
United States: FIA Says IOSCO’s Updated Principles Should Apply Only To Derivatives On Physical Commodities
25 January 2022
Cadwalader, Wickersham & Taft LLP
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In comments on a proposed update to IOSCO’s 2011 “Principles for the Regulation and Supervision of
the Commodity Derivatives Markets,” FIA asserted that
IOSCO should clarify that the principles only “apply to
exchange traded derivatives on a physical commodity or a
non-financial deliverable with a finite supply.”
As previously covered, IOSCO’s Principles are
intended to apply to the regulatory supervision of price discovery
and hedging in the commodity derivatives markets as to procedures
for preventing “manipulation and abusive practices.”
IOSCO requested feedback in response to market
developments, including (i) regulatory changes, (ii) an increased
dependence on electronic trading and data, (iii) technological
advancements, (iv) unforeseen disruptions, and (v) multi-market
trading abuses.
In its comments, FIA recommended that:
- IOSCO’s Principles should apply only to “derivatives
on a physical commodity or a non-financial deliverable with a
finite supply” because more review is needed to determine
their applicability to intangible commodities; - Principle 2 should be clarified to ensure that the “trading dynamics of commodity derivative dealers” are
followed by all regulatory capital regimes; and - Principle 16 should be clarified to ensure that government
interference in commodity derivatives markets is a measure of last
resort to restore proper functioning of the market.
FIA otherwise supported the updated principles, stating that the
revisions reflected the “changes, trends and activities in the
commodity derivatives market over last decade.”
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