As is so often the case with some of the lengthy documents that make up the Shakespearean drama that is the MiFID II implementation, the devil is in the detail. The technical standards on position limits for commodity derivatives are a good example. Right at the very end, just before President Juncker's imprimatur, is a little tidbit suggesting that competent authorities will adjust any position limit as they see fit in times of excessive volatility in the price of a derivative or its underlying commodity (Article 21).
So for the purposes of this particular bit of rulemaking, who gets to define what constitutes excessive volatility? Are we looking at a flash crash-type intraday move? A 10-15% spike in the price of the underlying? And what about the reactive impact of breaking news of a conflict or threatened drought? Will we end up with a regulator-driven price limit regime that stands wholly separate from those that the exchanges have imposed on a product by product basis for years?
I guess time will tell, but I'll be keeping an eye on the fine print to see how this one pans out.