CEER responds to ESMA’s Consultation Paper on the impact of position limits and position management and on weekly position reports
23 December 2019
CEER has published its submitted response to the European Securities and Markets Authority(ESMA) Consultation Paper on MiFID II review report on position limits and position management – Draft Technical Advice on weekly position reports. In this response, CEER communicates it does not share the ESMA paper’s analysis that the C (6) carve-out (a carve-out for wholesale energy products, as defined in REMIT, that are traded on an organised trading facility (OTF) and which must be physically settled) creates an unlevel playing field across trading venues.
CEER expresses its concern about ESMA’s proposal to reconsider the C (6) carve-out in a restrictive way, such that Energy Regulators could be replaced by Financial Regulators in supervisory tasks for the concerned products. This would be inappropriate, inconsistent and inefficient considering the experience gained in this field by energy regulators.
CEER would like to recall that gas and electricity markets have their own dedicated regulation to address market abuse and transparency – the REMIT regulation. REMIT and MiFID II both have the main goal to bring more integrity and transparency to energy and financial markets, respectively. REMIT foresees that each national regulatory authority has the investigatory and enforcement powers necessary to exercise the prohibitions against market abuse (article 13). It should be taken into account that, since REMIT’s creation in 2011, energy regulators have gained extensive experience in monitoring the trading of wholesale energy products. Recent sanctioning decisions taking into account energy particularities that do not pertain to financial markets have also confirmed that energy regulators are best placed to exercise such supervisory functions.
Furthermore, no quantitative data support ESMA’s argument that “the C (6) carve-out has proved a significant and successful incentive for market participants to move trading in REMIT contracts to OTFs and is the source of a major competitive disadvantage for regulated markets and MTFs”.
In addition, CEER is seriously concerned that a reconsideration of the C (6) carve-out in a restrictive way would result in unintended consequences which might endanger the integrity and transparency of wholesale energy markets, e.g. bringing additional costs for energy companies and higher prices being paid by consumers due to less efficient and more expensive hedging.
Bearing in mind the above stated arguments and taking in account that there is no evidence that the existing C (6) carve-out has resulted in any negative effects on the functioning and stability of the financial markets, CEER strongly advises to not revise the existing legislation in a restrictive way and to confirm the continuation of the C (6) carve-out for wholesale energy contracts with physical trades for the delivery of gas or electricity at a future date.
Please find the full response here.