As we move closer to finding out what, if any, compromises will be incorporated into the final MiFID II standards, more voices are pushing back against the currently proposed rules, following other statements earlier this year.
Firstly, Mars, the confectionery company, have now joined the push back, signing a letter to the European Commission which has also been signed by ICE, Shell BP and others, as reported in this article on the Financial Times web site. Once again, the letter complains that the rules as currently proposed would increase trading costs, thus reducing liquidity in the markets. This would also reduce hedging and ultimately lead to higher costs for end customers.
Such a lowering of activity would be caused by a loss of exemption from the wider MiFID rules, requiring many market participants to obtain “MiFID licences”, effectively regulating them as banks. This triggers many new regulatory requirements in many areas, the main one of concern being the capital requirements that would arise out of rules such as CRD IV, and mandatory clearing under EMIR.
In another article on the Reuters web site we see some push back against the proposed position limits rules, which would apply to everyone trading commodity derivatives, whether exempt from MiFID or not. The article includes quotes from the LME and Matif, who voice their concerns that the level of position limit will drive business away from the EU to other jurisdictions such as Asia. Position limits will be set on each deliverable contract and cannot be higher than 40% (They are set at 25%, with an ability for the regulator to flex each one by 15% in each direction).
Although the finalisation of the Regulatory Technical Standards has been delayed, we will hopefully soon get an insight into the thoughts of the different regulators. This should give a hint as to whether a large part of the commodities and energy market will really be caught by MiFID, or whether we will see significant compromise.