This week BaFin, the German financial market regulator, announced (click here) the reintroduction of MiFID II spot month and other months position limits for the Trading Hub Europe (THE) TTF natural gas futures contracts listed on EEX.
What is it about?
- The Dutch TTF gas derivative contracts are traded on both the ICE Endex and EEX exchanges. ICE Endex is supervised by the AFM, the Dutch financial market regulator, while EEX is supervised by BaFin. Both the ICE Endex and EEX TTF contracts qualify as significant under Article 57(1) of MiFID II and hence are eligible for position limits. However, since the largest volume of TTF trading takes place on ICE Endex, the AFM is designated as the Central Competent Authority (CCA) giving it responsibility for setting the position limit for TTF contracts traded on both ICE Endex and EEX (although the Dutch regulator works closely with BaFin when doing so). The AFM will also be responsible for granting position limit exemptions under the MiFID CCA arrangement;
- Based on a submission by BaFin, ESMA, the pan-EU financial regulator responsible for approving MiFID position limits, published this nine-page opinion confirming that they agreed with the limits proposed by BaFin. Note that while the opinion is dated 2 June 2025 it was only made public on ESMA’s website this week. The limits comprise of the following: Spot month: 17,938,800 MWh; Other months: 53,054,650 MWh and apply from 26 June 2025. The announcement reminds firms that the limits apply to the aggregate and net positions on the exchange as well as positions in economically equivalent over the counter contracts (EE OTCs);
- BaFin published this detailed announcement (in German) which provides a detailed explanation as to its rationale for setting the above limits which is largely mirrored in the ESMA opinion. As a reminder, BaFin removed its original position limits on TTF (and other contracts) in November 2021 following the introduction of the so-called MiFID “Quick Fix” rules where the open interest of these contracts was below the “critical or significant” threshold of 300,000 tradable units on average. This has now changed given the increase in liquidity in the THE TTF contract. TTF has also taken on a new prominence in Europe following Russia’s invasion of Ukraine and a significant decrease (and soon the complete banning) of Russian gas imports into the bloc.
Firms actively trading TTF are strongly advised to implement measures to actively monitor their positions in TTF, including in the THE contract traded on EEX. While position limit enforcement under the MiFID II position limit regime has been a damp squib since its inception, TTF is now a vital European price-setting contract with acute political focus. EU legislators frequently comment on the importance of monitoring market behaviour related to this contract and lament the possibility of market manipulation and its potential impact on consumers. At very least, firms should be able to demonstrate proportionate, documented policies, procedures and controls in this respect.
Crossing the Atlantic but remaining on the topic of position limits for TTF, this week the US-based CME NYMEX announced (click here) its own position limits and position reporting requirements on three TTF contracts. All three contracts are spread contracts which require both legs to be monitored independently. Note that only the spot month limit qualifies as a “hard limit”, with the single and all month limits being “accountability limits” which are soft limits.
