The current energy crisis has been driving prices of natural gas to record levels, impacting households and businesses. The European Commission has reacted by tasking the European Securities and Market Authorities to review different areas of the market, including the use of circuit breakers by energy trading venues. In a letter to ESMA and the European Commission, FIA makes recommendations and emphasizes controls should not be used to cap prices.
In its letter, FIA noted it was "generally supportive of exchange circuit breakers when used in the context of managing disorderly markets," but warned that "they should not be used as tools to control or cap prices and if improperly implemented and calibrated these tools can be damaging to the market and the wider financial system."
FIA pointed to its previous whitepaper on about potential responses to the energy crisis that was published in September, and urged ESMA and the Commission to consider various factors in their plans for any changes to market controls, including:
- Exchange, market and product specifics
- Market condition:
- Interconnected markets
- Careful use to avoid interfering with price discovery
- Short intraday pauses pause
- Use alongside other controls
- Additional monitoring
- Effective and efficient communication
- CCP Risk
- Industry Operations