Debate: Markets in financial instruments: amending information requirements, product governance requirements and position limits to help the recovery from the COVID- pandemic
Date: MONDAY, 23 NOVEMBER 2020
Speaker: Mairead McGuinness
Language: EN

You’ve dealt with some of the issues, but I want to just say that this debate is important because we need clarity, and therefore I hope I can provide that to you. I want to thank Mr Ferber for his work and for this report. It is a very important part of our Capital Markets Recovery Package, and this was proposed in July. And we want it to help the recovery from this COVID-19 crisis and we want it agreed as soon as possible, because time is of the essence in terms of getting capital flowing to where it’s needed. There are some concerns, and I’m sure I’ll hear them spelled out in detail this evening and I will listen very carefully to them. But first, let me address some issues, which may help our understanding. The first point is that our recovery from this crisis has to be green: I’ve made that statement in every comment I’ve made publicly since becoming Commissioner. The green energy transition needs to be accompanied by greater liquidity and transparency in the markets for energy derivatives. Producers of green energy, electricity from wind or solar, need to negotiate forward contracts. These contracts secure a minimum price for energy produced from renewable sources, and these forward supply contracts are derivative contracts. They secure a certain price for green energy. These forward contracts serve the real economy by providing some certainty to investors in the growing renewable energy sector. This is not about price speculation; it’s about certainty for those who are investing. Second, to be effective, forward supply contracts need to be liquid and available on a new generation of energy exchanges. If we maintain the current low position limit of 25% of market participants, these energy exchanges simply will not take off. And this is particularly important for energy contracts in smaller Member States, as contracts for forward delivery of green energy are still in their infancy. At most, there are often two or three market participants offering such hedging tools, and this means that all of these market players would be in breach of the 25% position limit even before the market takes off, and I’m sure you agree that is not what we want to see. My third point is that there is a clear link to the Covid pandemic. Energy prices have been volatile due to the more erratic demand for energy. Production capacity has ebbed and flowed in line with Covid restrictions. It is crucial that we protect the income for renewable energy producers when demand for energy is volatile. Fourthly, I want to be very clear that the Commission is not using the Covid crisis as a cover to introduce opportunities for food or energy price speculation. The proposed amendments do not apply to agriculture derivatives or derivatives for food for human consumption. The proposed amendments also do not apply to mature energy derivative markets. These markets will remain subject to the rules agreed with Parliament in 2016. Securing a decent price for the delivery of green energy is not price speculation. So in conclusion, inaction on energy derivative reform means that there are no transparent energy exchanges offering derivative contracts for electricity produced in smaller Member States. In our preparatory work we have presented evidence to this effect. Some will argue that there is no rush in reforming energy markets and that volatility is not going to last. I would just say that the COVID-19 crisis hit us harder and over a longer time period than any of us expected, and indeed, when my staff started working on this, this was not the case. So we are living with a more prolonged situation. Therefore, we cannot afford to postpone this important reform of energy markets for another year. The proposed measures are more important than ever. They should be adopted by the end of this year to make it easier for capital markets to support European businesses to recover from the crisis. Thank you, and I look forward to what I hope will be a very stimulating debate and where there is better understanding of the issues that may be in play at the moment.