ESMA response to EC's review of commodity derivatives markets

The European Securities and Markets Authority (ESMA) has published a response to the European Commission's consultation on the functioning of commodity derivative markets and certain aspects of spot energy markets. ESMA provides its input on the issues identified in the consultation, including inefficiencies and overlaps in reporting under MiFIR, EMIR and REMIT. The response covers the following issues from the consultation paper:

• Data harmonisation. ESMA recalls the findings of the EC's 'Fitness Check of EU 2 Supervisory Reporting Requirements' which identified inefficiencies, lack of standardisation and duplications between EMIR, MiFIR and REMIT reporting obligations. ESMA agrees there is a need for streamlining the reporting frameworks.
• Integrated reporting and data sharing. ESMA considers further integration and consolidation of EMIR, MiFIR and REMIT transaction data would increase efficiencies and bring benefits to market stakeholders due to the reduction of reporting flows and duplicative data processes.
• Ancillary activity exemption. ESMA considers that amending Article 2(1)(d) of MiFID II (Directive 2014/65/EU) to apply a single provision to all asset classes would add complexity to criteria for commodity trading derivatives. The impact on Article 2(1)(d) is also unclear. ESMA therefore supports keeping the existing differentiation of the MiFID II authorisation exemptions.
• Position management and reporting. ESMA makes a number of detailed observations and suggestions in relation to position reporting, position management and position limits, as well as specific feedback on the impact of the carve-out for C(6) contracts and broader implications beyond position limits.
• Circuit breakers. ESMA refers to its recent report on circuit breakers and confirms that in line with this, trading venues not operating a central limit order book or (periodic) auction systems are not prevented by ESMA from implementing other mechanisms achieving a similar outcome to trading halts or price collars.

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