On the 1^st October 2015, the Malta Financial Services Authority (MFSA) formally confirmed to the financial services industry that it shall be complying with the Guidelines issued by the European Securities and Markets Authority (ESMA) on the 6th May 2015 in connection with the application of the definition of commodity derivatives and their classification under C6 and C7 listed in Section C of Annex I of MiFID I.

the purpose of ESMA’s guidelines is to ensure a common, uniform and consistent application of the definitions of commodity derivatives under C6 and C7 of Annex I of MiFID I

The lack of uniformity in the application of MiFID I in different Member States has given rise to different interpretations (for certain types of instruments or contracts) among Competent Authorities on what should constitute a financial instrument and what should be classified as a derivative contract. It is understood that different interpretations could facilitate the inconsistent application of MiFID I, the European Markets Infrastructure Regulation (EMIR) and potentially other Directives and Regulations that rely on MiFID I definitions of financial instruments.

Accordingly, the purpose of ESMA’s abovementioned guidelines is to ensure a common, uniform and consistent application of the definitions of commodity derivatives under C6 and C7 of Annex I of MiFID I. The guidelines also provide a clarification on whether forward derivative contracts are included under C6 of Annex I of MiFID I, and offer an explanation on the meaning of “physically settled”, a term used under both C6 and C7 of the said Annex.

The MFSA confirmed that it shall comply with ESMA’s guidelines as of the 1^st October 2015.