|Inside information on the carbon market - time to build expertise|
|Monday, 15 February 2016 05:05|
I'm sure your company has in place documented systems and procedures to conduct - with due diligence - assessments, which of your emissions data will have the potential to influence on the market price of carbon (or that the said impact is, for example, negligible).
No? But, obviously, you have already verified whether your company exceeded, at the group level, the threshold of 6 million tonnes of carbon dioxide equivalent a year or a rated thermal input of 2,430 MW. Not true? I don't believe it!
If, neglecting the above issues, you're counting on the fact that your company is already publishing inside information under the REMIT Regulation, this misunderstanding may have severe consequences.
Someone may say: "nonsense, once more burdensome and duplicative requirement, we are doing all this under REMIT". However, this is not the case. It follows from several arguments, at least.
The first is that the publications' scope is different under both regulations. Under REMIT the influence on wholesale energy products' prices is required while under the new Market Abuse Regulation (MAR) the respective parameter is the influence on the of price of carbon (which is not a wholesale energy product under REMIT).
When it comes to market participants above the aforementioned thresholds, they will not have to disclose all information about their emissions, but only the information, which is inside information. Hence, firms will have to carry out documented case by case assessments, which ensure, the information that would not be useful to the carbon market, is not published.
Firms must learn how to conduct such an assessment, which, in itself, will not be an unproblematic task.
Under REMIT respective publications are more schematic as they mainly relate to the unavailability of generation or consumption assets above certain size (nevertheless, in this case firms' assessments are also required).
Furthermore, as opposite to REMIT, under MAR active dissemination of inside information to the media is required (the publication on the market participants' website only is not sufficient).
The latter of the above requirements (active dissemination of inside information to the media) notwithstanding, which, I suppose, can be treated as rather of a technical nature, the issue arises how much time the market participants will have, to accommodate to the new regulatory challanges.
MAR, in principle, replaces the existing Market Abuse Directive (Directive 2003/6/EC) and will become applicable 3 July 2016 (i.e. 6 months before the original MiFID II date of entry into force), except for provisions, which explicitly depend on MiFID II (for which the date of MiFID II entry into force applies).
Considering the logic behind:
- Article 39(4) second subparagraph of the MAR, which states: "Where reference in the provisions of this Regulation is made to OTFs, SME growth markets, emission allowances or auctioned products based thereon, those provisions shall not apply to OTFs, SME growth markets, emission allowances or auctioned products based thereon until 3 January 2017", and
- Article 2(2) of the draft amendment to MiFIR and MAR (European Commission's Proposal for a Regulation of the European Parliament of the Council amending Regulation (EU) No 600/2014 on markets in financial instruments, Regulation (EU) No 596/2014 on market abuse and Regulation (EU) No 909/2014 on improving securities settlement in the European Union and on central securities depositories as regards certain dates, 10.2.2016, COM(2016) 57 final, 2016/0034 (COD)), which replaces the above date with 3 January 2018,
it appears, the new MAR framework for carbon publications will need to be operational as from 3 January 2018 only.
This conclusion is supported, moreover, by the following comments contained in the aforementioned European Commission's Proposal of 10 February 2016, (p. 4):
"The market abuse framework will apply to certain definitions and concepts of MiFID II. As MAR is set to enter into application on 3 July 2016, there is already a provision in it, which ensures that before the originally foreseen date of entry into application of MiFID II, concepts and rules of MiFID I will apply. In order to ensure legal certainty for the period between the originally foreseen date of entry into application and the new date of entry into application, it is necessary to clarify in MAR that the concepts and rules as set out in MiFID I should be used until the new date of entry into application of MiFID II. MAR also refers to concepts that will be introduced by MiFID II, such as organised trading facilities ('OTFs'), small and medium-sized enterprises ('SME') growth markets, emission allowances or auctioned products based thereon. MAR sets out that its provisions shall not apply to these concepts until the originally foreseen entry into application of MiFID II. It is therefore also necessary to clarify in MAR that provisions referring to OTFs, SME growth markets, emission allowances or auctioned products based thereon shall not apply until the new date of entry into application of MiFID II."
Do you think 2018 is the remote perspective for accomplishing the required new systems, internal procedures and documentation?
I don't share such a view given the complexity of this task.
The first question to respond by firms' analysts will be whether the carbon market prices are still driven mainly by macroeconomic data or individual facilities' technical operation may influence this process as well.