Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The MiFID, markets in financial instruments directive, file was included on the ECOFIN agenda as part of the any other business legislative updates on key files and there was very little discussion on the issues in the file. The purpose of the discussion was to update the member states on the current state of play of this dossier and to reiterate my hope that the Council can reach an agreement on a general approach during the Irish EU Presidency.

Trading in commodity derivatives, including food commodity derivatives, forms part of the regulation of derivative trading in the EU. Regulation of derivatives has been part of Council discussions within the EU since September 2010 when the Commission published its proposal for the European market infrastructure regulation, EMIR, to regulate this market in the context of over-the-counter, OTC, trades. This EU regulation, which is directly applicable in all member states, entered into force on 16 August 2012.

In October 2011, the European Commission published a revised MiFID proposal, MiFID II, which includes within its scope commodity derivatives traded on exchanges. As previously stated, the negotiations on the MiFID review are still under way in the Council of the EU.

EMIR and MiFID II combined are expected to result in a tighter regime for all derivatives, including food securities, whether traded OTC or through exchanges. The measures are intended to keep pace with trends in derivatives trading, in line with G20 commitments made at the 2009 Pittsburgh summit.

The Central Bank of Ireland is the competent authority in this country for the purposes of derivatives legislation. In particular, the current Council text of MiFID II contains important provisions relating to position management, position limits and product intervention. These provisions are in respect of all financial instruments, including commodity derivatives, and have the purpose of providing regulators with tools to avoid excessive speculation in financial instruments, including commodity derivatives. Competent authorities will be obligated to establish and apply position limits on the size of a position in a commodity derivative which a person can have over a specified period.

Furthermore, competent authorities will have product intervention powers whereby they may prohibit or restrict trading of financial instruments or prohibit or restrict investment activities when there is a threat to the orderly functioning and integrity of financial markets or commodity markets. The European Securities and Markets Authority, ESMA, will have contingency and co-ordination powers in position management and product intervention to ensure consistent application across all member states. In the exercise of its powers, ESMA will also have to consult public bodies competent for the oversight, administration and regulation of physical agricultural markets.

When an agreement is reached on Council general approach, the negotiations will move to trilogues between the Council, European Parliament and Commission.

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