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Commodity Traders Face Tougher Rules as EU Curbs Speculation 

September 22, 2016

Alexander Weber & Silla Brush, Bloomberg

Traders in commodities from sugar to oil may face tougher regulation in the European Union as policy makers wrangle over new rules intended to curb speculation.

European Parliament lawmakers warn that the EU’s latest proposals for preventing market abuse and spikes in food prices aren’t strict enough. They delivered that message to Valdis Dombrovskis, the bloc’s financial-services chief, in a closed-door meeting earlier this month. Dombrovskis said he would “reflect on the points raised” and come out with a fresh proposal “soon.”

The European Securities and Markets Authority sent the latest version of the rules to the European Commission back in May, and the EU’s executive arm has been considering its next move ever since. ESMA set out a method for calculating position limits for physically settled and cash-settled commodity derivatives, which are intended to reduce speculation and systemic risk. The rules are needed to implement MiFID II, which takes effect in January 2018 after a one-year delay.

“One of the main goals of MiFID II is effectively to curb food speculation so that gambling on the back of the poorest won’t be possible anymore,” Markus Ferber, the European Parliament’s lead lawmaker on the legislation, said by e-mail. Read more

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