MiFID II's position limits will be the costliest part of compliance for commodity firms
Commodity firms are facing the biggest step change as a result of the greatly increased scope of MiFID II. Broad exemptions that could previously be used to take firms out of the scope of MiFID I, such as ‘dealing on own account’ or ‘ancillary trading activity’, have been removed or severely tightened. In addition, the commodity products considered to be financial instruments have been widened to include physically settled derivatives, emissions allowances and financial derivatives – regardless of their settlement method or trading venue.
This means commodity firms previously unaffected by MiFID I will be considered a financial services company and, from 3 January 2018, will be liable to the full set of MiFID II regulations – including commodity position limits.