Commodities market

Derivatives clearing

With the proposed review of EMIR, dubbed EMIR 3.0, announced in late 2022, the European Commission aims to make the European Union a choice location for derivatives clearing by building “a safe, robust and competitive EU central clearing ecosystem, able to withstand economic shocks”.

At this stage, and given developments under way in commodity markets since February 2022, AMAFI is concentrating on the potential effects of the proposed review on these markets. While AMAFI broadly supports the proposals, currently being discussed within the EU Council, some suggestions need to be clarified, including:

• the possibility of allowing bank guarantees and public guarantees to be considered eligible as highly liquid collateral that may be accepted by a central counterparty,

• the predictability of margin calls made by clearing members to their end clients.

Conversely, AMAFI has serious concerns about the proposal to scrap the disclosure exemption for over-the-counter derivative contracts between counterparties belonging to the same group, where at least one of the counterparties is a non-financial counterparty. Such a change will increase the scope of disclosure as well as the associated costs, without offering supervisors meaningful information.

Gas market

As previously reported, the European Commission published Regulation 2022/2578 establishing a correction mechanism for the gas market in December 2022 (Info AMAFI No. 158). AMAFI has identified a number of problems with the new mechanism, particularly involving the potential increase in margin calls. 

Although the mechanism came into effect on 15 February 2023, it has yet to be activated, as gas prices have plunged since the beginning of the year. In reports assessing the mechanism’s market effects (ESMA Report, ACER Report), the European Securities and Markets Authority (ESMA) and the EU Agency for the Cooperation of Energy Regulators (ACER) found that the mechanism has had no significant impact since coming into effect. However, they stressed that this finding reflects the current market environment of low gas prices and high stock levels. Given that markets could tighten again, AMAFI continues to watch this issue closely.