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In December 2020, we published aSupervisory Statementsetting out our approachto operatingthe MiFID markets regime after the end of the EU withdrawal transition period.
Thisapproachincluded a change tooursupervisory and enforcement actionsforcommodity derivative position limits in the light of evidence of potential constraints on market functioning highlighted during the coronavirus (Covid-19) crisis.Liquidity providers’ability to take on positions was impairedbecause ofposition limits,at a time when liquidity provision was most critical for the market.
We said that, until 1 January 2022,we did not intend to take supervisory or enforcement action for positions that exceed limits wherethe position is held bya liquidity providertofulfil its obligations on a trading venue.So far,we have found no evidence of adverse effects from thisrelief.
TheEconomic Secretary to the Treasury, John Glen MP,gaveaspeechon 23 November 2021,whichsupportedthe continued use ofoursupervisory approach on the position limits regime.
We confirm that we will extend this approach while the scope of the regime is being consideredunder theHMTreasury’sWholesale Market Review. Wewill review and reconsiderour approachif there are indications of market abuse.
We expect firms to make their own assessment of whether the positions they takearepositions resulting from their actions as a liquidity provider. Firms do not need to notifyus ofthese assessments. However, we mayaska firm to explain its assessment to us at any time, such as whenit breachesa positionlimit.The position should not be any larger than necessary to enable the firm to fulfil its role as a liquidity provider. We will expect a firm to reduce its positions if it reports a breach and it is not able to show that it is engaged in genuine liquidity provision.
This statement does not affect the responsibilitiesthatmembers or participants of a trading venueoweunder the venue’sposition management rules.Italsodoes not affect our expectation that firms comply with market conduct obligations, andthatentitiesoperate adequate systems and controls toremain within position limits at all times, unlesswe have grantedawaiveror a firmis able torely on this statement.
https://www.fca.org.uk/news/statemen...osition-limits
