UPDATE 1-Vote on EU benchmarks law postponed to next European Parliament
BRUSSELS/LONDON, March 7 (Reuters) - The European Parliament will not vote before May on a draft European Union law aimed at making it harder to rig market benchmarks, the chair of its economic affairs committee told Reuters on Friday.
The draft law was proposed last year after banks were fined for rigging the London Interbank Offered Rate (Libor), a market benchmark used to help price products worth trillions of dollars.
"The left wanted the inclusion of all commodities in the law and the right wanted all commodities out and so the agreement now is that it should be left to the next parliament," committee chair Sharon Bowles said.
A new European Parliament will be elected in May.
"The fact that the vote has been postponed will give legislators more time to consider the serious and unintended damage that the proposal could have on energy markets if it is adopted in its current form," said Adrian Binks, chairman and chief executive of Argus Media.
"In terms of the EU legislation, the current Econ committee draft recognises that physical markets are not the same as financial markets," Binks said. "This is an important message that the Commission needs to hear."
Regulators are already studying benchmarks in gold and oil.
The draft law sets out how benchmarks for the financial markets as well as commodities should be compiled, audited, governed and supervised, drawing heavily on reforms Britain has already introduced for Libor.
Debate on the law has been complicated by the pending European Parliament elections in May as well as a change in the European Commission set for October.
"The inclusion of all commodities does not carry majority support in the house and so agreement should be left to the next parliament," said Bowles, who is responsible for steering the draft law through parliament.
The main centre right EPP party wanted a delay so that lessons from current concerns regarding the foreign exchange market could also be applied to the draft law.
Once a new parliament is elected in May, the lawmaking process is not expected to resume until after a new set of Commissioners takes office, which could take several months after the current Commission steps down.
Some politicians blame the delay on lobbying by industry interests.
"It's been buffeted and pushed off course by the fact there is massive lobbying," said Arlene McCarthy, a British centre-left EU lawmaker, although she did not give specific details on the lobbyists.
Commodity traders have argued their business should be exempt from any Brussels oversight.
For decades, they have relied on an all-but unregulated system of contributing information to guide prices for oil and other valuable commodities and say proposed new rules would discourage market participants from submitting their prices.
"Nobody will be willing to report prices any longer and liquidity will dry up - making the price discovery mechanisms (such as the Platts trading window) useless," a senior source at a major oil company said.
However, McCarthy refuted this.
"Every time we say we want more transparency the industry says 'Then we'll get less liquidity', but we never get any evidence to point to how that's going to be the case," she said.
Commodity price assessment agencies Platts, a unit of McGraw-Hill, and smaller rivals Argus and ICIS, part of Reed Elsevier believe Brussels should instead back non-binding industry guidelines. (Reporting by Barbara Lewis in Brussels, and Huw Jones, Simon Falush and Peg Mackey in London; editing by Jason Neely)