“Big Compliance” Hits Energy and Commodities

Aviv Handler

Any participant in the European energy and commodity trading markets will be aware of the increased regulatory burden falling upon them, starting with the financial crisis of 2008 and going forward. Since then, regulations that are “financial in style” have been applied to the sector, in addition to “pure physical” energy and commodity regulation. The soup of regulatory acronyms only seems to increase over time, with one new rule set following another. Many, but not all, of the rules were written for the financial markets, but are then applied to energy and commodities with what seems to be great enthusiasm on the part of regulators.

Many in the market argue about the unfairness of it all, how the sector is “different” to banking, and that the encroachment of all these rules reduces the size of the market, or leads to an increase in prices. While some of these claims are backed by carefully thought-out argument, this has not stopped the onslaught, although there has been partial success in relaxing certain rules. In effect, the sector is having to embrace “big compliance” in much the same way as the financial sector has.

The rule sets are numerous, and the number of