Europex, the Association of European Energy Exchanges, welcomes the opportunity to take part in the European Commission’s Targeted consultation on the role of the euro in the field of energy.
As Europex is closely involved in the discussions about the European regulatory framework for wholesale energy trading, the present response will concentrate on what we believe is needed at EU-level to maximise the opportunities stemming from exchange-based energy trading to encourage a wider use of the euro for financial transactions in energy and energy related projects.
Europex members operate platforms for wholesale electricity, gas and environmental markets. Many of the contracts traded on these markets are denominated in euros. Although the decision to use a currency is ultimately made by the market, there is an important role the EU can play to foster the liquidity in contracts that are already denominated in euro. The EU can contribute to the success of these markets by creating a regulatory framework that is fit for purpose and ensures a high level of global competitiveness.
In order to achieve this aim, Europex believes that the European financial regulatory framework should be better calibrated for commodity trading. The current framework European energy exchanges are subject to, does not sufficiently take into account the specificities of commodity trading. Moreover, as European energy exchanges are subject to both financial regulation, such as the Markets in Financial Instruments Directive and Regulation (MiFID II / MiFIR) and the Market Abuse Regulation (MAR) as well as tailor-made regimes for energy trading, such as the Regulation on Energy Market Integrity and Transparency (REMIT), there is a high degree of regulation that is in conflict with the EU’s objective of enabling attractive and competitive markets.
To emphasise this point more concretely, the present paper outlines two examples of elements in MiFID II/MiFIR that are not properly calibrated for commodities and prevent European energy markets from becoming more liquid. These two points relate to:
- Specific features of the position limits regime in Article 57 MiFID II; and
- The calibration of the pre-trade transparency requirements in Article 8 MiFIR.