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On May 6, 2025, the European Securities and Markets Authority (ESMA) published its response to the European Commission’s targeted consultation document on the functioning of commodity derivative markets.
This consultation by the Commission, launched on February 26, 2025, aimed to comprehensively assess the current regulatory landscape for commodity derivatives, emission allowances, and certain aspects of spot energy markets. The goal was to ensure these markets continue to function effectively in the EU economy, particularly in light of the lessons learned from the energy crisis of 2022 and the extreme volatility observed during that period. The feedback from the consultation will inform a report by the Commission to the European Parliament and the Council, which could lead to future policy initiatives and potential legislative amendments to relevant legislation like MiFID II and REMIT.
ESMA’s response, dated May 2, 2025, addressed various key topics from the Commission’s consultation, including:
* Data Aspects: ESMA emphasized the need for data harmonization, streamlining reporting frameworks (across MiFIR, EMIR, and REMIT), and further integrating and consolidating transaction data to increase efficiency and reduce reporting burdens.
* Ancillary Activity Exemption: ESMA weighed in on the application of the ancillary activity exemption under MiFID II, considering whether a single provision for all asset classes would add complexity.
* Position Management and Reporting: ESMA provided detailed observations and suggestions regarding position reporting, management, and limits, as well as the impact of the C(6) carve-out contracts and broader implications beyond position limits.
* Circuit Breakers: ESMA referred to its recent report on circuit breakers and confirmed that trading venues not operating central limit order books or (periodic) auction systems are not prevented from implementing other mechanisms to achieve similar outcomes to trading halts or price collars.
* Elements from the Draghi Report: ESMA also responded to certain proposals from the Draghi report concerning gas spot and derivative markets, such as an obligation to trade in the EU and market correction mechanisms.
Overall, ESMA’s response aims to provide technical advice to the Commission as it evaluates potential adjustments to the regulatory framework for commodity derivatives, with a focus on improving market integrity, efficiency, and resilience.

Video courtesy of Escrow.com

Video courtesy of Escrow.com