For the purpose of REMIT transaction reporting, the following definition of spread contracts related to financial products applies in the Trade Reporting User Manual (TRUM): contract that involves using price differences in forwards / future / option prices, rates, based upon inter-market relationships (time differences (maturities), locational differences, commodity differences). Spread can be established by taking a position in one contract (first leg) and simultaneously taking an opposite position in another contract (second leg). However spread might also refer to trading based on pure price difference with an index or reference price.
Question 2.2.10 ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, 8 September 2015, REMIT Portal
A common workflow in our broking system is the aggregation of a number of similar deals into one "big ticket" – particularly prevalent where the deals are going to have a manual process applied to them anyhow such as sleeve deals or spread deals.
The clarification requested is how to report these deals
Party A and B trade 4 times today the NCG/TTF spread for June – so Party A initiated 4 orders at of 30 MW, at 0.225 and party B aggressed them.
The result is 4 x NGC/TTF Jun spreads at .225. These trades are not reportable as they are spread trades – however when the spreads are broken individually into an NCG leg and a TTF leg, they would reference the relevant orders – so 8 resulting trades in all (16 reportable sides).
2 trades would reference each order – the initiated side for the NCG and the initiated side for the TTF leg. The aggressed side would be a "click to trade" report.
Order 1 NCG/TTF 30MW
Order 2 NCG/TTF 30MW
Order 3 NCG/TTF 30MW
Order 4 NCG/TTF 30MW
Trade 1 (initiate side) NCG leg (30MW) – Order 1
Trade 1a (aggress side) NCG leg (30MW) – Click trade
Trade 1b (initiate side) TTF leg (30MW) – Order 1
Trade 1c (aggress side) TTF leg (30MW) – Click trade
Trade 2 (initiate side) NCG leg (30MW) – Order 2 Trade 2a (aggress side) NCG leg (30MW) – Click trade
Trade 2b (initiate side) TTF leg (30MW) – Order 2
Trade 2c (aggress side) TTF leg (30MW) – Click trade
Trade 3 (initiate side) NCG leg (30MW) – Order 3 Trade 3a (aggress side) NCG leg (30MW) – Click trade
Trade 3b (initiate side) TTF leg (30MW) – Order 3 Trade 3c (aggress side) TTF leg (30MW) – Click trade
Trade 4 (initiate side) NCG leg (30MW) – Order 4
Trade 4a (aggress side) NCG leg (30MW) – Click trade
Trade 4b (initiate side) TTF leg (30MW) –Order 4
Trade 4c (aggress side) TTF leg (30MW) – Click trade
However, the market convention here is to break the spreads not as four individual trades, but as a single trade of 120 MW. The question is how to report this.
Our view is that when a number of trades are bagged up into a single trade, that the reporting should be as below:
The single pair of 120MW trades (1 NCG and 1 TTF trade) would each reference the orders concerned
Order 1 NCG/TTF 30MW
Order 2 NCG/TTF 30MW
Order 3 NCG/TTF 30MW
Order 4 NCG/TTF 30MW
Trade 1 (initiate side) NCG leg (120MW) – Order 1, Order 2, Order 3, Order 4
Trade 1a (aggress side) NCG leg (120MW) – Click trade
Trade 1b (initiate side) TTF leg (120MW) – Order 1, Order 2, Order 3, Order 4
Trade 1c (aggress side) TTF leg (120MW) – Click trade
This way ACER will be able to see the relationship between the orders and resulting deals. Otherwise, ACER will get 3 matched orders with no resulting deal records at all, and 1 order with a deal record that does not match the order.
ANSWER
Each order must match another order irrespective if the latter is a click and trade order/trade or not. The correct way to report the above transitions is :
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(initiator side) |
(aggressor side) |
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Orders 1. Order 1 NCG/TTF 30MW 2. Order 2 NCG/TTF 30MW 3. Order 3 NCG/TTF 30MW 4. Order 4 NCG/TTF 30MW
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Orders Because these are Click and Trade orders, they are reported with the trade reports under Click and trade section of the Schema (nothing prevents the broker to create orders and report them under the order report section of the schema) |
| Trades
1. NCG leg (120MW) – UTI 123NCG linked to Order 1 – linked to UTI 123TTF 2. TTF leg (120MW) – UTI 123TTF linked to Order 1 - linked to UTI 123NCG ……. 3. NCG leg (120MW) – UTI 345NCG linked to Order 2 - linked to UTI 345TTF 4. TTF leg (120MW) – UTI 345TTF linked to Order 2 - linked to UTI 345NCG ……. 5. NCG leg (120MW) – UTI 678NCG linked to Order 3 - linked to UTI 678TTF 6. TTF leg (120MW) – UTI 678TTF linked to Order 3 - linked to UTI 678NCG ……. 7. NCG leg (120MW) – UTI 901NCG linked to Order 4 - linked to UTI 901TTF 8. TTF leg (120MW) – UTI 901TTF linked to Order 4 - linked to UTI 901NCG
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Trades 2. NCG leg (120MW) – UTI 123NCG Click and trade – linked to UTI 123TTF 3. TTF leg (120MW) – UTI 123TTF Click and trade - linked to UTI 123NCG ....... 4. NCG leg (120MW) – UTI 345NCG Click and trade - linked to UTI 345TTF 5. TTF leg (120MW) – UTI 345TTF Click and trade - linked to UTI 345NCG ....... 6.NCG leg (120MW) – UTI 678NCG Click and trade - linked to UTI 678TTF 7. TTF leg (120MW) – UTI 678TTF Click and trade - linked to UTI 678NCG ....... 8. NCG leg (120MW) – UTI 901NCG Click and trade - linked to UTI 901TTF 9. TTF leg (120MW) – UTI 901TTF Click and trade - linked to UTI 901NCG
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In our view, nothing prevents that the brokers or exchanges (those that do not store the aggressor order and treat this action as a click and trade) to create orders in their systems and report them under the order report section of the schema. When a trader aggresses an order on the screen and he accepts the initiator order price, he places a limit order. The fact that this order is not stored in the broker's or exchange's platform as an order does not means that it is not an order.
Please see example (3.19) in Annex II to the TRUM.
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Links
Question 2.2.1 ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, 8 September 2015, REMIT Portal
When a group of trades such as spreads are executed, to break them as one trade but where the volume is then agreed to be different to the sum of the constituent parts.
Party A and B trade 4 times today the NCG/TTF spread for June – so Party A initiated 4 orders at of 30 MW, at 0.225 and party B aggressed them. The result is 4 x NGC/TTF Jun spreads at .225. These trades are not reportable as they are spread trades. It is then mutually agreed to adjust the total volume to for example either 115MW or 125MW, so the total can go either up or down from the sum of the parts.
As an example the following deals are created.
NCG leg (125MW
TTF leg (125MW)
The open question would be then whether ACER wants the trades tagged as "voice" or some other tag to indicate that the trade does not match the sum of the orders.
Our view is that when a number of trades are bagged up into a single trade, that the reporting should be as below:
The single pair of 125MW trades (1 NCG and 1 TTF trade) would each reference the orders concerned
Order 1 NCG/TTF 30MW
Order 2 NCG/TTF 30MW
Order 3 NCG/TTF 30MW
Order 4 NCG/TTF 30MW
Trade 1 (initiate side) NCG leg (125MW) – Order 1, Order 2, Order 3, Order 4
Trade 1a (aggress side) NCG leg (125MW) – Click trade
Trade 1b (initiate side) TTF leg (125MW) – Order 1, Order 2, Order 3, Order 4
Trade 1c (aggress side) TTF leg (125M0W) – Click trade
Optionally these trades should also be tagged as "voice" or some other tag to indicate a verbal amendment to a screen trade, as these are not "voice" trades in the conventional sense and we think it likely that ACER would want to maintain the link between the screen orders and the resulting trades.
ANSWER
Each order must be matched by another order irrespective of whether the latter is a click and trade order/trade or not. Their amendment occurs outside the screen and it may be reported as amendment of one or all of the previously agreed trades or as a separate voice brokered trade (buy or sell trade according to the volume change) if this can be considered a separate transaction. Please see also the previous question and its answer.
Spreads reporting
There are in principle the two energy commodities under REMIT: power and gas. Spreads are not commodities. Clean and Dirty Spark Spreads, for trades that involve both electricity and gas have to be reported separately unless the contract itself includes both commodities in which case both, gas and electricity, should be reported in this field.
Clean and Dirty Dark Spreads, for a trade that involves electricity, coal and emissions should be reported as an electricity contract. Coal and emissions have not to be reported.
(TRUM p. 82 Data Field No 14 of the non-standard reporting form - Energy commodity
Documentation
ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, Questions 2.2.1, 2.2.10