LONDON, Nov 9 (Reuters) – European Union policymakers are contemplating extending among the powerful guidelines utilized to banks to commodity companies to forestall a re-run of the issues they confronted in assembly collateral funds after this 12 months’s gasoline value surge, a doc confirmed.
Commodity markets have lengthy been ruled by comparatively mild regulation, however the EU doc seen by Reuters mentioned waivers for large commodity gamers from guidelines that govern banks could possibly be scrapped.
The newest push for tighter scrutiny follows value spikes ilnked to Russia’s struggle in Ukraine that pressured governments to assist when utilities and merchants have been unable to satisfy margin name necessities to cowl their derivatives positions.
The European Fee, the EU government, is anticipated to set out proposals subsequent month to replace its European Market Infrastructure Regulation (EMIR) to ‘incentivise’ clearing in euro swaps to maneuver from post-Brexit London.
“Current occasions in commodity markets have highlighted focused areas the place there could also be deserves in bettering the EMIR framework,” the European Fee casual doc ready for a gathering on Tuesday of EU member state officers mentioned.
The Fee has already taken fast steps to assist vitality markets, however the paper mentioned it was searching for medium-term “structural options”.
Concepts embody clearing homes having separate accounts for monetary and non-financial clients to keep away from “commingling of danger”, although this could possibly be pricey to implement.
Clearing homes, which stand between consumers and sellers to make sure completion of a commerce and accumulate margin, may be required to have a separate default fund for his or her commodities enterprise.
Different concepts embody higher reporting of knowledge on positions to regulators, and limiting membership of clearing homes to banks, given they’ve entry to liquidity in a disaster, or set more durable standards for commodity companies that need to be part of.
Clearing members may be required to elucidate higher to non-financial clients akin to vitality firms how margins can rise sharply in instances of market turmoil, the paper mentioned.
Reporting by Huw Jones; modifying by Barbara Lewis
: .