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The financial market for commodity derivatives will likely be subject to greater supervision by the Czech National Bank

by AI | 06.Aug 2024 | Europe in brief AI

The bill translates into Czech legislation the regulations and directives adopted by the European Union in February this year.

Prague, view across the Vltava River to Prague Castle. Photo: ČTK Connect/Olga Patáková

Prague – The financial market for commodity derivatives will likely be subject to greater control by the Czech National Bank (CNB) and, in the event of extraordinary situations with sharp price movements, trading will have to be halted. This is assumed by the draft law on capital market business, which the Ministry of Finance has prepared in response to new European Union regulations. The amendment also reduces the requirements for disclosing certain information in relation to bonds.

The tightening of rules for commodity derivatives, which the law includes derivatives derived from emission allowances, is a reaction to the energy crisis of 2022. At that time, according to the explanatory report to the law, it turned out that the current rules were not being used effectively. Therefore, the amendment imposes an obligation on the organizers of the relevant financial markets to halt trading in the event of an extraordinary situation where prices are changing significantly. In case of inactivity of these organizations, the CNB should have the right to halt trading.

Operators of trading systems with commodity derivatives will also have to regularly inform the CNB about the compliance of all traders’ positions in the system. The information should enable the CNB to have sufficient oversight of the market and give it the possibility to intervene in a timely manner if it is necessary to suspend trading.

The draft law transposes into Czech law the regulation and directive that the European Union adopted this February. The norm should be effective from September 29, 2025, which is also the effective date of the European regulations. (August 5)