European commodity trading firms baulk at tougher rules

BY NEIL HUME AND PHILIP STAFFORD London: Commodity trading houses and energy companies are making a final attempt to win exemptions from European regulations that are set to subject them to the same capital requirements as banks. In a report published on Monday, Trafigura, one of the world’s leading commodity traders, said there was “little justification” for proposals that would impose substantial requirements but not reduce risk in the financial system. Trafigura is one of the biggest names to enter the debate over the regulations, which threaten to force tougher demands on many of the region’s energy and commodities traders, regardless of size. The pushback comes as European authorities conclude their final review in coming months of the Markets in Financial Instruments Directive (Mifid II), the region’s flagship markets legislation. Regulators want to increase transparency, foster competition, clamp down on speculation and guard against systemic risk across equity, fixed income and commodity markets. Unless the rules are amended, commodity traders and energy companies stand to lose market exemptions and will be forced to comply with the same requirements as banks. Commodity traders and energy companies use commodity derivatives to hedge the raw materials and products they buy and sell. “This … continue reading

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