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Rigid EU Rules Makes ICE Move 245 Oil Futures Contracts To U.S.

Tsvetana Paraskova

One of the world’s largest commodity exchanges, the Intercontinental Exchange (ICE), will move trading in 245 futures and options contracts on North American oil and natural gas liquids to the U.S. from Europe to meet growing customer demand for execution of contracts in the U.S. after stricter rules on European markets entered into force on January 3.

ICE has said in a circular to customers that effective February 19, it would be moving 245 oil and natural gas liquids contracts from ICE Futures Europe to ICE Futures U.S (IFUS).

ICE clarified that the biggest and most liquid contracts—WTI, Brent, heating oil, and gasoil—will continue to be traded in Europe. All futures and options, including those that are moving to the U.S., will be cleared in Europe.

The transitioning contracts will continue to be traded using the same ICE platform technology, and “open positions in the Transitioning Contracts will be treated as positions in the IFUS contracts from and after the Transition Date,” ICE said.

Although ICE did not specifically point at the new EU regulation on markets as the reason for moving the contracts, instead citing customer demand for execution of certain North American energy contracts in the U.S., the move is seen as a way to avoid the burdensome regulation that comes with the Markets in Financial Instruments Directive (MiFID II).

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For oil futures trading, MiFID II imposes tighter limits on positions to prevent any trader from having a very large position and therefore an outsized influence over the futures market.

In November 2017, two months before the new rules came into force, major oil traders and oil majors managed to persuade EU regulators to exempt them from the position limits, having argued that they trade oil futures and options to hedge large physical positions rather than for speculative position building.

By Tsvetana Paraskova for Oilprice.com

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