Grain trade risk in EU moves

Farmers’ ability to buy and sell on forward and futures markets could be severely limited by a proposed EU financial market regulation known as the Markets in Financial Instruments Directive (MiFID).

This covers a vast range of financial products and services, but includes futures and options trading.

See also: More market prices and trends

If the rule tightening (MiFID II) goes ahead as proposed in 2017, any grain sale further forward than a couple of weeks would be caught by the need for farmers to register with the financial regulation authorities, warned the NFU’s chief arable adviser Guy Gagen.

The NFU is lobbying for exemptions for most farmers – those who use futures and options directly are already required to register.

The NFU wants to see Defra and the Department for Business, Innovation and Skills get involved in this issue.

Mr Gagen urged farmers to lobby their MPs about the proposed changes and make them aware of the likely implications for farmers.

Limiting access to forward pricing was a major unintended consequence of regulation to reduce risk from banks and speculators and drive private trade (outside a regulated exchange such as the London International Financial Futures and Options Exchange) out of the market or on to regulated exchanges, said the NFU.

It feared the new rules would also reduce the use of futures exchanges, making them less useful and ultimately less viable, just when they were increasingly needed by farmers.

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