Brussels, 14/06/2011 (Agence Europe) - On Tuesday, just before the forthcoming G20 agriculture ministers' meeting on regulation (22-23 June in Paris), the president of France, Nicolas Sarkozy, called for closer regulation of the energy and raw materials markets.
As a star guest at the conference on raw materials organised on 14 June in Brussels by the European Commission, Nicolas Sarkozy made another appeal for closer regulation of the raw materials markets in an effort to increase transparency and reduce volatility. He stated that “the hike in raw material prices is one of the main threats to growth today… the G20 was set up to resolve imbalances provoked by the crisis and restore conditions of sustainable growth. In order to reach this objective, we have developed a principle: regulation. We have applied this principle to the banking system and financial products. We now have to extend it to raw materials. Regulation does not mean control, protectionism or governments setting out prices. Regulation requires transparency and supervision to ensure that the markets function effectively because as the financial crisis has demonstrated to us, without rules there are no markets.”
In addition to the challenge of developing sufficient production to meet global requirements, Sarkozy also highlighted essential challenges involving raw materials, market transparency, market regulation and derivatives. Although the EU has paved the way to greater transparency with the setting up in 2002 of JODI (Joint Organisation Data Initiative) on oil, Sarkozy insisted that “G20 members have to be committed to improving the regularity and comprehensive nature of information on this question”. He called for all G20 countries to publish their respective national reports “in the next few months” on the progress accomplished in the area of oil market transparency. The French president would like this transparency to be extended to other fossil fuels such as coal and gas, as well as the agricultural markets, which are “increasingly affected by price volatility”. Sarkozy supports the launch, together with other G20 countries, of a new information model for the agricultural markets based on the model that exists for oil. This tool could be based at the FAO, which would gather in all relevant data, including data on private stocks. The French head of state is convinced that this system “will help strengthen international co-operation in the field of food safety and help improve crisis planning and management”.
On the question of regulation for derivatives, Sarkozy would like to extend the commitment made by the G20 on regulating oil to the agricultural derivatives markets. This idea would see G20 countries adopting common regulatory principles for regulating and supervising all derivatives markets for raw materials. According to Sarkozy, transparency is the most important principle and should be based on the implementation of a register centralising transactions in the derivatives markets, including raw materials, which would require supervisors to have reciprocal access to these registers. The second principle involves extending regulation to all products traded on the raw materials and derivatives markets, which would include operators and all the different instruments used. The third principle includes the standardisation of derivatives and the way in which they are quoted in a regulated market or otherwise. This would include reducing the leverage effect by imposing a minimum cash deposit for each transaction carried out. The fourth principle, supervision, is based on improved coordination between the action taken by the regulatory authorities on the physical markets and the regulators of the financial markets, in an effort to detect attempts to manipulate prices. This would also be based on the powers conferred upon supervisors when penalising market irregularities. In this connection, Sarkozy thinks that position limitations should be considered, similarly to the initiative introduced in the US in 1936. (E.H./transl.fl)