In preparation for MiFID II coming into effect on the 3rd of January 2018, FundApps have published a whitepaper covering everything compliance professionals need to know about the new position limits rules in the European Union.
The report comes shortly after FundApps launched their Position Limits service earlier this spring, automating the most difficult parts of a complex and intricate area of compliance.
Position Limits is set to be one of the most complicated and ambiguous aspects of the new MiFID II Directive, with the FCA estimating as many as 1,900 commodity derivatives will come under the new rules. MiFID II will also require companies to identify OTC contracts that are “economically equivalent” (EEOTC) to their exchange-traded counterparts, placing them under identical restrictions.
Accurately determining not only one’s positions, but also one’s proximity to limits, requires a daunting level of calculation. Aggregation and netting procedures are often opaque and extremely complex, and correctly recognising EEOTCs will put further burden on compliance teams at investment firms.
Under MiFID II, exchange limits are monitored within “Spot Month” and “Other Month” timeframes. To calculate these, calendar information from trading venues must be used.
FundApps’ 22-page guide, titled “A Guide to MIFID II Position Limits: Monitoring, Reporting and Data Sourcing” goes into detail about what the new EU rules mean for those trading commodity derivatives, and explains what firms need to do to avoid sanctions and penalties for non-compliance.
The whitepaper includes:
- – The content of the regulation, regarding their scope in terms of assets and markets considered for the purposes of the regime.
- – The market participants who will be impacted by the new rules.
- – The types of limits and calculations which are to be performed to determine correct exposures in a certain commodity.
- – The data and reporting requirements and the challenges related to data sourcing.