Positions in an OTC contract which is economically equivalent to more than one exchange-traded derivative (ETD) contract traded on the EU trading venue are to be reported to any of the National Competent Authorities (NCAs) of the trading venues where the ETD contract is traded (ESMA’s clarification of 28 March 2018).
The inherent condition is that those ETD contracts do not qualify as the same derivative contract in accordance with Article 5(1) of RTS 21.
In the answer to the Question 21 in Questions and Answers on MiFID II and MiFIR market structures topics (ESMA70-872942901-38) updated on 28 March 2018 ESMA explained that in cases where an OTC contract is economically equivalent to more than one ETD contract traded on a trading venue in the EU and where those ETD contracts do not qualify as the same derivative contract in accordance with Article 5(1) of RTS 21, positions in the EEOTC contract can be reported to any of the NCAs of the trading venues where the ETD contract is traded.
According to the said ESMA’s interpretation:
- position reporting of such EEOTC contract should not be split among different NCAs and should not be reported to more than one NCA;
- investment firms should ensure that non-reporting or double reporting is avoided and that EEOTC contracts are consistently reported to the same NCA, with a consistent reference to the contract;
- for aggregation purposes, in order to calculate “net positions” according to Article 57(1) of MIFID II and Article 3 of RTS 21, the EEOTC contract should be considered only once and be aggregated only once with the ETD contract that the investment firm has considered it is equivalent to.
According to aforementioned Article 5(1) of the RTS 21 (Commission Delegated Regulation (EU) 2017/591 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), a commodity derivative traded on a trading venue is considered the same commodity derivative as a commodity derivative traded on another trading venue where the following conditions are met:
(a) both commodity derivatives have identical contractual specifications, terms and conditions, excluding post trade risk management arrangements;
(b) both commodity derivatives form a single fungible pool of open interest or, in the case of commodity derivatives defined under point (c) of Article 4(1)(44) of Directive 2014/65/EU, of securities in issue by which the positions held in a commodity derivative traded on one trading venue may be closed out against the positions held in the commodity derivative traded on the other trading venue.