Call for evidence on overall financial markets reform: Europex contributes to DG FISMA consultation

Brussels, 29 January 2016 | Europex welcomes the Commission’s call for empirical evidence and concrete feedback on the EU’s overall regulatory framework for financial services. Reflecting the interests of exchange-based wholesale markets for electricity, gas and environmental products, the Europex response mainly focuses on the specificity of wholesale energy trading.

Wholesale energy trading is in many ways different from traditional financial markets. Energy market participants use energy trading for mitigating their price risk along the value chain (sourcing, production, storage and retail-business). This is a common and important commercial practice and constitutes a necessary prerequisite for ensuring stable and affordable energy prices for the real economy and final consumers. Moreover, there is a significant difference between most of the energy trading firms and purely financial entities. Non-financial energy market participants (e.g. utilities) pose no threats to deposits, raise no issues of investor protection and have no access to central bank liquidity. Applying strict rules on financial services, such as MiFID II/MiFIR, to the electricity, gas and emission allowance markets without making a sufficient distinction, would therefore not only be disproportional to the intended policy objectives, but would also contradict the general aim of further integrating EU energy markets. In order to meet the EU‟s energy and climate objectives (ensuring a secure and sustainable energy supply at a competitive price), both, liquidity and market diversity, are crucial.

Against this background and in the context of the ongoing discussion on MiFID II Level 2, Europex supports the possibility for companies to calculate their overall activity based on capital employed. This will avoid that a large number of firms will need to obtain a MiFID II license, even though their activity in commodity derivative markets is by any reasonable assessment ancillary to their wider group business. In addition, Europex calls for a level playing field between market venues offering trading in energy derivatives, as the significant financial and organisational requirements following from MiFID II are expected to lead to a major liquidity shift to non-regulated markets. Such a shift is contrary to the G20 and EU objectives of creating safer, more efficient and more transparent financial markets, and needs to be reversed. Finally, Europex recommends streamlining the different reporting requirements under EMIR, MIFID II and REMIT. The overall efficiency and the data quality of the reporting mechanisms would significantly improve, if data was to be transmitted to only one collecting entity.

Please find the whole response attached.