ARTICLE
25 January 2022

FIA Says IOSCO's Updated Principles Should Apply Only To Derivatives On Physical Commodities

CW
Cadwalader, Wickersham & Taft LLP

Contributor

Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
FIA otherwise supported the updated principles, stating that the revisions reflected the "changes, trends and activities in the commodity derivatives market over last decade."
United States Finance and Banking

In comments on a proposed update to IOSCO's 2011 "Principles for the Regulation and Supervision of the Commodity Derivatives Markets," FIA asserted that IOSCO should clarify that the principles only "apply to exchange traded derivatives on a physical commodity or a non-financial deliverable with a finite supply."

As previously covered, IOSCO's Principles are intended to apply to the regulatory supervision of price discovery and hedging in the commodity derivatives markets as to procedures for preventing "manipulation and abusive practices." IOSCO requested feedback in response to market developments, including (i) regulatory changes, (ii) an increased dependence on electronic trading and data, (iii) technological advancements, (iv) unforeseen disruptions, and (v) multi-market trading abuses.

In its comments, FIA recommended that:

  • IOSCO's Principles should apply only to "derivatives on a physical commodity or a non-financial deliverable with a finite supply" because more review is needed to determine their applicability to intangible commodities;
  • Principle 2 should be clarified to ensure that the "trading dynamics of commodity derivative dealers" are followed by all regulatory capital regimes; and
  • Principle 16 should be clarified to ensure that government interference in commodity derivatives markets is a measure of last resort to restore proper functioning of the market.

FIA otherwise supported the updated principles, stating that the revisions reflected the "changes, trends and activities in the commodity derivatives market over last decade."

Primary Sources

  1. FIA: Public Comment on the Principles for the Regulation and Supervision of Commodity Derivatives Markets

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More