Michael McGrath (Cork South Central, Fianna Fail)
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The regulation of commodity derivative markets, including commodity futures markets, predominantly falls under the EU Markets in Financial Instruments Directive (MiFID II). MiFID II was transposed into Irish law via Statutory Instrument 375 of 2017.

MiFID II established a position limit and position management regime for all commodity derivative contracts traded on trading venues and economically equivalent over-the-counter contracts. Position limits set a ceiling for the number of shares or derivative contracts that a trader, or any affiliated group of traders and investors may own, so as to prevent market abuse and support orderly pricing and settlement conditions. MiFID II also establishes position reporting obligations to enable monitoring of compliance with the position limit regime and mandates the publication of weekly reports by the European Securities and Markets Authority (ESMA) detailing aggregate positions held by different categories of market participants.

Amendments were made to the MiFID position limit regime under the EU Capital Markets Recovery Package that was published in the Official Journal of the EU in February 2021. Within this package were adaptations to the position limit regime for commodity derivatives to help develop euro denominated commodity markets. Commodity derivatives deemed to be critical or significant as well as agricultural derivatives remain subject to the position limit regime.

The MiFID regulations concerning commodity derivatives are supported by a suite of other financial services regulation. The European Markets Infrastructure Regulation (EMIR), which was developed following the 2008/2009 financial crisis to promote financial stability and to make markets more transparent, introduces central clearing, risk mitigation and reporting requirements for over-the-counter commodity and other derivatives in order to make these markets safer and more transparent. The EU Market Abuse Regulation (MAR) also increases the regulation of commodity derivative markets by, among other things, extending the regime’s scope to cover certain related Over- the- Counter (OTC) traded instruments which can have an effect on the covered underlying market including inside information for spot commodity contracts within the definition of 'inside information' and extending the market manipulation offence to include, in some circumstances, spot commodities. The EU Benchmarks Regulation, which entered into application in 2018, further increases the regulation of commodity derivatives by providing a framework for the regulation of commodity benchmarks and their administrators.

Last year’s energy crisis in Europe, resulting from Russia’s invasion of Ukraine, had a significant impact on commodity future markets. In response, EU legislators adopted Council Regulation (EU) 2022/2578 which, among other things, established a temporary market correction mechanism (MCM). The mechanism is designed to prevent excessive pricing in the gas market by providing for price caps on certain natural gas derivatives during periods of market volatility.

The totality of financial services regulation of commodity derivative markets, including commodity futures markets, represents a comprehensive set of regulations designed to ensure the proper functioning and integrity of these markets as well as addressing specific concerns regarding the potential impacts of commodity derivative markets on underlying commodity markets. The EU Commission, the various EU supervisory and regulatory institutions along with the EU member States regularly consider the appropriateness of the overall framework for the regulation of commodity derivative markets.