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Monday, 13 September 2010

France calls for stricter EU rules on commodity derivatives

Three French ministers, finance minister Christine Lagarde, energy and environment minister Jean-Louis Borloo and the agriculture minister Bruno Le Maire, have sent a letter to the EU Commission demanding increased supervision of commodity derivatives markets.French president Nicolas Sarkozy last week said stabilizing commodities markets would feature high on France’s agenda when it chairs the G-20. This position was followed on 31 August by the letter from the three French ministers, addressed to the EU Commissioners for the Interior, Agriculture and Energy, in which they called for a European initiative on improving “regulation of trade in commodity derivatives and assimilated goods.” The ministers listed specifically such instruments based on oil, gas, metals, agricultural produce and carbon quotas.“Failing [a legal proposition], a statement from the Commission could lay down European guidelines on regulating raw material derivatives,” the ministers clarified. These principles could be “repositioned” within the framework of the review of directives on market manipulations and markets in financial instruments (MiFID).

Greater transparency
In a note attached to the ministerial letter, France acknowledges that these mechanisms anticipate “a system of market manipulations” related to raw material markets. The note, prepared by Bruno Le Maire’s office, also recommends greater transparency, “especially on physical markets”, in order to improve the way prices are set. The authors of the note consider that “the financial markets of raw materials currently suffer from inadequate and inappropriate European regulation.” Not only are the physical markets not covered by “real measures of framework”, but also on the financial side, “only part of the raw materials derivatives is subject to financial regulation,” according to the note.
The note also points out the “fear of contamination” between the financial sphere and the physical sphere on the commodities markets, citing the spectacular increase in cereal prices. In the first semester of 2007, the price of wheat doubled on European markets.

Source: Euractiv