Written answers

Wednesday, 20 November 2013

Department of Finance

Food Securities Regulation

Photo of Denis NaughtenDenis Naughten (Roscommon-South Leitrim, Independent)
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27. To ask the Minister for Finance the steps being taken to regulate food securities trading on the stock market; and if he will make a statement on the matter. [49225/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Proposals to regulate food securities at an EU level form part of the current MiFID II and MiFIR proposals which aim to make financial markets more efficient, resilient and transparent, and to strengthen the protection of investors. The Irish Presidency achieved a Council General Approach on this file which has enabled the Lithuanian Presidency to commence the next stage of the legislative process, which is the engagement, via Trilogues, with the European Parliament and the European Commission.

Under the current MiFID II proposals, the level of exemptions available has been reduced and more products will be defined as derivative financial instruments when compared with MiFID I, and will therefore fall within the scope of MiFID II and other financial legislation such as Market Abuse. MiFID II also 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. The Council is proposing that 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 of time.

Furthermore, subject to the final agreement between the co-legislators, 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 coordination 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.

MiFID contains important provisions which set out new rules for commodity derivative markets. However, the regulation of commodity derivative markets, including where they take place Over the Counter (OTC) and as they are related to the physical commodity markets, must be assessed based on how they are dealt with across the totality of financial services files.

In relation to the scope of EU financial services legislation on commodity and related derivative markets, it should be noted that the MiFID file, along with the Market Abuse Regulation (MAR) agreement secured under the Irish Presidency, and the European Market Infrastructure Regulation (EMIR), provide for a much stronger legislative framework in relation to commodity derivative markets.

We will continue to monitor developments on this file throughout the legislative process.

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