BRUSSELS/LONDON, March 7 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
"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
"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)