Verena Ross, Chair of the European Securities and Markets Authority (ESMA), was heard on Monday 24 October by the European Parliament Committee on Economic and Monetary Affairs (ECON). Asked by ECON Chair Irene Tignali (S&D, Italian) about the energy crisis, she reported on the current discussions within ESMA on mechanisms to stem the volatility of energy derivatives prices in financial markets.
Ms Ross said ESMA was looking at energy markets, in particular electricity. In addition to market surveillance, ESMA is looking at whether there is potential market abuse in these markets, and whether this has been properly monitored.
It has also considered whether their way of investigating is appropriate and is more broadly examining some of the structural aspects of the market.
“So it is both the relationship and the coordination with the national authorities concerned, but also with the context between the financial and the energy markets”, she explained.
“We saw that not many trading hold mechanisms are being triggered”, she added, recalling that circuit breaker mechanisms are prescribed in the Markets in Financial Instruments Directive (MiFID).
These mechanisms put in place by trading platforms are intended to temporarily suspend or limit trading in the event of a significant price fluctuation in a financial instrument.
In its response letter to the Commission (see EUROPE 13030/17), ESMA had argued that it would be appropriate to consider this issue at the European level.
“When you calibrate that you need to be very careful because as financial regulators, we see a risk”, Ms Ross said. “If you just stop the pricing mechanism happening in the derivatives markets, you might actually drive markets off exchanges, you might drive them into less visible parts of the market and therefore it’s very important that you have a mechanism that still makes sure that you have orderly price formation on the market”, she stressed.
The Chair of ESMA reported that some exchanges are reviewing market mechanisms, while national competent authorities are examining these revisions.
On Wednesday 19 October, the European Commission adopted measures to alleviate liquidity problems in the energy sector (see EUROPE 13045/10).
On Friday, the European Council called for urgent decisions to increase transparency in the functioning of energy markets, alleviate liquidity pressures and eliminate factors that amplify gas price volatility, while ensuring that financial stability is preserved (see EUROPE 13047/1).
“We are ready to provide technical support and advice if we can”, she said. (Original version in French by Anne Damiani)