The Commission has published its letters telling ESMA it will endorse ESMA’s draft RTS on non-equity transparency, the ancillary test and position limits under MiFID 2 if ESMA makes certain changes.

  • RTS 2 deals with transparency requirements in respect of bonds, structured finance products, emission allowances and derivatives. The amendments relate to the definition of a “liquid market” and the determination of the waiver threshold and have been deemed necessary to take a more cautious approach to the calibration of the regime in the initial years;
  • RTS 20 concerns the ancillary business test and related exemption. The Commission considers that groups that have undertaken significant capital investments, relative to their size, in the creation of infrastructure, transportation and production facilities, and investments which cannot be hedged in financial markets, when proportionate and appropriate, should measure their main and ancillary activity using a capital-based test rather than one based on their trading activity only; and
  • RTS 21 relates to the application of position limits to commodity derivatives. The Commission seeks amendments in the areas of:
    • sensitivity to different types of underlying commodities, as very liquid and highly traded agricultural commodities should attract lower limits;
    • other month limits should not be skewed by the choice of the open interest as a parameter for setting the limits;
    • economically equivalent over-the-counter- contracts (EEOTC) should be defined so that contracts which yield similar economic exposure for position holders whilst not necessarily identical in contractual terms are considered in scope of the limit regime; and
    • the resulting methodology should provide competent authorities with sufficient certainty over the application of the relevant factors. This is in order to ensure uniform limits regime across the EU based on objective criteria.

(Source: Commission gives ESMA conditions for endorsement on RTS for non-equity transparency, ancillary test and position limits)