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EMIR, Mifid

Europex statement on the definition of physical commodity trades as derivatives

Europex (the association of European energy exchanges) have just published this statement about whether physical commodity trades should be classified as derivatives, as defined in MiFID Annex I section C. The answer to this question defines whether trades are within the scope of MiFID and therefore also EMIR and MAR.

In the statement they are arguing that it is better for the market if more instruments are brought into MiFID, because of the transparency that this brings. They are arguing against certain carve outs for the gas and power industry for this reason. They also refer to their response to the previous MiFID consultation, (see here) where among other things they argue that physical trades that “can” be physically settled and which are traded via an OTF (rather than an MTF) should be considered a derivative and they also make other arguments and a proposal about how to scope the definition of “must be physically settled.

The basis of the argument is that the transparency brought about by MiFID will be good for the industry, and that any adverse effects on the commodities industry will be offset by exemptions such as the remaining MiFID carve outs, and also by non financial firms staying under the threshold.

This debate continues as part of the specific consultation on the topic now being run by ESMA, whose documents can be found via this page.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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