Brussels, 26 April 2012 | The legislative proposals by the European Commission for MiFID II (Arts 59-60) and MiFIR (Arts 34-35) provide ESMA with new competences for the setting and management of position limits. While we understand the intention of this step, we consider that energy commodity and especially electricity and gas markets could suffer from significant unintended damage if MiFID II / MiFIR were to enter into force in their current versions.
In this context, it is important to note that market squeezing – the actual target of position limits – is very unlikely to happen in electricity and gas markets due to their specific physical characteristics (delivery is done over time periods and not at one point in time, etc.). Nevertheless, if general position limits for commodity markets on ground of avoiding excessive speculation on agricultural products, e.g., were to be widely and generally imposed by ESMA, this could significantly hamper commercial hedging activities as an essential part of risk mitigation efforts in the real economy.
Please find the position paper attached.