We supervise certain firms and market operators active in commodity derivative markets. We work closely with our regulatory counterparts overseas and with physical market authorities such as Ofgem.
We play a leading role in developing commodities policy and regulation globally through IOSCO and within Europe through ESMA.
We use the term ‘commodity markets’ to mean both the financial commodity derivative markets that we regulate and the underlying physical market, which we do not regulate. We use ‘commodity derivative’ and ‘physical’ when we specifically mean these.
Commodity derivatives have been within the scope of UK regulation since the Financial Services Act 1986 (FS Act) came into force. The FS Act captured:
While the precise scope of the FS Act is subject to some complexities, the most notable features are that instruments are within scope if traded on a Recognised Investment Exchange (RIE) and out of scope if for spot physical delivery.
The Financial Services and Markets Act 2000 (FSMA) did not materially change the scope of commodity market instruments covered under UK regulation.
The Markets in Financial Instruments Directive (MiFID), which came into effect in November 2007, brought commodity derivatives within the scope of EU financial services legislation for the first time.
There is some overlap between the MiFID and FSMA scope but they are not identical. FSMA is more comprehensive in capturing firms under a domestic regime that are not within MiFID scope.
See our guide to how we regulate the commodity markets for more on our role in this area and the regulatory framework.
We also have a market update which sets out our views on the current regulatory challenges of the commodity derivative markets and how we will address them.
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