REMIT/EMIR derivatives' reporting overlap


 

 

Derivatves are reportable under EMIR as well as MiFIR and REMIT. The reporting requirement under EMIR encompasses all derivatives contracts, OTC and exchange-traded alike, while Article 3(1)(a) and (b) of the REMIT Implementing Regulation (Commission Implementing Regulation No 1348/2014 of 17 December 2014 on data reporting implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency, OJ L 363, 18.12.2014, p. 121) stipulate the reporting of the following derivatives contracts (unless already reported under EMIR or MiFIR): 

 

- options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the European Union,

 

- options, futures, swaps and any other derivatives of contracts relating to the transportation of electricity or natural gas in the European Union

 

However, precise delineations are not easy to identify, key distinctions appear to lay in whether the product is financially- or a physically-settled and whether the delivery in the European Union. 

 

The additional cause of confusion is stuck in the meaning of entering into transaction in EMIR - different from the meaning of entering into transaction in REMIT, where the latter refers to entering into transaction in "wholesale energy markets" and not to be counterparty to a contract (distinction meaningful for example with respect to CCPs or clearing members).

 

 

 

 

 

 

 

 Remit-label

ACER's examples of derivatives not reported under EMIR

(including those that are reported under non-EU regulations)

but still reportable under REMIT:

 

1. Transaction reportable under the U.S. Dodd Frank Act

 

U.S. counterparty enters into a transaction on a derivative admitted to trade at an exchange within the EU (most likely the U.S. firm reports that transaction under the U.S. Dodd Frank Act to the U.S. authorities). Nevertheless, since the firm traded a wholesale energy product as defined in REMIT, the person is a REMIT market participant and must report that transaction to the ACER in order to comply with REMIT.

 

2. Trading in financially-settled energy products traded outside the EU along with physical trading with delivery in the Union

 

If a person enters into a transaction on a derivative contract related to EU gas and electricity (such as a futures contract only for financial settlement that is traded on exchange located outside the EU), that person is not a REMIT market participant. 

 

However, if that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets, e.g. enters on a physical trade (or derivative) for the delivery of gas or electricity (or transportation of gas or electricity) within the EU, that person is a market participant and has to report all the transactions on wholesale energy products including those trades outside the EU that are only for financial settlement.

 

 

 

 

 

 

 

 

 

 

 

 Non-REMIT

ACER's examples of derivatives not reported under REMIT:

 

When a person only enters into transactions on derivatives traded outside the European Union that are only for financial settlement even though they are related to EU electricity or natural gas (for example a future or a swap that can only be financially settled) that person should not be considered a REMIT market participant and should not report those transactions, unless that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

 

For example, if a person enters into a transaction on a derivative contract related to EU gas and electricity (such as a futures contract only for financial settlement that is traded on exchange located outside the EU), that person will not be considered a REMIT market participant.

 

Another example is when a person enters into a transaction on an exchange traded (or bilaterally) financial swap on two floating gas prices for two monthly contracts i.e. (1) EU Natural Gas Futures contract and (2) U.S. Henry Hub Natural Gas Futures contract of the corresponding contract month, traded outside the EU, that person will not be considered a REMIT market participant.

  

If a person trades only REMIT-related financially-settled derivative contracts traded at organised market places outside the EU, that person is not a market participant and should not report those transactions.

 

The word: "only" in the above examples need to be stressed as it appears to be particularly meaningful.

 

 

 

 

 

 

ACER's clarification on reporting of derivatives contracts

 

According to the Implementing Acts, the following derivatives contracts shall be reported to the Agency:

1. Options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the Union (Article 3(1)(a)(viii)),

2. Options, futures, swaps and any other derivatives of contracts relating to the transportation of electricity or natural gas in the Union (Article 3(1)(b)(iii)).

 

The Implementing Acts also provide that where persons have reported details of transactions in accordance with Article 26 of MiFIR or Article 9 of EMIR, their obligations in relation to reporting those details under REMIT shall be considered as fulfilled.

However, subject to the agreement of organised markets, trade matching or reporting systems, that information may be reported directly to the Agency.

 

Therefore, information on derivatives reportable under EMIR and MiFIR may either be made available to the Agency in the EMIR / MiFIR format or reported directly to the Agency in the REMIT format, that is in accordance with Table 1 of Annex I of the Implementing Acts as regards contracts referred to in Article 3(1)(a)(viii) and Tables 3 or 4 as regards contracts referred to in Article 3(1)(b)(iii).

 

Furthermore, derivatives contracts covered by the Implementing Acts, but not reportable under EMIR or MiFIR (e.g. in a case of market participants not established or resident in the Union and not reporting those derivatives under EMIR or MiFIR), shall be reported in accordance with Table 1 of Annex I of the Implementing Acts as regards contracts referred to in Article 3(1)(a)(ix) and Tables 3 or 4 as regards contracts referred to in Article 3(1)(b)(3).

 

For derivatives not reported under EMIR, including those that are reported under non-EU regulations but still reportable under REMIT, market participants shall refer to this manual on how to report transactions to the Agency. For example, if a U.S. counterparty enters into a transaction on a derivative admitted to trade at an exchange within the EU, most likely the U.S. firm reports that transaction under the U.S. Dodd Frank Act to the U.S. authorities. However, since the firm traded a wholesale energy product as defined in REMIT, the person is a REMIT market participant and must report that transaction to the Agency in order to comply with REMIT.

 

When a person only enters into transactions on derivatives traded outside the European Union that are only for financial settlement even though they are related to EU electricity or natural gas (for example a future or a swap that can only be financially settled) that person should not be considered a REMIT market participant and should not report those transactions, unless that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

 

For example, if a person enters into a transaction on a derivative contract related to EU gas and electricity (such as a futures contract only for financial settlement that is traded on exchange located outside the EU), that person will not be considered a REMIT market participant.

 

Another example is when a person enters into a transaction on an exchange traded (or bilaterally) financial swap on two floating gas prices for two monthly contracts i.e. (1) EU Natural Gas Futures contract and (2) U.S. Henry Hub Natural Gas Futures contract of the corresponding contract month, traded outside the EU, that person will not be considered a REMIT market participant.

 

However, if that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets, e.g. enters on a physical trade (or derivative) for the delivery of gas or electricity (or transportation of gas or electricity) within the EU, that person is a market participant and has to report all the transactions on wholesale energy products including those trades outside the EU that are only for financial settlement.

 

If a person trades only REMIT-related financially-settled derivative contracts traded at organised market places outside the EU, that person is not a market participant and should not report those transactions.

 

Source: ACER's Trade Reporting User Manual (TRUM)

 

 

 

The clearing brokers and central counterparties are not considered by ACER "market participants" under REMIT (and, consequently, not subject to REMIT reporting requirements) as they do not enter into transactions in the REMIT sense (this is intended to be in line with the meaning of entering into transaction according to Article 5 of MiFID I where the meaning of entering into transaction does not include actions related to option exercise, settlement or clearing). 

 

Another significant specificity of the EMIR derivatives' reporting scheme against the background of the REMIT reporting rules is the former does not prescribe the submitting of data on orders to trade. Accordingly, orders to trade in derivatives must be reported under REMIT and not EMIR.

  

According to Article 6(4) of the Commission Implementing Regulation (EU) No 1384/2014, information in relation to wholesale energy products which have been reported in accordance with Article 26 of Regulation (EU) No 600/201412 or Article 9 of Regulation (EU) No 648/2012 shall be provided to the Agency by:

a) trade repositories referred to in Article 2 of Regulation (EU) No 648/2012,

b) approved reporting mechanisms referred to in Article 2 of Regulation (EU) No 600/2014;

c) competent authorities referred to in Article 26 of Regulation (EU) No 600/2014; or d) the European Securities and Markets Authority.

 

According to Article 6(5) of the above Regulation, where persons have reported details of transactions in accordance with Article 26 of Regulation (EU) No 600/2014 or Article 9 of Regulation (EU) No 648/2012, their obligations in relation to reporting under REMIT shall be considered as fulfilled.

 

  

ACER in Annex III to the TRUM stressed as follows: "[m]arket participants should report transactions under REMIT only if those transactions are not reported under EMIR." This directive emerges as a landmark for the complex puzzle of the partially-overlapping EMIR and REMIT derivatives' reporting schemes.

 

The European energy regulator underlines that there may be some exchange-traded derivatives traded on EU venues by non-EU counterparties that are not reported under EMIR (e.g. U.S. counterparties reporting under the Dodd Frank Act).

 

The energy regulator expects of market participants to make sure that supply contracts and derivatives reportable solely under REMIT (e.g. energy derivatives not traded on regulated markets or MTFs) are reported to the ACER and not to EMIR trade repositories.

 

For example, if a market participant reports all its transactions to a trade repository, including spot and physical forward transactions not captured by EMIR, the market participant is not complying with REMIT unless the trade repository is a Registered Reporting Mechanism under REMIT and the market participant has given precise instructions to the trade repository to report its transaction to the ACER. 

 


 

 

ACER has also presented the thesis that market participants that have to comply with EMIR should focus on EMIR requirements rather than on the REMIT ones.

 

The regulator concludes the thread saying that parties involved in the execution of an exchange-traded contract will have to report their transactions under EMIR. If they do so, they are complying with REMIT too. However, the obligation to report orders to trade to the ACER is still with the market participants. 

  

 

 

Under REMIT, a market participant is any person who enters into transactions in one or more wholesale energy markets, where wholesale energy markets means any market within the Union on which wholesale energy products are traded. 

 

Wholesale energy products are contracts for the supply and transportation of gas and electricity in the EU and derivatives related to them irrespective of where and how they are traded.

 

 

See also practical scenarios for REMIT/EMIR derivatives' reporting: 

 

Case 1 and 

 

Case 2.

 

 

 

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Last Updated on Tuesday, 14 March 2017 12:48
 

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