International policy

Find out how international policy influences regulation of commodities markets and the affect of likely changes.

Initiatives by the G20 have aimed to “improve the regulation, functioning, and transparency of financial and commodity markets to address excessive commodity price volatility”.

These initiatives are complementary to developments for wider derivatives markets to move towards central clearing and provide greater transparency. They will also bring these markets more comprehensively within the scope of mainstream regulation.

We are fully engaged with implementing the agenda of the G20’s commitments, which are reflected in a number of EU legislative measures – notably MiFID, EMIR, REMIT and MAD/MAR – and the Dodd-Frank Act in the US.

Impact of key changes

The key changes that are likely to be introduced will affect:

Regulatory scope

These measures bring a more consistent treatment of similar activities across different types of firms and support market integrity.

Systemic risk

These measures address the potential for disruption arising from what is now a mainstream financial asset class.

Market transparency

These measures are intended to improve market integrity and assist consumer protection.

Market conduct

These measures support market integrity and address the inter-linkages and dependencies between physical and financial markets.

You can find out more about these key changes in our commodity market update.

Further policy developments

In addition to changes arising from EU legislation, there are broader international policy developments related to commodity markets, a key part of which relates to benchmarks.

IOSCO published its Principles for the Regulation and Supervision of Commodity Derivatives Markets in 2011, giving guidance on expected regulatory standards for members. In common with other EU states, the UK complies with the Principles; any areas of shortcoming will be addressed by EU legislation currently under negotiation.

IOSCO is also working on benchmarks while changes in capital requirements are being implemented under Basel III.

The regulatory framework is evolving through and beyond the implementation of these measures. We will continue to work with market participants through this process to ensure an effective, robust and proportionate approach to commodity market regulation.