By Dmitry Zhdannikov and Silvia Antonioli
LAUSANNE, Switzerland, April 21 (Reuters) - BP calledon Tuesday on European regulators to refrain from imposingstricter capital requirement and greater disclosure measures onoil trading, saying they could ultimately hit consumers.
The head of BP's trading division, one of the most activeand biggest among oil majors, Paul Reed, told the FT CommoditiesSummit some markets could be exposed to severe stresses ifcompanies and trading houses were forced to disclose too much.
European authorities will implement a set of regulationsknown as the Markets in Financial Instruments Directive (MifidII) in 2017, which contains capital requirement directive (CRDIV) aimed at cutting systemic risks across equity, fixed incomeand commodity markets.
"To do so (impose capital requirements) would bedisproportionate as it would lead to a series of materialadverse impacts on energy markets, energy consumers and the realeconomy without any correspondent improvement on the riskprofile or the integrity of the financial markets," said Reed.
His BP supply and trading division employees hundreds ofpeople and trades millions of barrels of oil and refinedproducts per day.
Earlier this year, trading house Trafigura funded researchwhich said the proven resilience of trading houses has shownthere is no need to put them under capital requirementregulations.
The report said that if Europe decided to slap new capitalrequirements on traders, they would be forced to shrink anddeleverage, ultimately making commodity prices more expensive.
Reed said the entire commodities trading industry would needto tie up dozens of billions of dollars in additional capitalunder new requirements instead of investing - in the case of BP in oil exploration and modernisation of refining assets.
"I would argue that unlike financial institutions the valueof industrial commodity physical assets eliminates almostentirely any systemic risk that might arise from commoditytrading," Reed said.
Other measures that keep worrying traders and couldultimately backfire are the requirements to disclose proprietaryinformation as well as the introduction of position limits invarious commodities markets, said Reed.
"Consider for example a unit falls over here at any Swissrefinery. The owner would be required to announce this eventbefore their risk managers enter the market to make up for theproduct shortfall. Therefore the price of diesel and gasolinewould rise severely in anticipation of that sudden demand.".
He also said that if position limits were introduced somemarkets with a traditionally small number of participants wouldgo through a severe stress.
"I'm not sure the Spanish AOC gas market for example wouldbe able to survive if participation were limited from holdingany more than 25 percent of available contracts," Reed said. (Reporting by Dmitry Zhdannikov)
BP (BP.)
