Europeans Tightening Oversight Of Commodities Markets

The European Commission is expected to unveil proposed legislation in the coming weeks designed to curb speculation in commodities trading, which has been blamed for sharp increases in energy and food prices.

A draft of the Commission’s proposed revisions to the EU’s 2004 Markets in Financial Instruments Directive (“MiFID”) obtained by some news outlets would require “that all trading venues on which commodity derivative contracts are traded adopt appropriate [position] limits or alternative arrangements to ensure the orderly functioning of the market and settlement conditions for physically delivered commodities and provide systematic, granular and standardised information on positions by different types of financial and commercial traders to regulators … and market participants ….”

The Commission is reported to be simultaneously drawing up plans for an overhaul of the Market Abuse Directive (“MAD”) enacted in 2003.  If adopted by the Council of the European Union and the European Parliament, that reform would give European regulators enhanced authority to investigate trading systems on spot commodity markets, which had thus far escaped effective oversight.

Reuters has quoted a leaked draft of the Commission’s proposal as saying that “By gaining access to spot commodity market traders’ systems, competent authorities are also able to monitor real-time data flows.”

The Commission’s proposed amendments to MiFID and MAD are expected to be made public – officially, this time – this month.