EU Push for Market Law Deal Stumbles Amid Commodity Rule Split

The European Union’s bid to clinch a deal next week on overhauling its financial market law may fail amid clashes over rules for commodity derivatives and other issues, a lawmaker said.

Members of the Parliament and officials from Lithuania, which holds the rotating presidency of the EU, didn’t resolve any of the main outstanding points in the draft law during talks today in Strasbourg, France, Markus Ferber, the Parliament’s chief negotiator on the law, said in a phone interview. Sticking points included how to handle overseas-based firms and access to clearinghouses’ trade-feed data, he said.

“We have not even been able to solve minor problems,” Ferber said, adding that he’s “a little pessimistic” that a deal can be reached in the next round of negotiations, which are scheduled for Dec. 18.

The updated legislation is the centerpiece of Europe’s efforts to implement agreements reached by the Group of 20 nations in the wake of the financial crisis that toppled Lehman Brothers Holdings Inc. Michel Barnier, the EU’s financial services chief, has said the updated legislation is needed to rein in “speculative trading activities” and to “improve the structure of the market.”

The EU is racing to secure a deal by the end of the year on the update of legislation from 2004 known as the Markets in Financial Instruments, or Mifid. The plans require approval by the parliament and by national governments before they can take effect.

Position Limits

On commodity derivatives, nations and the parliament are at loggerheads over how far the European Securities and Markets Authority, an EU agency in Paris, should be entrusted with setting position limits for traders, Ferber said.

While both sides agree on the principle of having such limits, governments are fighting against handing responsibility for setting them to ESMA, preferring the task to be handled at national level.

“Our main concern is that you could end up with different position limits in different member states for the same product,” said Ferber, a German member of the Parliament’s center-right group. A predominantly national approach could “create new loopholes.”

Lithuania “fully understands the significance of the dossier and will do its best to have the agreement on Dec. 18,” Vykintas Pugaciauskas, a spokesman for the EU-presidency holder, said in an e-mail. “There are good signs it is possible. But likewise, there are some signs that it may take a longer time to find a compromise among various positions.”

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