ESMA_QA_2439
Status: ✅ Answer Published
Link to ESMA Q&A tool: https://www.esma.europa.eu/publications-data/questions-answers/2439
Regulatory Context
Regulation : MIF2
Level 1 Regulation: Markets in Financial Instruments Directive II (MiFID II) Directive 2014/65/EU- Secondary Markets
Level 2 Regulation: Regulation 2017/565 - MiFID II Delegated Regulation
Level 3 Regulation: No information available
Topic: Position reporting
Subject Matter: Q&A on open interest thresholds in energy derivatives
Question
Submission Date: 13 February 2025
How do open interest thresholds that are denominated in lots such as in Article 83(1)(b) of CDR 2017/565 (10,000 lots) and in Article 57(1) of MiFID II (300,000 lots) translate into underlying units of energy derivatives such as Megawatt Hour (MWh), million British Thermal Units (MMBTU), or Therms (therm)?
ESMA Answer
Answer Date: 13-02-2025
For the purpose of converting thresholds that are denominated in lots into underlying units of energy derivatives, ESMA considers the monthly contracts in which most trading activity is concentrated as a baseline, each representing 1 lot. The conversion for the 10,000 lot threshold is exemplarily demonstrated below: For gas and base load power, the monthly contracts representing 1 lot, are considered equivalent to 720MWh (1MW[1]24h30days). Given that 1 MWh = 3.41[2] MMBTU and 1 MMBTU = 10 therm, the following thresholds apply: 10,000 lots = 10,000 * 720MWh = 7,200,000 MWh 10,000 lots = 10,000 * 720MWh * 3.41 MMBTU/MWh = 24,548,477 MMBTU 10,000 lots = 10,000 * 720MWh * 3.41 MMBTU/MWh * 10 therm/MMBTU = 245,484,766 therm For peak load power, the monthly contract representing 1 lot is considered equivalent to 264MWh (1MW12h22days) and consequently, the following threshold applies: 10,000 lots = 10,000 * 264MWh = 2,640,000 MWh This Q&A expands the scope of the existing Q&A on Position limits - the definition of “a lot” to also cover position reporting, without changing the approach. Concerning gas derivatives denominated in units different from MWh, please also refer to the Q&A on lot sizes and position limits.
[1] Sometimes the physical power of energy contracts is stated in daily terms, e.g. 1 MWh/d = 1/24 MW instead of 1 MW, however, this is less common.
[2] The calculations were performed using a conversion factor of 3.4095106405145.
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