EDHEC Criticises French Position on Regulation of the Derivatives Markets

In an open letter to European Commissioner Michel Barnier, EDHEC Risk Institute supports the idea of better regulation of the derivatives markets for commodities requested by France in a recent report sent to the commissioner by the French Ministers of the Economy, Energy and Agriculture, and which serves as a basis for the French position ahead of its future presidency of the G20, but criticises the motivations behind the French request, which it considers cannot be a starting point for a credible European initiative.

According to EDHEC Risk Institute, the objectives of improved transparency and security of transactions carried out on the derivatives markets are praiseworthy and are in line with the consensual conclusions of the Pittsburgh summit, but it would be regrettable if the necessary support of all actors for strengthening the regulation of the international markets comes up against ideological presumptions and preconceptions that could ultimately lead to a genuine misunderstanding on both sides of the Channel or the Atlantic.

The assumption that underlies the French initiative, namely that derivative instruments are currently one of the causes of the high level of volatility in commodity prices, has absolutely not been demonstrated and is contradicted both by EDHEC Risk Institute’s own work and also by two recent empirical studies conducted by the two main international economic organisations with whose work the European Union is associated, namely the international Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).

This absence of a genuine and serious cause behind the request to regulate the derivatives market for commodities does not make the French position credible and in EDHEC’s opinion cannot seriously lead to support from all the European countries and more globally, the countries concerned by the subject.

In these conditions, EDHEC Risk Institute thinks that the European Commission (EC) should not commit to regulatory initiatives that are as important for the structure of the financial markets without the facts and arguments being clearly and objectively established.


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