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.