that commodity derivative that are outstanding on trading venues at a point in time.

Article 13 Methodology for determining the baseline figure in respect of certain contracts(Article 57(4) of Directive 2014/65/EU)

  1. (1)

    By way of derogation to Article 9, the competent authority shall determine the baseline figure for the spot month position limits for cash settled spot month contracts which are under paragraph 10 of Part 1 of Schedule 2 to the Regulated Activities Order and which have no measurable deliverable supply of their underlying commodities by calculating 25 % of the open interest in those commodity derivative contracts.

  2. (2)

    By way of derogation to Articles 9 and 11, the competent authority shall determine the baseline figure for the position limits for commodity derivatives defined under Article 2(1)(24) of Regulation 600/2014/EU by calculating 25 % of the number of securities issued. The baseline figure shall be specified in number of securities.

  3. (3)

    By way of derogation to Articles 9 and 11, where a commodity derivative provides that the underlying is delivered constantly over a specified period of time, the baseline figures calculated pursuant to Articles 9 and 11 shall apply to related commodity derivatives for the same underlying to the extent that their delivery periods overlap. The baseline figure shall be specified in units of the underlying.