Broker or broker platform (REMIT definitions)


 

"Broker" or "broker platform" within the REMIT Regulation compliance system means:

 

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.

 

 

- 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.

 

The above definition has relevance for REMIT reporting.

 

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. 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)).

 

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) form the separate issue.

 

 

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

  

 

 

ACER's Frequently Asked Questions (FAQs) 

 

on REMIT transactions reporting

 

(Question 2.3.6, as of 21 November 2015)

 

In some cases where trades are executed via a broker, these trades are in the broker's books for some time until the position is allocated to the respective customers.
Are these brokers considered to be market participants? If so, (how) would this interfere with them being OMPs?
By consequence: do these trades with brokers as counterparties need to be reported under REMIT? Or are only the allocations (give-up/take-up) to be reported?

  

Answer

 

Our understanding is that firms may have several business activities. When a firm is an executing broker (exchange member) and is also an Organised Market Place (it runs a Broker platform) the firm has two different types of business and it should be treated as such. For their executing broker business the firm may need to register with the competent NRA as market participant. Further details can be found in Annex III to the TRUM available on the REMIT Portal.

 

  

 

 

ACER's Frequently Asked Questions (FAQs) 

 

on REMIT transactions reporting

 

(Question 2.4.4, as of 21 November 2015)

  

IAs: Table 1, field #58. TRUM: We note that the TRUM v1.0 states the following on p.25: "Lifecycle events that happen bilaterally between the counterparties with- out involving a broker, or an organised market, should be reported by the market participants through third parties."
We kindly ask for the Agency's opinion and clarification on the following, please:

 

Timeframe:

 

i) For OMP-traded deals: If MPs are to report subsequent bilateral lifecycle events of OMP-traded deals via third party RRMs (i.e. after the "new" execution has been reported by the relevant OMP), is the relevant start-date for the reporting of such purely bilateral lifecycle events Phase 1 or Phase 2?

 

ii) ii) For OTC-traded deals: We expect the start-date for bi- lateral lifecycle events of OTC-traded deals to be in Phase 2.

 

Reporting Channel:

 

i) OMP: If OMPs would agree to offer the service of re- porting any bilateral non-OMP lifecycle events on be- half of the MPs, does ACER foresee that both MP counterparties would need to notify the broker/OMP of the bilateral lifecycle event? ii)

 

ii) 3rd party RRM: If the OMP does not agree to report bi- lateral modifications, does this mean that MPs need to be prepared to report directly to a 3rd party RRM in Phase 1 (for instance, through the 3rd party RRM(s) that the MP envisions to use for OTC/bilateral trade reporting in Phase 2)?

 

Example:

 

A deal is concluded via two counterparties over a broker, and the broker submits a "new" transaction report in Phase 1. The two counterparties later agree to amend the deal bilaterally without the involvement or knowledge of the broker.
Our assumption is that such bilateral lifecycle modifications of OMP-traded deals need to be reported in Phase 1, even though no OMP is involved.

 

Answer

 

If two counterparties enter into a trade concluded over a broker platform (Organised Market Place), the broker (subject to an agreement with the market participants) will submit a "new" transaction report on a T+1 basis in Phase 1.

 

If the two counterparties to the trade agree to amend the deal bilaterally without the involvement or knowledge of the broker, they are responsible for the reporting of such lifecycle events which have to be reported on a T+1 basis in Phase 1.

 

OTC transactions, are normally reportable on a T+30 basis in Phase 2. Please see the TRUM for additional clarifications.

 

 

 

 

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Last Updated on Saturday, 19 March 2016 23:51
 

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