(1)

Directive (EU) 2021/338 of the European Parliament and of the Council (2) sets out amendments to Article 57 of Directive 2014/65/EU as regards position management controls.

(2)

In accordance with those amendments to Article 57 of Directive 2014/65/EU, trading venues which trade commodity derivatives have to have in place and apply effective position management controls to prevent and address disorderly trading, support orderly pricing and settlement conditions and ensure the efficiency of markets.

(3)

Effective position management controls include for example legal arrangements to obtain and use data of end position holders and parent undertakings as well as technical arrangements, such as reports and metrics to construct for example a position dashboard. Therefore, effective position management controls should be closely intertwined with and rely on the ongoing monitoring by the trading venue.

(4)

In order to ensure that the price discovery process is not unduly influenced by the existence of a position and to identify the build-up of concentrations of positions that could result in price distortion, market manipulation or other abusive trading practices, trading venues should be aware of large positions held by end position holders and parent undertakings in physically settled commodity derivatives and the reasons for holding those positions. As the actual supply of the underlying physical commodity is restricted to a finite supply, physically settled commodity derivatives are more susceptible to disorderly trading practices such as market squeezes or market cornering where counterparties would make use of a dominant position to secure the price of a commodity derivative, or of the underlying commodity, at an artificial level. Therefore, large positions should be identified in commodity derivatives that are physically settled by design as well as in commodity derivatives that can be physically settled at the option of the buyer or the seller.

(5)

The determination of what constitutes a large position should be made by trading venues taking into account the size and composition of the market in question. For that purpose, trading venues should establish qualitative or quantitative criteria that are used to identify such large exposures and should have procedures in place to identify all positions held by any person which exceed such pre-determined accountability levels. Quantitative and qualitative criteria could be, amongst others, the size of the total open interest in the commodity derivative, the share of the position of the position holder, the volatility of the markets and the characteristics of the underlying commodity market. Where such levels are exceeded, the trading venue should seek to understand the rationale for the build-up of that large position. To that end, the trading venue should assess whether it needs to request additional information from the person holding that large position, considering in particular how frequently the positions held by that person exceed the accountability levels and the extent to which the accountability levels are exceeded. Such information could include, amongst other, positions in related products, the economic reason for the open position and the activity in a related underlying commodity market. Based on the information already available or gathered through the request for information, the trading venue should take appropriate actions where necessary.

(6)

It is important that the accountability levels set remain adequate and effective to serve their intended purpose and that the competent authority is informed of the methodology used for setting and updating those accountability levels.

(7)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Securities and Markets Authority.

(8)

The European Securities and Markets Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Securities and Markets Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council (3),