Joint association pre-trilogue comments on the MiFID II / MiFIR Fundamental Review in relation to commodity derivatives

FESE, together with CMCE, EFET, Europex, FIA, IETA, and ISDA, prepared a joint statement commenting on the MiFID II / MiFIR review in relation to commodity derivatives markets in preparation for the trilogues negotiations in the MiFIR review.

The ongoing energy crisis, caused by supply issues, has intensified the debate with respect to commodity derivatives. Whilst we agree that it is useful to consider any lessons learned, we believe making major changes to the current regime during a crisis and a period of increased volatility would exacerbate the strain on liquidity and could cause lasting damage to financial markets. For these reasons, the Associations do not believe that the amendments adopted by the European Parliament in relation to commodities and commodity derivatives would address volatility, nor would they reduce energy prices. Instead, they could further impede the development of EU commodity markets and lead to competitive disadvantages for market participants.

Executive Summary

• The Associations are concerned about the European Parliament’s proposal to review the position limit regime and the ancillary activity exemption, as they were only recently reviewed.
• The Associations support the scope-in of derivatives on emission allowances to the position management controls regime but are concerned about the proposal to include trading volume in the weekly position reports.
• A minimum holding period for agricultural, energy, and emission allowance derivatives would negatively affect the functioning of these markets.
• The Associations see no added value in a mandate for ESMA to define the principles for establishing the main technical parameters that regulated markets shall consider when establishing their circuit breakers.
• The Associations support the re-introduction of the hedging exemption for their own account exemption.