Background

On 3 January 2018, a new Directive 2014/65/EC (“MiFID II”) and Regulation (EU) No 600/2014 (“MiFIR”) will become effective, introducing new requirements on position limits and position reporting for commodity derivatives and emission allowances.

National Competent Authorities (“NCAs”) (i.e. regulators) of each European Economic Area (“EEA”) Country will calculate the limits on the size of the net position that a person can hold in commodity derivatives traded on an EU venue or its “economically equivalent contracts” (“EEOTC”).

The European Securities and Markets Authority (“ESMA”) intends to publish approved position limits on its website.
Limits will be set for the spot month and all other months, for both physically settled and cash settled commodities.
Investment firms trading in commodity derivatives and emissions allowances are obliged, on a daily basis, to report
their own positions in commodity derivatives traded on a trading venue and EEOTC contracts, as well as those of
their clients and the clients of those clients until the end client is reached, to the NCA.

Clients holding positions have to be identified using specified National Identifiers for individuals and LEIs for
organisations under MiFID II.

Interactive Brokers’ Implementation of the Requirements

In order to comply with its reporting obligations, IB will not allow its clients to trade if they have not provided the
specific National Identifier or LEI that is necessary for reporting positions of in scope financial products.

Whenever possible, IB will act to prevent account holders from entering transactions that may result in a position
limit violation. This process will include monitoring account activity, sending a series of notifications intended to
allow the account holder to self-manage exposure and placing trading restrictions on accounts approaching a limit.

Examples of notifications which are sent via email, TWS bulletin and Message Center are as follows:

1. Information Level: sent when the position exceeds 50% of the limit. Intended to inform as to the existence of the position limit and its level.
2. Warning Level: sent when the position exceeds 70% of the limit. Intended to provide advance warning that account will be subject to trading restrictions should exposure increase to 90%.
3. Restriction Level: sent when the position exceeds 90% of the limit. Provides notice that account is restricted to closing transactions until exposure has been reduced to 85%.