EEX: Letter By The Energy Industry To Commissioner Lord Hill, DG FISMA - "Ensuring Effective And Efficient Regulation Of European Commodity Derivative Markets”

In relation to MiFID II, there is a need to ensure the ancillary exemption framework incorporates an appropriate assessment in relation to the overall group business, consistent with the intent of the legislators. The present proposals from ESMA do not achieve this and also have a number of other serious deficiencies (including the approach to defining legitimate hedging activity and the starting year for assessment against the thresholds). Together, these problems will result in a large number of firms being brought into the scope of MiFID even though their activity in commodity derivative markets is, by any reasonable assessment, ancillary to their wider group business.
 
We suggest that the risk-reducing effect of Regulated Markets (RMs) should also be recognized similar to exchange traded derivatives (ETDs) under EMIR. Contracts traded on RMs are always centrally cleared and thus have a different risk profile than non-cleared contracts traded outside regulated platforms. RM-traded contracts should therefore only be partially taken into account for the calculation of ancillary activity thresholds with a maximum ratio of 15 % (corresponding with the level of initial margin placed with the CCP).