MFA submitted a comment letter to the FCA in response to the Consultation Paper on reforming the commodity derivatives regulatory framework. MFA supports the FCA’s efforts to mitigate risk by granting trading venues greater authority to impose stricter requirements on specific critical contract sets. Moreover, MFA advocates for ongoing collaboration between the FCA and international regulatory bodies, particularly the United States, to ensure alignment of the UK market framework with global standards, facilitating cross-border trading. MFA also endorses aligning proposed UK requirements with corresponding regulations in the US where appropriate.
The letter emphasizes several key points. Firstly, MFA supports the application of position limits solely to commodity derivatives contracts deemed “critical.” Additionally, MFA advocates for exemptions from position limits for non-financial firms engaged in hedging activities, recognizing the importance of facilitating hedging operations. MFA further recommends transferring the responsibility of setting position limits from the FCA to trading venues, contending that venues are better equipped to identify contract types warranting such limits. However, MFA opposes enhanced position management controls and reporting requirements, citing concerns that mandating firms to proactively report such information to trading venues could impose burdens and potentially reduce liquidity.
Through its detailed comments and recommendations, MFA aims to contribute to the development of a regulatory framework that balances risk mitigation with the facilitation of efficient market operations.
