EBA targets commodity derivatives

EBA targets commodity derivatives

The European Banking Authority has detailed its plan to increase its oversight of fund managers using commodity derivatives, the latest regulatory intervention in the commodities market.

The regulator, an agency of the European Union, issued instructions this week calling for specific details from fund managers using commodity-related options, futures and swaps.

It forms part of the watchdog’s new prudential regime for investment companies, aimed at firms not deemed “systemic and bank-like”.

The first two parts of the data collection focus on general and financial information. The other three areas aim at gathering information on regulatory capital, liquidity and large exposures.

EBA officials said they are "mindful of the burden" for the institutions that participate.

As a result, the data collection will be carried out on a "best effort basis" with a limited number of variables to be filled out.

Templates have been designed to take into account the specificities each firm, including the fact that some firms are not currently prudentially regulated.

Instructions will be published on the EBA website and circulated to regulators.

Firms have to submit completed templates to their national authority by 20 February 2017.

Companies that are not currently regulated can submit the data directly to the EBA, the authority said in its statement.

The move is part of a broader regulatory effort to improve regulatory scrutiny of the commodities markets.

The European Commission signed off at the start of the month the last remaining parts of MIFID II just 13 months before the controversial trading reforms are set to take effect across Europe.

The Commission adopted the last remaining regulatory technical standards -- for position limits and commodity derivatives trading for non-financial firms – on 1 December.

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