Principles for the Regulation and Supervision of Commodity Derivatives Markets
The principles address the following areas:
- Design of Physical Commodity Derivatives Contracts - focused on establishing design concepts for futures contracts;
- Surveillance of Commodity Derivatives Markets - including the basic framework for surveillance, powers needed to access information for both on-exchange, OTC, and cash market transactions, emphasises the importance of monitoring large positions;
- Disorderly Markets -sets out the powers needed by market authorities to intervene in the markets to address disorderly conditions;
- Enforcement and Information Sharing - addresses the basic framework for a successful enforcement program, including required powers; and
- Enhancing Price Discovery and Transparency - how to improve this to the public and regulators through the publication of open interest according to certain categories of traders, the establishment of formalised systems to allow regulators to impose position limits and the promotion of the reporting of OTC derivatives to trade repositories.
These principles try to respond to contemporary trends in commodity derivatives markets, which include: the scale, speed and cross-border nature of trading on markets; novel forms of market abuse; investors focus on commodities as an asset class and the impact of new investor classes and futures trading on physical commodity prices; the rapidly evolving regulation of OTC derivatives markets; and regulation of market participants.