In the light of the energy crisis, the Ministry of Finance favours decisive action in financial markets
Due to distorted price fluctuations in energy markets, the Ministry of Finance advocates for decisive action and all the enforceable measures in the field of financial markets by means of which regulated trading would be ensured in the event of stressful conditions in the market. On this note, we commend the fact that our ideas are also reflected in the proposals of the European Commission.
This year, we are being faced with enhanced pressures on energy product prices and distorted price fluctuations in the European energy futures markets. Strong growth in energy prices and the compromised security of energy supply thus represent a new challenge for the European Union internal market that must be addressed efficiently. The Ministry of Finance thus believes that regulated trading must be ensured in the current situation in the event of stressful conditions in the market and a more ambitious approach regarding the application of trading restriction systems with derivative financial instruments in the EU futures markets must be adopted.
In this light, the Ministry of Finance commends the strong and coordinated response of the EU and all the proposed measures to mitigate the energy crisis in financial markets which were announced by the European Commission on 18 October 2022.
Relating to the proposals to mitigate the effect of energy prices in financial markets, the Commission is working closely with the European Securities and Markets Authority (ESMA) and the European Banking Authority. The objective of this cooperation is the support and development of correct functioning of the European energy futures markets. In compliance with ESMA advice, the Commission has already adopted two delegated acts to reduce the liquidity stress currently being encountered by certain European energy companies.
Within the proposal for a new regulation on an emergency intervention to address high energy prices, the Commission proposes a temporary measure to mitigate price volatility in derivatives markets for gas and electricity. The new temporary mechanism for limiting intraday price spikes will prevent excessive fluctuation of prices and extreme energy price movements in derivatives markets.
Furthermore, it is anticipated that the Agency for the Cooperation of Energy Regulators (ACER) and ESMA will enhance their cooperation by establishing a new joint working group. In doing so, the agencies will ensure enhanced monitoring and detecting of possible market manipulation or abuse in the European spot markets and energy derivative markets.
The Ministry of Finance firmly supports all enforceable measures, including those in the field of financial markets, which could regulate trading in the event of stressful conditions in the market. In his recent letter to Mairead McGuinness, the EU Commissioner for the Financial Services, Financial Stability and Capital Markets Union, Klemen Boštjančič, the Minister of Finance, particularly highlighted the need to address liquidity stress in the European energy markets and the need for a more decisive approach regarding the application of trading restriction systems with derivative financial instruments in the EU futures markets. The Ministry of Finance thus commends the fact that these ideas are also reflected in the Commission’s proposals and is looking forward to their prompt and efficient implementation. In future discussions of the relevant EU acts, the Ministry of Finance will remain active and will particularly advocate the ambitious approach in the sense of a sufficiently broad selection of instruments and agreements to be included in the measure to control price fluctuations.