Broker or broker platform (REMIT definitions)
Broker a person or a firm that arranges transactions between a buyer and a seller for a commission when the deal is executed (Frequently Asked Questions (FAQs) on REMIT transaction reporting, 12th Edition, 30 April 2021).
This is not necessarily an Organised Market Places (OMPs).
"Broker" or "broker platform" within the REMIT reporting compliance system means:
- any system or facility, which is not an energy exchange, operated by a market operator, which brings together multiple third-party buying and selling interests in wholesale energy products – in the system and in accordance with non‐discretionary rules – in a way that results in a contract,
- any system or facility, which is not an energy exchange, operated by a market participants or a market operator, in which multiple third-party buying and selling interests in wholesale energy product are able to interact in the system in a way that results in a contract, or
- a market participant which, on an organised, frequent and systematic basis, deals on own account by executing client orders outside an energy exchange.
Difference between clearing brokers and executing brokers as regards the REMIT's application
Clearing brokers are not considered market participants under REMIT as they do not enter into transactions in one or more wholesale energy markets (TRUM Annex III v1.0 of 7 January 2015, p. 1).
For this reason they are not covered by the REMIT respective registration, reporting and disclosure obligations.
In turn, executing brokers according to the regulators' view may act as principal before giving up the transaction for clearing and this seems to be the case for most of the transactions executed at regulated markets.
As a consequence, executing brokers are considered as having entered orders to trade and having entered into transactions, hence they are REMIT market participants and the above requirements apply thereto.
If:
1) a market participant places an order on an electricity and/or gas exchange through a broker (usually an executing broker); and
2) the broker is the counterparty to the transaction made at the exchange,
the executing broker is a REMIT market participant and has reporting obligations for all its trades and orders to trade placed on the exchange, including those that the broker gives up (ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting (General questions, Question 1.1.5, as of 21 November 2015)).
Brokers as Organised Market Places (OMPs)
The term "broker" is included among examples Organised Market Places (OMPs). Hence, ambiguity arises as to the interrelation of the two, whether every broker is an Organised Market Place etc.
Pursuant to ACER's understanding, a broker is a person or a firm that arranges transactions between a buyer and a seller for a commission when the deal is executed.
This is not necessarily an Organised Market Place (OMP). Broker platforms are mentioned as examples for OMPs, but this does not mean all brokers automatically have to be considered as OMPs.
This will only be the case if they fulfil the OMP criteria stipulated in Article 2(4) of Commission Implementing Regulation (EU) No 1348/2014 (ACER's Frequently Asked Questions (FAQs) on REMIT transactions reporting (General questions, Question 1.1.3, as of 21 November 2015)).
The ACER's Transaction Reporting User Manual (TRUM, June 2020 edition, p. 18) contains the following clarification on the difference between a broker as an OMP and executing broker:
"The Agency considers a broker a natural or legal person that arranges transactions between a buyer and a seller for a commission when the trade is executed. This is not necessarily an OMP. Broker platforms are mentioned as examples of OMPs, but this does not mean that all brokers automatically have to be considered OMPs. This will only be the case if they fulfil the OMP criteria stipulated in Article 2(4) of Commission Implementing Regulation (EU) No 1348/2014.
If a market participant places an order on an OMP through a broker (usually an executing broker) and this particular broker is the counterparty to the transaction, then the executing broker is a REMIT market participant and has reporting obligations for all its trades and orders to trade placed on the exchange, including those that the broker gives up.
An executing broker is a natural or legal person that executes transactions on an OMP on behalf of its clients. Since an executing broker places an order and executes it without bringing together “multiple third party” buying and selling side, the executing broker would not be considered an OMP.
In some circumstances, a broker (when considered a REMIT OMP) may offer the service of executing broker to their clients. The firm is providing two different services: one as OMP and one as executing broker. For the executing broker business the firm will be considered a REMIT market participant (please see Annex III to the TRUM available on the REMIT portal). This firm should register its executing broker business (and only that) as market participant with the relevant National Regulatory Authority.
Brokers (that are organised market places rather than executing brokers) are not market participants and should not appear as a counterparty."
ACER's Frequently Asked Questions (FAQs)
on REMIT transactions reporting
(General questions, Question 1.1.3, as of 21 November 2015)
The term "Broker" is mentioned when defining Organised Market Places; that is, a Broker is considered an Organised Market Place. Elsewhere in TRUM there is the term "Executing Broker". We consider our company an Executing Broker, as we execute client orders. Do these two terms, "Broker" and "Executing Broker" somehow overlap? Is an Executing Broker considered an Organised Market Place?
We would be grateful if ACER could clarify what is meant by "a Person Professionally Arranging Transactions", so we might decide if we are a PPAT or not. This is relevant for us, as to our understanding the Organised Market Place obligations apply to PPAT's, so if we are a PPAT we would have to have market surveillance etc.
Answer
The Agency considers a broker a person or a firm that arranges transactions between a buyer and a seller for a commission when the deal is executed. This is not necessarily an Organised Market Place (OMP). Please see Article 2(4) of Commission Implementing Regulation (EU) No 1348/2014 for the OMP definition. Broker platforms are mentioned as examples for OMPs, but this does not mean all brokers automatically have to be considered as OMPs. This will only be the case if they fulfil the OMP criteria stipulated in Article 2(4) of Commission Implementing Regulation (EU) No 1348/2014.
An example of a broker who is not an executive broker would be a person facilitating deals between a buying and a selling side and then passes the names to both so that they can confirm a bilateral trade without the engagement of the broker.
An executing broker is a firm that executes deals on behalf of its clients on an OMP. An executing broker places an order and executes it without bringing together buying and selling side. The executing broker would not be an OMP.
However, in some circumstances, a brokerage firm (when considered a REMIT OMP) may offer the service of executing broker to their clients. The firm is providing two different services: one as OMP and one as executing broker. For the executing broker business the firm will be considered a REMIT market participant (please see Annex III to the TRUM available on the REMIT portal). This firm should register its executing broker business (and only that) as market participant with the relevant National Regulatory Authority.
With regard to Person Professionally Arranging Transactions definition, please see Question II.3.7 in 10th edition of the Agency's Q&A on REMIT available on the REMIT portal.
Brokers' reporting of client trades
Pursuant to the Trade Reporting User Manual (TRUM), with regard to orders to trade placed by executing brokers at the organised market place, the Beneficiary ID of the broker's client should also be reported in the Data Field No 8 of the REMIT reporting format if available to the organised market place.
Alternatively, if the order report is reported through a third party (in particular RRM) on behalf of the executing broker, this should be made available to the reporting party by the executing broker along with trading ID (Data Field 3) and reported to the ACER by the third party reporting on behalf of the broker.
Brokers qualifying as "persons professionally arranging transactions" (PPATs) are subject to specific requirements.
ACER's Frequently Asked Questions (FAQs)
on REMIT transactions reporting
(Question 2.3.4, as of 21 November 2015)
If 'alpha' trades identified by the UTI generated by the OMP are reportable under REMIT (if not reported under EMIR) then do the lifecycle events of the 'gamma' trade qualify as eligible for reporting, if so how is the UTI of the 'gamma' trade linked and is the Clearing Broker expected to report their side?
Answer
The Agency has already provided its understanding in Annex III to the TRUM (available on the REMIT portal), according to which clearing brokers do not have reporting obligations under REMIT for their clearing activity. The UTI of the transaction executed at the exchange may be different than the UTI of the back to back transaction reported by the executing broker (or other member of the exchange) and their clients. Still, both transactions should indicate the Organised Market Place they were originating from. Executing Brokers can report their transactions in two ways:
- reporting two trade reports: one trade executed on the exchange and one trade as a back-to-back transaction with their client; or
- reporting one trade report: one trade report which includes their client information in the Beneficiary ID field (8) if the client is a REMIT market participant