05 March 2023, EU: “Extreme circumstances” on energy and commodity derivatives markets led to a “very low number” of market safety mechanisms being activated in 2022, parliament’s economic and monetary affairs committee said. Given a “lack of transparency” around the activation of such mechanisms, parliament’s committee has called on the European Commission and financial regulator Esma to review an ancillary activity exemption from MiFID/R rules for commodity firms. The commission “might” consider whether to mandate Esma to revise or replace the existing exemption test so as to ensure that the largest entities are “duly licensed and supervised” as investment firms.
And parliament wants Esma to submit to the commission a comprehensive assessment of position limits and position management controls by the end of 2025. The report should assess the appropriateness of the limitation of the scope of position limits to “agricultural commodity derivatives and critical or significant commodity derivatives”.
“We have come to an agreement that applies stricter regulatory requirements for big food and energy companies that are trading on commodity derivatives markets,” committee member Philippe Lamberts said of the vote. “We have also succeeded in empowering supervisors to suspend trading in cases of high market volatility, such as we witnessed in the gas markets last summer,” he added.
Parliament will now need to negotiate a final legal text with EU member states.
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