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MiFID directive to curb food speculation

The European Parliament and the Greek EU Presidency sealed a deal on Wednesday 15 January 2014 on the reform of the Markets in Financial Instruments Directive (MiFID), which sets new regulation for financial markets.

The deal includes new rules to limit speculation on financial products linked to what we eat. These so-called 'commodity derivatives' are derived from commodities, including agricultural commodities such as wheat, corn, soybean or sugar.

Deregulated and secretive agricultural commodity derivatives markets have attracted huge sums of speculative money, and there is growing evidence that they deliver distorted and unpredictable food prices. There is extensive debate about the harmful effects of excessive speculation. While there is no unanimous consensus on the effects, a long list of studies and analyst reports have found various indications for price distorting and inflating impacts of commodity speculation. Position limits cap the number of contracts in a particular commodity that can be held by a trader or group of traders, preventing concentration by the individual or group concerned. This ensures speculators do not exert an excessive influence on prices.

In a reaction to the deal, Marc Olivier Herman, Oxfam's EU policy advisor, said that the "decision marks a good start in tackling 'gambling' on food prices which are a matter of life and death to millions in the developing world. The agreement introduces limits on speculating in spite of attempts by the UK and other governments to block any meaningful reform."