Photo: Perry McKenna

After the new EU laws on commodity derivatives – MiFIDII and MiFIR – started to come into force in July 2014, still quite some technical details to implement these laws needed to be decided on. The European Securities and Markets Authority (ESMA) has proposed the first part of the technical standards at the end of December 2014, that need to be confirmed or amended by the European Commission and approved by the European Parliament and Council – a cumbersome process.

Technical details can strengthen or weaken the laws on (food) commodity derivatives (see for instance here). The current ESMA proposals are enhancing loopholes in the law, for instance by extending the definition of oil derivatives that get many exemptions from the regulations. The proposals also undermine transparency by preventing weekly public reporting of trade in a particular derivative. ESMA proposes to stop public reporting 3 months after there are less than 30 participants having an open contract in a derivative, which is a situation that is, or might be, the case for many derivatives contracts e.g. for cocoa.

ESMA is consulting on its website on the second part of technical standards to be decided on, such as how to concretely limit the speculation in commodity derivatives (detailed standards for position limits), detailing transparency requirements for all trading (shares, derivatives), and defining when a commodity company is to be treated as a speculator. The deadline for the written consultation is 2nd March 2015. A hearing on the same issues will be held on 19th February 2015 in Paris.