Recent Developments in the Regulation of European Commodities Markets

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In September 2010, the European Commission (EC) published the draft European Market Infrastructure Regulation (EMIR), which is intended to regulate the over-the-counter (OTC) derivatives markets through enhanced market oversight, reduced operational and counterparty risk in trading, and increased market transparency. The stated aim of EMIR is to introduce requirements to improve the transparency and risk management of the OTC derivatives markets, as well as uniform requirements for the performance of central clearing counterparties and trade repositories.

The EC is working towards a deadline of late 2012, set by the G-20 during the 2009 Pittsburgh Summit, by which time all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, as appropriate, and be cleared through central counterparties, again, where appropriate. Now over a year has passed since the publication of the draft regulation and, although the EC has taken steps to clarify aspects of EMIR, the final text is yet to be published. With so many issues still outstanding, including what constitutes a “standardised” OTC derivative contract, and how the term “standardised” is defined, it is not clear how realistic this timeframe is, especially as important thresholds that will determine exactly who is governed by EMIR, are only timetabled to be published later this year.

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