The cumulative impact on the commodity markets of regulation is a
serious concern, particularly to smaller market participants faced with
restricted access to capital markets and difficulties absorbing the
resultant higher costs, a senior executive at BP
International said Wednesday.
Marc Cornelius, policy and regulation IST, compliance, said
new regulation, including the shift to centrally-cleared markets, is
posing challenges from a collateral and margining perspective.
"BP
can absorb some costs, but our end users can't and won't, so where do
they go and what do they do?" he said. "We'll more than likely see
smaller players who don't have the same access to capital markets
turning to banks for financing, creating increased systemic risks in the
financial system," he added.
According to Cornelius, regulatory changes often occur on the
misconceived basis that commodities markets are broken and therefore
need to be fixed.
"BP
is not a bank; fundamentally, we deliver energy to the world," he said.
"Commodities wasn't the catalyst for the problems linked to the
financial crisis, but regulators have looked through the lens at the
sector to address what they see as excessive price volatility," he told
the IDX International Derivatives Expo in London.
"One of the consequences of this is that there's a significant
raft of regulation that will touch on our business in one form or
another, whether our trading activities or as a pure end user," he
added.
While Cornelius welcomed the introduction of position limits
to ensure the orderliness of markets, he noted that BP
has a physical business to manage too. "If we see the introduction of
hard limits and overly complex exemptions, BP
would bump up against those limits quite regularly, for genuine
reasons. I'm extremely concerned about the cumulative impact of
regulation."