In-depth Markets: Commodities

Commodity market regulation

Published on July 3, 2013

The regulation of commodity markets, which are increasingly financialised, has become a concern in recent years. Derivatives, as well as financial institutions, play an increasingly important role. Certain major players that may present a systemic risk are not subject to any regulation. For certain segments, volatility has reached historic highs. Lack of transparency remains largely the rule, both on the physical and OTC derivatives markets. Several incidents of manipulations have shown the inadequacy in monitoring these markets. Europe is working on it.


Considerable progress has already been made towards effective regulation of the commodity markets through the recent adoption of two Community regulations. The regulation relating to OTC derivatives, clearing houses and the European Market Infrastructures Regulation (EMIR), which was subject to a policy agreement on 9 February 2012, will apply to OTC commodity derivatives as well as other OTC derivatives, thus reducing systemic risks and improving the transparency of derivative markets. The Regulation on Energy Market Integrity and Transparency (REMIT), published in the Official Journal of the European Union on 8 December 2011, prohibits market abuse in the electricity and gas markets, requires publication of certain sensitive industrial data, and provides for monitoring the markets concerned under the aegis of the new European Agency for the Cooperation of Energy Regulators (ACER), in coordination with national financial and sector regulators and the European Securities and Markets Authority (ESMA).

Revision of Markets in Financial Instruments Directive (MiFID) and Market Abuse Directive (MAD)

The proposed revisions of MiFID and MAD published by the European Commission in October 2011 are intended to complete the European regulatory system for the commodities markets on several important points. In particular, these projects include the following proposals, currently under discussion:

> For texts relating to revision of MiFID:

  • restricting the scope of exemption from authorisation for firms that participate in commodities derivatives markets;
  • requiring declaration of large positions on commodities derivatives and publication of large positions by type of provider;
  • establishing the limits of positions or systems with an equivalent impact on commodities derivatives;

> For texts relating to revision of MAD:

  • clarifying the definition of privileged information on the commodities markets,
  • explicitly targeting application of the market abuse system to cross market manipulations between derivative markets and underlying physical markets.

Role and position of the AMF

The AMF supports these advances, which are completely in line with the principles published by the International Organization of Securities Commissions (IOSCO) in September 2011 on the regulation and supervision of commodities markets. It is actively involved in current work on various proposals for European legislation with the General Directorate of the Treasury, with a view to clarifying a certain number of proposed provisions. Once the level 1 regulation is stabilised, the AMF will also work to refine the application measures through its participation in the working groups of the European Securities and Markets Authority (ESMA).

Next steps: The proposals to modify current regulations have been submitted to the European Parliament and Council (i.e., the Member States) for negotiation and adoption.

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