EFET have published their response to the public consultation run by the European Commission, which is a Call for Evidence on the EU Regulatory Framework for Financial Services. The consultation can be found here and the EFET response can be found here.
The consultation is seeking input on the impact of the last few years’ financial legislation (i.e. EMIR, MiFID etc.) on the market, in particular with respect to the ability for the economy to grow, unnecessary regulatory burdens, inconsistencies and gaps, and unintended consequences.
The EFET response follows the same train of thought as previous responses, in arguing that while financial legislation is necessary, commodity and energy trading when carried out by industry is not “systemic” to the financial markets, and that therefore the level of regulation aimed at the industry is disproportionate and potentially damaging.
The response covers a number of energy specific topics: For example there is a great deal on the impact of capital related rules such as CRR and CRD IV on the industry, not only due to market participants possibly having to set up regulated entities (and therefore be subject to the rules) but also because of the application of the rules to banks, with the subsequent impact to credit availability. It is also claimed that the liquidity of the commodity derivative markets has reduced, with a detrimental effect on the market. There is also a mention of the link between the physical and financial markets, including the interaction between MAR and REMIT (page 13) and how proper calibration is required so that the markets continue to function effectively.
There are also some general points made: For example it is pointed out that the uncertainty generated by leaving detail to Level 2, and the often late publication of such rules, increases uncertainty and makes compliance unnecessarily hard.
We can expect this type of debate to continue as the next sets of rules, such as MiFID II and MAR, get closer to implementation.