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Chocolate and oil companies join to oppose European regulations

Chocolate-maker Mars has co-signed a letter opposing European financial market regulations, alongside the European Cocoa Association, commodity trader Vitol, and oil companies including BP and Shell, according to the Financial Times09 Jun 2015

The manufacturers wrote to the European Commission as it conducts a final review of the Markets in Financial Instruments Directive (MiFID II). The new rules, which aim to guard against systemic risks in equity, fixed income and commodity markets, would increase the cost of trading and hedging, the signatories said, according to the Financial Times.

The new restrictions on buyers and sellers of commodity products would hit manufacturers like Mars, which buys ingredients on commodities markets and uses derivatives to 'hedge' the cost of the materials. By treating companies similarly to banks, MiFID II would have a "significant unintended risk of damaging the markets", the letter said, according to the report.

Companies do not pose the same risk to financial markets as banks, and should not be forced to raise the capital that they hold in the same way. The effect would be a rise in the price of consumer goods ranging from food to energy, the companies said, according to the Financial Times.

The consultation period on MiFID II finished on 2 March.

Once in force MiFID II will revise and update the existing Markets in Financial Instruments Directive, which came into force on 1 November 2007 with the aim of creating a harmonised regulatory regime for investment services across the European Economic Area (EEA).

The revised MiFID package was adopted by the Commission in October 2011, partly in response to the financial crisis.

The new framework is designed to take into account developments in the trading environment since the original directive came into force, but also covers a broad range of investments and widens the scope of investment services needing authorisation from national regulators.

Changes include the introduction of a new 'trading obligation' to ensure that derivative trades take place on a regulated platform, in line with requirements agreed by the G20; new trading controls and liquidity requirements for algorithmic and high-frequency trading; and investor protection measures including restrictions on certain types of fees and remuneration that could interfere with adviser independence.

The legislation would also introduce trading caps on alternative trading markets, known as 'dark pools'; and new supervisory tools and reporting requirements for commodity derivatives.

The new regime is due to be phased in from 3 January 2017, although transition periods will apply to some of the rules.