Shares of IntercontinentalExchange Group Inc. (ICE), the owner of Europe’s second-largest futures market, declined the most in two years after the European Union agreed to increase competition among derivatives exchanges.
The new rules include provisions for “non-discriminatory access to trading venues and central counterparties,” which could make it easier for investors to initiate transactions at one exchange and exit them at another. Previously, investors had to buy and sell futures contracts at the same exchange, a process known as the vertical silo model.
“We understand investors are concerned about the vertical silo, but a lot more needs to be clarified,” said Rich Repetto, an analyst at Sandler O’Neill & Partners LP. Having up to five years to implement the change may help Atlanta-based ICE react to the rules, he said during an interview.
ICE slumped 4.1 percent, the most since November 2011, to $210.88 today. The shares also posted the largest decline in the Bloomberg World Exchanges Index of 26 market owners.
The EU’s bid to revamp its market legislation, known as Mifid, is a centerpiece of the 28-nation bloc’s work to implement agreements reached by the Group of 20 nations in the wake of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc. Members of the European Parliament and officials from Greece, which holds the rotating presidency of the EU, resolved outstanding differences on the law over more than seven hours of negotiations that concluded late yesterday.
The rules also curb speculation in commodity derivatives. ICE owns Europe’s largest energy market, ICE Futures Europe, which offers trading in crude oil, natural gas, coal and electricity futures. The rules for commodities limit the size of trades, an attempt to “curb speculation and help decrease price volatility and inflation,” Arlene McCarthy, a U.K. lawmaker in the parliament’s Socialist group, said in an e-mailed statement.
Brookly McLaughlin, an ICE spokeswoman, declined to comment.
Some derivatives in the electricity and gas markets will be granted exemptions from Mifid rules on the grounds that they are covered by other EU legislation. The accord also grants a temporary waiver for some coal and oil derivatives from requirements that trades go through clearinghouses.
The European Securities and Markets Authority, an EU agency in Paris, will now give guidance to national regulators on how to calculate the position limits for commodities.
CME Group Inc. (CME), owner of the world’s largest derivatives market and one of ICE’s biggest competitors, does less business in Europe, and its shares gained as much as 1.9 percent today. Frankfurt-based Deutsche Boerse AG (DB1) lost 1.2 percent.
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