EU financial watchdog proposes emergency brake for energy markets

(EurActiv, 23 Sep 2022) A temporary brake on gas and electricity derivatives when prices spike could improve how energy markets operate, the European Union’s securities watchdog proposed on Thursday (22 September), along with more fundamental changes over time.

The European Securities and Markets Authority (ESMA) said the number of trading halts in energy derivatives has been very low in recent weeks despite rules on circuit breakers already in place and prices racing higher following Russia’s invasion of Ukraine in February.

“It would, therefore, appear useful to consider implementing, on a temporary basis and for energy derivative markets only, a new type of trading halt mechanism,” ESMA said in a statement.

The parameters of such a mechanism should be set at the EU level to apply to all platforms that trade energy derivatives, it said – step that would override exchanges.

“We would envisage these mechanisms to trigger halts for a limited period of time only and in exceptional circumstances, for instance, in case of extreme volatility spikes that may lead to disorderly trading conditions,” ESMA said.

Such a mechanism would need to be implemented as part of emergency measures tackling the current energy crisis, it added.

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EurActiv, 23 Sep 2022: EU financial watchdog proposes emergency brake for energy markets