European directive poses serious questions for commodities firms
By James Brown, Senior Energy
Correspondent at Allegro Development, EMEA
The growing compliance burden in Europe
and America created by the financial crisis is set to intensify
for energy traders with the introduction of Mifid II in 2017.
It is still unclear how the directives may be implemented by
Europe’s nation states and there is doubt over the
future of regulatory exemptions presently relied on by the
industry. As a result, the Mifid II consultation process that
will take place over the next three years will prove critical,
but companies cannot afford to wait and see to decide how best
to address the likely increase in regulatory risk.
Understanding the variables today -- and planning accordingly
-- is essential.
A CHANGING REGULATORY LANDSCAPE
EU regulators created the Markets in
Financial Instruments Directive (Mifid) to increase competition
and consumer protection in banking and equity-related financial
services. In commodity markets they created two regulatory
regimes - Emir and Remit - to address potential manipulation in
derivatives and physical trading respectively. These are
rolling out now but even as they complete their implementation
phase an extended set of Mifid rules – Mifid II
– is expanding beyond its banking scope to take in
aspects of commodity trading as well, with far reaching
implications for energy market participants.
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