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CRDIV

Council agrees to postpone capital rules for commodity traders – and a paper

The European Council has agreed to postpone the application of certain capital rules to the end of 2020 for “Commodity Dealers” as reported here. This represents the latest step in the process of extending the delay already in force until the end of 2017.

Commodity and energy traders will need to observe rules such as CRD IV and CRR if they lose their exemption to “full MiFID II” because of failure to pass the ancillary¬†activity test, whose final version is awaited from ESMA. Although the resulting regulated entity is a financial counterparty, it has the status of “Commodity Dealer” in financial regulations, and will be able to claim the above relief.

While the resulting capital requirements may be substantial, this paper from PwC briefly examines how those who fall under the regime may reduce the burden through various strands of optimisation. It is likely that the rules themselves, as applied to Commodity Dealers, will also be tailored during the delay, before they hit market participants.

 

 

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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