The European Securities and Markets Authority (ESMA), in final guidelines published on 30 September 2016, has backed away from proposals it put forward earlier this year which would have meant that a freight derivatives trader with private information relating to a commodity to be shipped could have been in breach of new regulations on insider trading. The guidelines which define inside information in relation to commodity derivatives are being introduced under the recently implemented Market Abuse Regulation.

The Baltic Exchange had argued strongly against the proposal on a number of counts, in particular on the basis that this is not ‘information which is required or expected to be disclosed in accordance with market rules, customs or practice’.  

Commenting on the changes, Baltic Exchange Chief Executive Jeremy Penn said:

“The proposed changes would have led to onerous and impractical disclosure requirements for FFA traders. We were able to argue successfully that there is no reliable correlation between information and prices and it is therefore impossible to predict which piece of information would be likely to have a significant effect on the prices of freight derivatives if such information were made public.”

ESMA has now accepted this argument as explained in paragraphs 41-44 of the final guidelines. These can be downloaded from the ESMA website.

The Baltic’s written response to ESMA’s original proposals can be viewed here.