On 20 December, the FCA published a statement on its website regarding the supervision and enforcement of commodity derivative position limits (‘the Statement’). The Statement reiterates the position taken in its December 2020 Supervisory Statement (‘2020 Statement’) that the FCA did not intend to take supervisory or enforcement action for positions that exceed limits where the position is held by a liquidity provider to fulfill its obligations on a trading venue.
This relief set out in the 2020 Statement was due to expire on 1 January 2022, but the Statement now confirms that this relief is to be extended while the scope of the regime is being considered under the HM Treasury’s Wholesale Market Review, with a view to reviewing and reconsidering the approach if there are indications of market abuse. Presently, the FCA has found no evidence of adverse effects from the application of the relief so far.
The Economic Secretary to the Treasury, John Glen MP, gave a speech on 23 November 2021, which supported the continued use of the FCA’s supervisory approach on the position limits regime. The FCA reminds firms that it expects firms to make their own assessment of whether the positions they take are positions resulting from their actions as a liquidity provider, but that they do not need to notify the FCA of these assessments.
To read the statement in full on the FCA’s website, please click here.