IOSCO Consultation: Principles for the Regulation and Supervision of Commodity Derivatives Markets

Europex firmly supports the IOSCO Principles for the Regulation and Supervision of Commodity Derivatives Markets (hereafter: the Principles). We are fully aligned with the core objectives of the Principles to ensure that commodity derivatives markets can serve their fundamental role of facilitating fair and efficient price discovery and hedging in a transparent, secure and well-regulated trading environment, while remaining free from market manipulation and other abusive practices. To this end, Europex welcomes the current update and reaffirmation of the Principles to reflect developments in the commodity derivatives markets over the past decade and to ensure that they continue to provide resilient international guidance for their regulation and oversight.

In line with the IOSCO Principles and the G20 Pittsburgh Commitments, regulated venues such as energy exchanges, play a fundamental role in providing the necessary transparency and security in the trading of commodity derivatives. In this regard, it is vital to ensure that the messages embedded in the updated Principles continue to recognise the benefits of trading in efficient, secure, cleared and transparent markets, such as regulated exchanges.

Concretely, Relevant Market Authorities should ensure that changes to their market surveillance frameworks and programmes are proportionate and do not push traded volumes away from transparent regulated markets towards over-the-counter (OTC) trading (see Principle 10). Measures which lead to any such shift would neither be in line with the objectives of the Principles themselves nor the related G-20 Pittsburgh Commitments.

Europex shares the view that Relevant Market Authorities should promote investor education in commodity derivatives markets and their associated benefits (see Principle 24). Specifically, this should also include education on the operation and functioning of these markets, as well as the differences between the existing markets and their different contributions towards greater transparency and risk-mitigation. Special attention should be paid to the further added value of transparent, cleared regulated markets in comparison to less transparent, uncleared OTC trading.