Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 Draft Financial Services and Markets Act 2000 (Commodity Derivatives and Emission Allowances) Order 2023

Barry Gardiner Excerpts

Tuesday 2nd May 2023 General Committees

[Barry Gardiner (Brent North) (Lab)]

I pay tribute to you in the Chair, Mr Gray, and look forward to contributing to this debate, but only to say this: King Canute would be horrified to find out that he was a Dutchman. King Canute was not a Dutchman and did not stick his finger in the dam. King Canute was the chap who tried to stop the tides from coming in and failed to do so. I just wanted to correct the right hon. Member for North West Hampshire on his metaphor.

--- Later in debate ---

[Kit Malthouse]

I am grateful for your indulgence a second time, Mr Gray. Again, in delving into the details of the legislation, I wish to urge a little caution about this regulatory approach. The trading of commodities and, in particular, commodities futures can have a huge impact on the price our constituents pay for ordinary goods in their everyday lives. In history, attempts have been made to manipulate those prices. In the 1950s, two traders attempted to corner the onion futures market in the United States. That resulted in the Onion Futures Act, which is still extant in the US and forbids the trading of onion futures. Similarly, we saw—in the 1980s, I believe—a 10-year project by a trader at Sumitomo bank to corner the copper market, which eventually collapsed and failed. The trading of commodities and commodities futures, particularly at a time when there is more and more algorithmic trading and artificial intelligence being used in trading, means that we should take care in this complicated area of regulation and legislation.

One thing I could not find in the information given to us on this SI was why the current rules were introduced. What problem were they trying to solve? I acknowledge the supposed cost of these calculations, while being a little sceptical about them, given the amount of automation that so many of these traders use. Nevertheless, that rationale has not been offered to us, so I would be grateful if the Minister explained why the original rules were devised as they were and what problem they were deemed to be solving. In the past few months, we have learned that we need to take care because our regulatory organisations are not always watertight on looking at systemic and structural risk in financial markets, commodities or otherwise.

[Barry Gardiner]

I was listening to the right hon. Gentleman’s argument on onion futures trading. How does he reconcile that? Does it not give the lie to his argument about NFTs? It shows precisely that anything can be traded as a derivative in that way and therefore there would be no specific reason—he previously outlined this—to put NFTs into the other regulation. I find that his arguments conflict.

[The Chair]

I call Kit Malthouse, to respond specifically on the SI that we are considering.