The two sets of blueprints were unveiled separately by
the EU's financial services chief, Michel Barnier, and its energy commissioner,
Guenther Oettinger.
Barnier wants traders to disclose buying and selling of
stocks, bonds and derivatives, a cap on mega-trades and power for regulators to
curb the speculators suspected of driving food and energy prices to record
highs in 2008.
"If someone is doing something which affects the
market then he or she must be held to account," Michel Barnier, the EU
commissioner in charge of the reform, told journalists.
"Hyper-speculation is scandalous." Barnier, a
former French agriculture minister, proposed the new rules as France continues
to push for tighter regulation of the sector, having taken over the presidency
of the Group of 20 (G20) top global economies.
France, the EU's biggest grain producer, wants to stem
speculation on futures markets designed to help farmers guard against the risks
of a poor crop by guaranteeing a payout at a fixed price.
In a parallel move to tackle energy speculators,
Oettinger said rules in 2012 would stop power giants withholding energy
capacity to force up prices in a market estimated to be worth about 500 billion
euros ($660 billion) annually.
That should also prevent spikes in domestic energy
prices.
Just as Barnier envisages giving more power to
regulators, Oettinger wants a team of monitors in Slovenia to get extensive
powers to collect market data and act on manipulative behavior.
"We believe there have been one or more cases where
power prices were influenced by unnecessary profits from power trading,"
said the German commissioner.
Barnier's proposals, which could become law in 2012, are
part of a sweeping reform of EU rules known as MiFID (the Markets in Financial
Instruments Directive), which govern financial instruments.
Many blame financial tools such as derivatives, unchecked
by regulators, for plunging the global economy into chaos.
Washington has already responded to this in a sweeping
reform of finance which tightens controls and attempts to limit the dominance
of market players.
Barnier will also tackle high-frequency trading, the
millisecond buying and selling by computers of stocks and bonds that is
suspected of triggering the flash crash in July, when US stock markets plunged,
only to recover within minutes.
"This reform has been overdue because the markets
broke down in the same way as banks did," said Sony Kapoor, a financial
expert with London think tank Re-define.
"No one knows what is going on in the markets in
Europe.
They are playing catch-up with the United States.
Regulators there already know more about how the markets work." Also on
Wednesday, a top US futures regulator official said he supported tougher
oversight of the high-frequency trading market that is responsible for a third
of the volume on regulated US futures exchanges
As part of Wednesday's proposals, the commission launched
a push to raise penalties across the region for financial crimes such as
insider trading, and to force national regulators to name and shame offenders.
Barnier even signaled there should be more criminal
sanctions for serious wrongdoing. "People need to know if they are not
complying with the rules, they will be hit hard," he said.
The Commission's proposals will need the backing of the
European Parliament as well as powerful EU member states such as Germany and
France.
European commodity markets are under pressure to tighten
regulation as the United States pushes forward with plans to tame speculative
activity.
"I don't think there is any reason why we Europeans
should be any less rigorous than the Americans," Barnier said.
But many in industry think the move is misguided.
"Complaints that speculation leads to market manipulation
misunderstands what drives the commodity markets, which is fundamental demand
and supply," said Andrew Moorfield, head of the oil and gas division of
banking group Lloyds.
The proposals bring the EU into line with US practices
such as the weekly disclosure of speculative positions in futures markets.
Barnier signaled he favored position limits or caps on
individual trades, something which is already in place in the US Britain has
said exchanges should develop their own position management systems.
