Introduction to Compliance & Regulation

What is extraterritorial jurisdiction?

When laws apply based on market impact, not where the trader is.

Can multiple regulators investigate a trader at once?

Yes — national, foreign, and exchange-level regulators can all take action.

Why did regulatory reform become a priority after the 2008 financial crisis?

Because markets were seen as risky, there was abuse, pushing governments to introduce stricter controls.

What are the three global goals of post-2008 financial regulations?

• Increase market transparency

• Reduce fraud and manipulation

• Ensure companies play fair

What is the primary regulatory body for commodity markets in the U.S.?

The Commodity Futures Trading Commission (CFTC)

What is the mission of the CFTC?

To protect market participants and the public from:

• Fraud

• Manipulation

in derivatives markets, and to promote

• Transparent

• Competitive

• Stable markets

What is the key law the CFTC uses to enforce regulation?

• The Dodd-Frank

• Consumer Protection Act

What are the main implications of the Dodd-Frank Act for commodity traders?

• Position limits to prevent market control

• Trade reporting for oversight

• Regulation of swaps

• Transparency in OTC markets

Which EU body oversees financial markets across the union?

ESMA – the European Securities and Markets Authority

What is ESMA’s mission?

Protect investor , Promote stable, fair, and transparent financial markets through consistent regulation and supervision.

What are the three main EU regulations governing commodity and energy markets?

MiFID II – Market structure and reporting rules
MAR – Rules against market abuse and insider trading
REMIT – Ensures transparency and fairness in energy markets

What does MiFID II require from traders?

• Compliance with position limits

• Trade reporting

• Regulation of algorithmic trading

Some firms may get exemptions if trading is a small part of their business

What does MAR require?

• Prohibits insider trading

• Requires firms to file Suspicious Transaction or Order Reports (STORs)

What does REMIT regulate?

It requires firms trading wholesale electricity or gas to report their trades and avoid manipulation.

What is Switzerland’s main financial regulator?

FINMA – Swiss Financial Market Supervisory Authority

What is FINMA’s mission?

To ensure market stability, transparency, Proper functioning of Swiss financial markets.

What is the main law regulating commodity trading in Switzerland?

FMIA – Financial Market Infrastructure Act (also known as FinfraG or LIMF)

What types of activities does FMIA regulate?

• Derivatives trading – reporting, clearing, and risk controls

• Financial market infrastructures – like exchanges, CCPs, CSDs, and trade repositories

• Market conduct – bans insider trading and market manipulation

• Shareholding disclosures – mandatory reporting when crossing ownership thresholds

• Transparency & risk reduction – especially in OTC derivatives

When might a commodity trader be exempt from FMIA requirements?

If the derivative results in physical delivery, which is seen as less risky.

Who sets the global ethical standard for business and human rights?

The United Nations, through the UN Guiding Principles on Business and Human Rights (UNGPs)

What is the mission of the UNGPs?

To ensure businesses respect human rights and that governments protect individuals from harm caused by corporate activity.

Are the UNGPs legal requirements?

No, they are not laws but are widely recognized as global standards for ethical business conduct.

How has Switzerland implemented the UNGPs in commodity trading?

Through a National Action Plan and by developing tools to help companies perform due diligence, report responsibly, and avoid harm in their operations.

What does ethical compliance mean for a commodity trader?

If a trader sources commodities linked to human rights violations or environmental harm, they are still responsible—even if the misconduct happens abroad.

What are the main human rights and environmental risks linked to commodity trading?

Commodity trading can harm people and the environment at every stage. Risks include:

Buying : unfair labor, child or forced labor, and lack of community

Transportation: unsafe transport and pollution when moving goods

Storing : contamination and displacement

Transforming : poor conditions and toxic emissions

Sellling : health risks from harmful products when selling.

What are the main areas of criticism related to commodity trading in Switzerland?

• Lack of transparency – Limited public reporting and oversight.

• Human rights and environmental risks – Weak supply chain due diligence.

• Regulatory gaps – Traders face lighter rules than banks.

• Tax avoidance – Low taxation on large profits.

• Corruption exposure – Deals in high-risk countries raise bribery concerns.

What is the general structure of regulatory enforcement in the European Union?

It’s multi-layered, involving

• EU-level regulators (like ESMA and ACER)

• National enforcers (NCAs/NRAs)

• Exchanges and trading platforms

• STOR reporting mechanisms

• Cooperation with foreign regulators.

What is ACER and what does it regulate?

ACER is the Agency for the Cooperation of Energy Regulators. It focuses on wholesale energy markets (electricity and gas), enforces REMIT, and supports cross-border investigations.

What are NCAs or NRAs?

NCAs (National Competent Authorities) or NRAs (National Regulatory Authorities) are national-level bodies responsible for applying and enforcing EU regulations within their own country.

Give examples of NCAs in different countries.

• Examples include

• BaFin (Germany)

• AMF (France – financial)

• CRE (France – energy)

• CONSOB (Italy)

• Ofgem (UK, pre-Brexit).

What are the main responsibilities of NCAs/NRAs?

They supervise local market participants, investigate misconduct, apply penalties, and coordinate with ESMA and ACER.

What is the enforcement role of markets exchanges?

They monitor trading activity, detect suspicious transactions, collect and report data, and enforce internal rules of conduct.

What does STOR stand for?

STOR stands for Suspicious Transaction or Order Report.

When must STORs be filed and by whom?

Firms and platforms must file them when they suspect insider trading or market manipulation.

Who receives these reports?

The relevant National Competent Authority (NCA) of the country.

Why do EU regulators collaborate with foreign regulators?

To align enforcement on cross-border trading, share intelligence, and combat global market misconduct.

What role does ACER play in REMIT?

ACER collects trade data, detects suspicious patterns, and provides regulatory support to NRAs.

What are the three main categories of enforcers in the U.S.?

• Federal/National Regulators

• Exchanges

• Local/State Regulators.

What is the role of the DOJ?

The Department of Justice prosecutes civil and criminal cases related to financial market abuse and fraud.

What is FERC and what does it do?

The Federal Energy Regulatory Commission regulates interstate energy markets (electricity, gas, oil) and enforces fair practices.

What is the SEC’s relevance here?

The Securities and Exchange Commission oversees securities markets, with some overlap in financial instruments linked to commodities.

Who are local enforcers in the U.S.?

State Attorney Generals and local financial or energy commissions.

What is the role of State Attorney?

Enforce state-specific laws, handle local cases of fraud or abuse, and work with federal agencies when needed.

Who ensures cross-border enforcement in the EU?

ESMA, ACER, and coordinated efforts with foreign regulators like the CFTC.