REMIT reporting - derivatives traded in the EU with a delivery outside the EU
REMIT Reporting Database

 

From the group of derivatives of contracts related to electricity/natural gas (a) produced, (b) traded or (c) delivered in the European Union, only those that also relate to the supply of electricity/natural gas with delivery in the European Union are reportable under REMIT.

Contracts for the supply of electricity or natural gas exhibit an interesting dualism under the REMIT Regulation

 

This dual treatment is reflected in the fact that conditions under which these contracts are subject to REMIT transaction's and orders' reporting on the one side, and to the remainder of REMIT requirements on the other, differ significantly.

 


 

 

Let's turn to the latter group firstly.

 

Pursuant to Article 2(4)(b) of REMIT, the definition of wholesale energy product includes 'derivatives relating to electricity or natural gas produced, traded or delivered in the Union'.

 

Hence, the said derivatives contract that relates to the supply of electricity or natural gas will be the "wholesale energy product", and, consequently, subject to REMIT, if the underlying is electricity or natural gas produced, traded or delivered in the European Union.

 

What needs to be stressed, the delivery in the Union is not the only criterion, since the scope of REMIT also includes derivatives relating to electricity or natural gas produced or traded in the Union.

 

It follows, such contracts are subject to REMIT irrespective of whether the related electricity or natural gas is delivered in the European Union.

 

What does it mean? Consequences are important - such derivatives relating to electricity or natural gas produced, traded or delivered in the Union are, in particular, covered by REMIT prohibitions (e.g. prohibition of insider trading or market manipulation) and obligations (e.g. obligation to publish inside information).

 

And now back to the reporting obligation under REMIT, where the situation is more complex.

 

Pursuant to Article 8(1) of REMIT in connection with Article 3(1)(a)(viii) of Commission Implementing Regulation (EU) No 1348/2014, options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the Union' are reportable.

 

However, the first sentence of Article 3(1)(a) of Commission Implementing Regulation (EU) No 1348/2014 limits the scope of reporting to the contracts that are wholesale energy products in relation to the supply of electricity or natural gas 'with delivery in the Union'.

  

ACER considers (Question III.3.24 of the ACER's Q&As on REMIT) that from the group of derivatives of contracts related to electricity/natural gas (a) produced, (b) traded or (c) delivered in the Union, only those that also relate to the supply of electricity/natural gas with delivery in the Union shall be reported to the Agency pursuant to Article 3(1)(a)(viii) of Commission Implementing Regulation (EU) No 1348/2014.

 

In conclusion, if a derivative contract (i.e. wholesale energy product) is traded on a platform in the Union, but it relates to the supply of electricity or gas with delivery outside the Union, the above condition 'with delivery in the Union' is not fulfilled.

 

ACER underlines, for this reason, the market participant has no obligation to report this derivative contract to the Agency pursuant to Article 3(1)(a)(viii) of the Commission Implementing Regulation (EU) No 1348/2014.

 

However, the Agency highlights that such contracts fall under the scope of REMIT and therefore other REMIT prohibitions and obligations remain applicable.

 

It follows, the scope of REMIT and its prohibitions (e.g. prohibition of insider trading or market manipulation) and obligations (e.g. obligation to publish inside information) is much wider than the scope of the reporting obligation under 8(1) of REMIT in connection with Commission Implementing Regulation (EU) No 1348/2014.

 

Interesting bifurcation, isn't it? This is in contrast to, for example, the EMIR structuring, where the EMIR reporting obligation has much wider scope (all derivatives) than all other EMIR requirements (clearing obligationrisk mitigation techniques, etc.), which encompass the OTC derivatives only.

 

 

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Last Updated on Tuesday, 22 March 2016 00:16
 

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