The non-binding interpretation of the European Agency for the Cooperation of Energy Regulators (ACER) and the EU National Regulatory Authorities (NRAs) regarding the concept of 'persons professionally arranging transactions' (PPATs) under Article 15 of the REMIT Regulation (Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency) is laid down in the Guidance Note 1/2015 of 4 March 2015.
Role and obligatons of a PPAT
(ACER's REMIT Quaterly, Issue No. 1 / Q1 2015, p. 2/8)
"PPATs typically act as intermediaries that either enable or assist third parties (buyer or seller) in a way that directly brings about a particular wholesale energy transaction(s). They can also facilitate the entering into transactions in wholesale energy products by third parties. Under this role PPATs have a good understanding and overview of the market segment they operate in.
Taking into account their proximity to the market, PPATs qualify as potential informants should any suspicious transaction appear in the market segments they operate in. Thus the legislation (Article 15 of REMIT) puts an obligation on PPATs to notify the relevant NRA without delay if they reasonably suspect that a wholesale energy market transaction might breach the prohibitions on insider trading or market manipulation.
To fulfil their obligation to notify NRAs, Article 15 of REMIT imposes on PPATs the obligation to establish and maintain effective arrangements and procedures to identify breaches.
Such arrangements may involve setting up active software aided surveillance systems, passive process based mechanisms to detect and notify potential market abuses, as well as organisational mechanisms to avoid possible conflicts which may arise between commercial and compliance interests."
REMIT puts two obligations on persons professionally arranging transactions in wholesale energy products:
- to notify the national regulatory authority (NRA) without further delay, when it reasonably suspects that a transaction might breach Articles 3 (prohibition of insider trading) or Article 5 (prohibition of market manipulation) of REMIT; and
- to establish and maintain effective arrangements and procedures to identify breaches of Article 3 or 5 of REMIT (Article 15).
ACER underlines the need to distinguish the different obligations of PPATs: reporting obligations based on Article 8 on the one part (are of different nature and shall be assessed according to the specific rules), and notifications and establishment and maintenance of effective arrangements and procedures based on Article 15 on the other.
The assumption of a reasonable suspicion lies within the responsibility of the PPAT (ACER Guidance on the application of REMIT, p. 59).
Persons professionally arranging transactions are, in particular, organised market places and trade-matching systems, as well as other entities engaged in similar activities (see Article 8 (4)(d) of REMIT: '4. For the purposes of paragraph 1, information shall be provided by: (...) (d) an organised market, a trade-matching system or other person professionally arranging transactions').
It follows, the most common examples of PPATs will in practice be electricity and gas exchanges (regulated markets, MTFs and OTFs including) and brokers.
Transmission System Operators (TSOs) or persons acting on their behalf fall under the said definition insofar as they are arranging balancing markets. Although ACER does not mentioned this explicitly, the preceding remark may lead to the conclusion, the Distribution System Operators will not be considered persons professionally arranging transactions under REMIT, as long as they are not engaged in operating balancing markets (this is usually the TSOs' competence).
REMIT Article 15
Obligations of persons professionally arranging transactions
Any person professionally arranging transactions in wholesale energy products who reasonably suspects that a transaction might breach Article 3 or 5 shall notify the national regulatory authority without further delay.
Persons professionally arranging transactions in wholesale energy products shall establish and maintain effective arrangements and procedures to identify breaches of Article 3 or 5.
Under some circumstances the PPATs' definition include also gas hubs. In that regard ACER said:
'Concerning gas hubs, the Agency considers that normally the TSO operates the gas hub, but it might be the case that gas hubs operate separately from the TSO.
At gas hubs transfer of title (ownership) takes places, which can be considered a transaction. Thus the person owning the gas hub can be considered as a person professionally arranging transactions according to Article 15 of REMIT.
It should be noted that the depth of data available to hubs varies on a hub-by-hub basis. Certain hubs will be unable to conduct surveillance (for example, a hub receiving highly aggregated data without price details), with market monitoring being conducted elsewhere (e.g. at an exchange).'
ACER's annual report on its activities under REMIT in 2014 (p. 47) refers to the following cases where the obligations of persons professionally arranging transactions were enforced.
In the course of a review of a case related to a potential market manipulation in the form of marking the close, the voice records between the trader and the broker that intermediated the orders and transactions unveiled that the broker was aware that the orders introduced were not reflecting the market fundamentals.
The Agency shared this evidence with the relevant NRA to verify the PPAT compliance with obligations under Article 15 of REMIT. Based on the evidence collected through an interview with the transaction intermediary, the NRA concluded that there was a potential breach of Article 15 of REMIT.
This time the NRA could not sanction, as no sanctioning powers were implemented in the relevant Member State (as defined in Article 18 of REMIT). Nevertheless the intermediary decided to internally develop training for the personnel to ensure full compliance with REMIT obligations.
PPAT characteristics pursuant to ACER's Guidance Note 1/2015
The term 'person professionally arranging transactions' includes three different elements that should be assessed independently in order to determine whether an entity is a PPAT or not. For an entity to be considered a PPAT it has to fulfil the following three cumulative criteria:
-person: means either natural or legal person;
- professionally: the literal analysis of the wording and the jurisprudence leads to the following interpretation: 'engaged in a specified activity as part of one's normal and regular paid occupation';
- arranging transactions is an activity that aims to: enable or assist third parties (buyer or seller) in a way that directly brings about a particular wholesale energy transaction(s) (i.e., has the direct effect that the transaction is concluded); or, provide a facility that facilitates the entering into transactions by third parties (buyer or seller) with a view to transactions in wholesale energy products. Simply providing the means by which parties to a transaction (or possible transaction) are able to communicate with each other is excluded from the concept of PPATs. For instance, persons such as Internet service providers, e-mail service providers, messaging providers or telecommunication providers are excluded from the concept of PPATs.
If a person makes arrangements that go beyond providing the means of communication, and adds value to what is provided, it will lose the benefit of this exclusion and shall be recognised as a PPAT.
Further ACER's considerations for the definition of PPAT concept:
- The main characteristic of a PPAT is its intermediary role, i.e. arranging transactions in wholesale energy products. Its legal form, ownership, the type of market it operates, the type of the wholesale energy contract, the number of parties it represents and whether it acts as a principle or as an agent are not relevant in order to determine whether an entity is a PPAT.
- REMIT places different obligations on PPATs and market participants. Therefore, it is necessary to establish whether that person is acting as a PPAT or as a market participant, in the particular case. Whereas a market participant enters into transactions involving a wholesale energy product, a PPAT arranges the transaction on the wholesale energy product. Nevertheless, the same entity may well qualify as a PPAT in one transaction and a market participant in another transaction. Also, there are situations where a person is both a market participant and a PPAT in the same transaction.
- The arranging activity can comprise the whole trade lifecycle or be restricted to one or more parts of it.
- Some transactions may involve the participation of several PPATs and others may not involve the participation of any PPAT.
Content of the Suspicious Transaction Report (STR)
pursuant to ACER Guidance on the application of REMIT (Chapter 9)
As a best practice, the Agency recommends that a Suspicious Transaction Report (STR) should contain, when available, information on the:
1. type of market abuse:
* insider trading and/or market manipulation;
* identification of the subcategory of market abuse.
2. details of the notifying party:
* identification of the notifying party: name, organisation, position and contact details;
* notification date and time.
3. description of the potential breach (transaction(s)/order(s)/behaviour(s)):
description of the order(s)/transaction(s)/behaviour(s): product(s) involved, product delivery location, product delivery date (start and end, orders/transactions timestamps, time period when the potential breach occurred), load type, contract ID(s), transaction ID(s), transactions/orders other details;
* description of the inside information or potential inside information (for Article 3 breaches):
date of disclosure of inside information, asset concerned, start date and time, end date and time, content disclosed remarks on the inside information disclosure;
* information on the potentially affected parties and products;
* identification of the PPAT(s) involved (other than the notifying party – if applicable): PPAT name, PPAT other identification details.
4. reasons for suspecting that the order(s)/transaction(s)/behaviour(s) might constitute insider trading/market manipulation.
5. identification of persons involved in the potential breach:
* identification of person(s) involved in the potential breach: name, organisation, position and
* identification of any other person(s) associated with the potential breach: name,
organisation, position and contact details.
6. identification of the notified parties:
* identification of the relevant NRA(s) to be notified;
* identification of other entities that were notified.
7. further information which may be of significance:
* analysis of the behaviour;
* spreadsheet analysing the relevant transaction(s)/order(s)/behaviour(s);
* copy of the communications with the market participant or other entities on the event;
* any kind of other action already undertaken by the PPAT;
* estimation of the impact of the event on the market prices;
* estimation of the benefit from the potential breach for the market participant;
* Member State(s) affected and any related supporting evidence;
* any other information which the PPAT considers relevant (e.g. information on events which may lead to a potential breach of another REMIT provision).
Every company as a prosecutor - impressions from reading ACER's 4th edition of REMIT Guidelines
ACER's Guidance Note 1/2015 of 4 March 2015
ACER Guidance on the application of REMIT, Chapter 9
Attachment: ACER's Analysis of selected entities vis-à-vis the PPAT characteristics - ACER Guidance Note 1/2015 Figure 2