The European Securities and Market Authority (ESMA) has published its draft regulatory technical standards which when adopted will establish ways of working under MiFID II, the European Union’s updated markets in financial instruments legislation. If passed in its current form this legislation would mean that energy and other real economy companies become subject to requirements applicable to investment banks.
EFET is concerned that ESMA’s proposed ways of implementing this important EU financial sector legislation could have a negative impact on competitiveness, energy security, affordability and sustainability. Adverse impacts on the degree of liquidity and on the cost of participation in wholesale markets would tend to increase energy prices across Europe. Such outcomes are in stark contrast to the policy pillars underpinning the European Commission’s stated ambitions for an EU Energy Union.
We propose an approach based on the ESMA proposal to assess whether the capital employed in the derivatives’ trading is ancillary to the main business. This approach will avoid the exit of market participants and mitigate any adverse consequences for energy markets, the wider real economy, and consumers.