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15 October 2008

CESR/CEBS advice on commodities business


The advice concludes with recommendations in particular with regard to the future scope of the exemptions which exist in MiFID and the prudential treatment of specialist commodity derivatives firms.

CESR and CEBS identified potential for market and regulatory failures with regard to commodity derivatives markets. Market failures may in particular result from asymmetric information and negative externalities. Potential regulatory failures may arise where regulation is not sufficiently adapted to the specificities of the commodity derivatives market or due to different regulatory treatments across the EEA.

 

The advice concludes with recommendations in particular with regard to the future scope of the exemptions which exist in MiFID and the prudential treatment of specialist commodity derivatives firms.

 

Both Committees recommend considering whether an additional Article could be included into MiFID which would clarify that firms covered by the exemptions relating to commodity derivatives in Article 2 shall not be prevented from being authorised as investment firms.

 

On the prudential treatment of specialist commodity derivatives firms, Committees recommend either to require specialist commodity derivatives firms to meet a high-level requirement to have adequate financial resources and qualitative risk management requirements, or as a second option, the full application of CRD to specialist commodity derivatives firms with an exemption from any prudential requirements for firms where this would not impede the overall aims of prudential regulation.

 

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© CEBS - Committee of European Banking Supervisors

Documents associated with this article

CESR - CEBS advice on commodities business.pdf


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