CMCE/EFET/Europex/FESE/FIA/ISDA (the “Associations”) would like to provide comments aimed at preserving the well-functioning of European commodities markets for the upcoming agreement on a final MiFID/R legislative text. We refer, in particular, to the European Parliament’s ECON report on MiFID/MiFIR in relation to commodities and commodity derivatives in advance of the MiFID/MiFIR trilogue process.
As a general remark, we understand that the current energy crisis has intensified the debate with respect to commodity derivatives after the publication of the European Commission’s MIFIR and MiFID Review proposal. However, the recent market stress in energy derivatives has been caused by supply issues, in particular the disrupted supply of gas from Russia and requirements to fill gas storages. The energy crisis is still on-going and whilst we agree that it would be useful to consider any lessons learned once it has passed, we believe making major changes to the regime during a crisis and a period of increased volatility would exacerbate the strain on liquidity as well as market participants and could cause lasting damage to markets. Commodity markets are already being subjected to cumulative and frequent regulatory changes, e.g. a review of REMIT and market abuse requirements is conducted in parallel, as well as to implementation of the market correction mechanism, new LNG reporting and the price assessment. These changes put additional strain on firms’ resources while already dealing with the energy crisis and its fallout. In addition, we do not believe that the amendments adopted by ECON in relation to commodities and commodity derivatives will address volatility nor will they reduce energy prices, but instead further impede the development of commodity markets in the EU and lead to competitive disadvantages for participants in EU commodities markets.
We have set out our concerns in more detail in the attached paper.