Treasury written question – answered on 15th December 2022.
To ask the Chancellor of the Exchequer, what steps he is taking to strengthen the regulation of commodity markets to promote (a) stability and (b) transparency.
The Government believes effective commodities markets regulation is key to ensure economic stability. This is the lesson we have learned from the 2000s food and financial crises and the Government remains committed to the G20 recommendations that sought to uphold that.
Through the Financial Services and Markets Bill, the Government is making changes to the regime which we have inherited from the EU, which is overly complicated and poorly designed. For example, to ensure that the regime is calibrated effectively, the Bill delegates the setting of position limits from the Financial Conduct Authority (FCA) to trading venues, who are well placed to ensure that it only applies to contracts that are subject to high volatility. The FCA will also retain its ability to directly intervene if need be. This will ensure that speculation in agricultural and physically settled contracts such as oil and gas does not lead to economic harm.
The Government is also using the Financial Services and Markets Bill to improve the transparency regime for commodity derivatives. The regime that we have inherited from the EU was designed for equity markets and as such does not take into account the inherent differences between these two markets. The FCA will be given responsibility for creating a more tailored regime that improves transparency and recognises the diverse nature of our markets.
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