Michael Noonan (Limerick City, Fine Gael)

As I indicated in my reply to this question from the Deputy on Tuesday, 15 November 2011, my understanding is that the Deputy is referring to trading in futures in foodstuffs, such as wheat, on stock markets and the need to have a regulatory framework in place to deal with these trades. A regulatory regime for these types of trades was set down in the 2004 Markets in Financial Instruments Directive, which was transposed into Irish law by the European Communities (Markets in Financial Instruments) Regulations 2007, SI 60 of 2007.

Part 3 of Schedule 1 of the statutory instrument provides a list of the financial instruments within the scope of the regulations. Paragraph 8 of that part refers to "options, futures, swaps, forward rate agreements and any other derivative contracts" and sets down specific circumstances where these apply. Similar provisions should be in place in all member states. The scope of this paragraph is wide-ranging and includes derivative contracts in commodities such as foodstuffs. Although rules are in place for this type of trading in Ireland, in practice there is little prospect of them being implemented because currently there are no commodities exchanges established in Ireland, either as part of the Irish Stock Exchange or elsewhere.

In order to keep pace with trends in derivatives trading, and in line with G20 commitments, a proposal to extend the scope of market abuse regulation, so that it includes derivatives trading, has recently been adopted by the Commission and is being negotiated at Council working group level. A revision of the Markets in Financial Instruments Directive, with a view to improving transparency and accountability in securities trading, is also being negotiated at Council working group level.

A Commission proposal for a regulation, which is now nearing agreement, addresses trades in derivatives that are conducted away from exchanges, in other words, over the counter. The outcome of this negotiation will include reporting and clearing obligations for these trades, leading to more transparency and control over derivatives, including food derivatives. When finalised, these EU legislative initiatives will come into force in all member states. The Central Bank of Ireland is the competent authority in this country for the purposes of derivatives legislation.

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