Sunday

19th Nov 2017

EU lawmakers agree deal on commodity trading

  • Commodity speculation has been blamed for volatile food prices in recent years (Photo: Travel Aficionado)

EU lawmakers reached a breakthrough on new rules to crack down on commodity speculation on Tuesday night (14 January) in Strasbourg.

Under the so-called Market in Financial Instruments directive (MiFiD) that will regulate financial markets across the bloc, taking financial positions in commodity derivatives will be limited, in a bid to prevent market distortions and abuse.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The new bill is also the first EU law to establish rules for mathematical algorithms used in high frequency trading.

Firms engaging in high frequency trading, which involves thousands of trades every hour, will have to put in place “circuit breakers” that stop the trading process if price volatility gets too high.

Meanwhile, investor protection rules have also been beefed up. Firms will be required to withdraw 'toxic' products and design bespoke financial products for customers who demand them.

The deal marks "a key step towards establishing a safer, more open and more responsible financial system and restoring investor confidence," said EU financial services commissioner Michel Barnier.

For his part, Sven Giegold, finance spokesman for the Green MEPs, described the agreement as being "a step forward for transparency and curbing damaging practises in investment markets such as high frequency trading."

It is "an important step towards tackling food and other commodity speculation," he added.

Market analysts say that speculation in commodity markets has led to volatility in crop prices, having a knock-on effect on the price of food.

However, the compromise does not go far enough for some.

The UK, which has the EU's largest financial services sector, led opposition to limits on commodity speculation, securing the support of six other countries including Sweden, Spain and the Netherlands.

As a result, the European Securities and Markets Authority (ESMA), which regulates the sector, will be tasked with "determining a methodology for calculation" on which national authorities would base their own position limits.

MEPs and the Commission had hoped that the regulator itself would have the powers to set position limits.

"There is a real risk, particularly in the UK, of ineffective sky high limits triggering a regulatory race to the bottom," warned Oxfam's Marc Hermon in a statement.

The European Commission unveiled plans to re-write the now nine-year old MiFid rules in autumn 2011, but the draft directive proved controversial, attracting more than 1,500 amendments from MEPs.

The compromise deal will now require the approval of finance ministers and MEPs before it can become law.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

News in Brief

  1. Bonn climate talks extend into Friday evening
  2. UK needs to move on Brexit by early December, Tusk says
  3. Puigdemont extradition decision postponed to December
  4. Ireland wants written UK guarantees to avoid hard border
  5. US did not obstruct climate talks, says German minister
  6. EU signs social declaration
  7. Puigdemont to be heard by Belgian judges
  8. Steep fall in migrants reaching EU

Stakeholders' Highlights

  1. European Jewish CongressAntisemitism in Europe Today: Is It Still a Threat to Free and Open Society?
  2. Counter BalanceNew Report: Juncker Plan Backs Billions in Fossil Fuels and Carbon-Heavy Infrastructure
  3. Nordic Council of MinistersNordic countries prioritise fossil fuel subsidy reform
  4. Mission of China to the EUNew era for China brings new opportunities to all
  5. ACCASmall and Medium Sized Practices Must 'Offer the Whole Package'
  6. UNICEFAhead of the African Union - EU Summit, Survey Highlights Impact of Conflict on Education
  7. Nordic Council of MinistersNordic Council Calls for Closer Co-Operation on Foreign Policy
  8. Swedish EnterprisesTrilogue Negotiations - Striking the Balance Between Transparency and Efficiency
  9. Access EuropeProspects for US-EU Relations Under the Trump Administration - 28 November 2017
  10. World Vision20 November: Exchange of Views at the EP on Children Affected by the Syria Crisis
  11. Nordic Council of MinistersSustainable Growth the Nordic Way: Climate Solutions for a Sustainable Future
  12. EU2017EEHow Data Fuels Estonia's Economy

Latest News

  1. EU keeps former Soviet states at arm's length
  2. EU leaders make pledge on social issues after populist backlash
  3. EU agencies and eastern neighbours This WEEK
  4. Germany slams Dutch call for more ambitious EU climate goal
  5. Mind the gap: inequality in our cities
  6. Climate activists 'disappointed' with EU at climate talks
  7. Davis outlines UK vision on Brexit in Berlin
  8. German coalition talks in near collapse