Sunday

4th Dec 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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.

Analysis

Doubts hang over EU investment plan's future

Questions of value for money and a lack of transparency complicate adding almost €200 billion more and extending the Juncker investment plan to 2020.

News in Brief

  1. Talks on wholesale roaming rules to start
  2. Lead MEP Dieselgate committee: Italy and Slovakia will cooperate
  3. Transparency NGO sues EU commission on Turkey deal
  4. Pro-EU liberal wins UK by-election
  5. Finnish support for Nato drops, Russia-scepticism grows
  6. Cyprus talks to resume in January
  7. Documents from German NSA inquiry released
  8. Transport commissioner 'not aware' of legal action on emissions

Stakeholders' Highlights

  1. CESIElects Leaders and Sets Safety & Health at Work and Gender Equality Among the Guidelines For Next Term
  2. European Gaming & Betting AssociationContinues to Grow its Membership and Welcomes its Newest Member Association
  3. ACCASupports the Women of Europe Awards, Celebrating the Women who are Building Europe
  4. European Heart NetworkWhat About our Kids? Protect Children From Unhealthy Food and Drink Marketing
  5. ECR GroupRestoring Trust and Confidence in the European Parliament
  6. UNICEFChild Rights Agencies Call on EU to put Refugee and Migrant Children First
  7. MIRAIA New Vision on Clean Tech: Balancing Energy Efficiency, Climate Change and Costs
  8. World VisionChildren Cannot Wait! 7 Priority Actions to Protect all Refugee and Migrant Children
  9. ANCI LazioRegio-Mob Project Delivers Analysis of Trasport and Mobility in Rome
  10. SDG Watch EuropeCivil Society Disappointed by the Commission's Plans for Sustainable Development Goals
  11. PLATO15 Fully-Funded PhD Positions Open – The Post-Crisis Legitimacy of the EU (PLATO)
  12. Access NowTell the EU Council: Protect our Rights to Privacy and Security