On April 22, ISDA and FIA submitted a joint response to the European Commission’s (EC) consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and limits and the ancillary activities exemption, the consultation also addressed data and reporting and certain concepts raised in the Draghi report, such as a market correction mechanism to cap pricing of natural gas and an obligation to trade certain commodity derivatives in the EU only.

In the response, the associations argue that any changes to the reporting framework for commodity derivatives should be seen through the lens of the EC’s simplification and burden reduction agenda. It maintains that the current position management, position reporting and position limits framework and the existing ancillary activities exemption all work well, without any need for changes that would involve reopening the Markets in Financial Instruments Directive. The response argues strongly against the imposition of a pricing cap and against a trading obligation for commodity derivatives.