Eurelectric have recently written this letter to the European Commission, which makes recommendations on how certain aspects of MiFID II’s Regulatory Technical Standards (RTS) could be changed to lower the potential impact on the energy industry. This follows a long list of other parties who have made similar protests.
The letter focuses on two specific aspects of the proposed RTS:
- Thresholds – It is recommended that the threshold for the two tests for exemption (capital employed and market share) be raised significantly.
- Definition of a derivative – It is recommended that the proposed changes to Annex I Sections C6 and 7 of MiFID which define whether certain types of physical trades are financial instruments, be sharpened and changed, so that they do not sweep up many types of trade that are currently excluded.
The recommendations focus on the items which could still be adjusted within the RTS before the final version is published in July, meaning that they may well have an impact on the final result. Having said that, and as we have heard from ESMA, the actual intent of the legislation is to catch far more commodity trading within the net of financial legislation.
As a result, we may well see a compromise of some sort, but the chances are that most will still be caught by increased regulation.