To avoid a repeat of 2008 when food and energy prices in Europe reached record highs, the European Commission is considering regulating the commodities markets.
Referring to provisions in the Dodd-Frank bill that will require the Commodities Futures Trading Commission to set limits on the number of futures contracts any one trader can hold, Michel Barnier, the EU commissioner in charge of financial regulation, said: “I don’t think there’s any reason why we Europeans should be less rigorous than the Americans.”
Europe is reviewing commodities provisions as well as dark pools, high-frequency trading, circuit breakers, derivatives, structured products and bonds in its Markets in Financial Instruments Directive.
Further, Europe is considering stiffening and standardizing penalties for financial regulation violations.
“If a financial institution does not abide by EU rules in the area of financial services, traders and executives must realize that they won’t get away with it and that the response will be tough—wherever in Europe the violation occurs,” Barnier said.