The EU Regulation on Wholesale Energy Market Integrity and Transparency (REMIT)1 came into force on 28 December 2011. It establishes an insider trading, market manipulation, disclosure, registration and transaction reporting regime governing trading in wholesale gas and power and related transportation contracts and derivatives.
The timing of the registration regime is based on the entry into force of the REMIT Implementing Regulation, which was published on 17 December 2014 and entered into force on 7 January 2015. National regulatory authorities (NRAs) are required to have registration procedures in place three months after publication (i.e., 17 March 2015). The Agency for the Cooperation of Energy Regulators (ACER) has previously mentioned2 that it expects market participants to have submitted all registration information by 17 June 2015.
Other requirements under REMIT are subject to phased-in implementation and a timeline is included outlining the upcoming requirements.
This client alert provides you with:
- an overview of the registration process
- guidance regarding which entities need to register
- timeline for registration and transaction reporting
- points for EU and non-EU firms to consider ahead of registration
1. Summary overview REMIT is the first tailor-made legal framework for the EU energy sector. It is intended to prevent market abuse and the use of insider information in the wholesale electricity and gas markets and in related transportation contracts and derivatives. REMIT introduces an EU-wide regime for gas and power trading in the EU that encompasses:
- prohibitions on insider trading and market manipulation of “wholesale energy products”
- a disclosure regime for inside information in relation to “wholesale energy products”
- a registration regime for “market participants”
- transaction reporting for transactions in “wholesale energy products”3
ACER is responsible for monitoring trading activity to detect and prevent trading based on inside information and market manipulation. ACER will collaborate with NRAs in each Member State.
The obligations currently in force include:
- prohibitions on insider trading
- the obligation to publish insider information
- the obligation for persons professionally arranging transactions to report suspected breaches
The phase-in of requirements for registration and transaction reporting (and reporting of fundamental data) will begin in the coming months. A subsequent alert will provide details of the transaction reporting regime.
Below is an overview of the REMIT registration regime, information on timing and some issues for firms to consider where they have a choice about where to register.
2. Who must register? A “market participant” (MP) entering into reportable transactions under REMIT must register with its appropriate NRA4.
Unlike under EMIR, an entity does not need to be a principal to a transaction to be regarded as entering into a trade, and so to be an MP under REMIT.
Market participant Under Article 2(7) of REMIT, a “market participant” is a person who enters into transactions (or places orders to trade) on “wholesale energy markets” that are required to be reported to ACER.
Even if a parent or subsidiary or other related undertaking of the MP is already registered or in the process of registering, the MP must still register.
All transactions that are required to be reported to ACER are in “wholesale energy products” (WEPs). Some WEPs are currently the subject of a “no-action” letter and are thus not reportable to ACER until at least 31 December 2016: https://www.acer-remit.eu/portal/acer-staff-letters-doc.
Wholesale energy products Under Article 2(4) of REMIT, WEPs means:
“the following contracts and derivatives, irrespective of where and how they are traded:
- contracts for the supply of electricity or natural gas where delivery is in the Union;
- derivatives relating to electricity or natural gas produced, traded or delivered in the Union;
- contracts relating to the transportation of electricity or natural gas in the Union;
- derivatives relating to the transportation of electricity or natural gas in the Union.”
Contracts where the energy is for the use of final consumers (below a consumption capacity threshold5) are excluded. ACER has issued guidance6 which suggests that entities in the same group may need to aggregate their consumption capacity across all of their plants in the EU where they can be regarded as a “single economic entity”. This may turn on the group structure in question and how decisions are taken.
WEPs include LNG contracts where they are for delivery in the EU.
Does my entity need to register?
Whether a specific entity is an MP will depend on the types of transactions the entity enters into. All entities entering into a reportable transaction, even if they are not a principal to the transaction, will be considered MPs and required to register.
An entity will need to register even if its parent company or subsidiary company is registered.
As both EU and non-EU entities may be classified as MPs, firms will need to examine the activities of both EU and non-EU entities to determine if they will be considered MPs under ACER’s guidance.
Points to consider for non-EU entities:
- Are EU gas and power trades booked to a non-EU entity?
- Even if trades aren’t booked to the non-EU entity, does the non-EU entity act as agent for any other entity in reportable WEPs?
If yes to either of those points, the entity may be an MP for REMIT purposes and would need to register.
3. Where do MPs need to register?
MPs established or resident in the EU
MPs are required to register with the NRA in the EU Member State where they are established or resident. According to ACER and EU case law, “established” means“pursues a professional activity on a stable and continuous basis.”
If an MP is established in more than one member state, ACER expects the MP to register with the NRA located in the Member State in which the MP has its primary establishment.
MPs not established or resident in the EU
For MPs not established or resident in the EU may choose with which NRA to register, so long as the MP is active in the NRA’s Member State.
Do I have a choice where to register?
If you are an EU entity and are established or resident in only one Member State, you will be required to register in that Member State.
If you are an EU entity and are established in more than one Member State, you will be required to register in the Member State in which you have your primary establishment.
If you are a non-EU entity, you may choose in which Member State to register, as long as you are active in that Member State.
REMIT is a regulation and is directly applicable in each Member State (and therefore does not require implementation by the Member States); however, certain Member States may choose to “gold-plate” the REMIT standards. MPs that have a choice where to register should consider the local implementation of REMIT. Where an MP has a choice as to where it registers, it may want to take any locally- enhanced standards (e.g. on record-keeping and recording) into consideration.
In addition, Member States may introduce different sanctions (including criminal sanctions) for breach of the REMIT insider trading and market manipulation prohibitions and MPs may wish to consider whether registration in a Member State increases its exposure to, for example, criminal sanctions in that jurisdiction.
4. How do MPs register? MPs register via a web-based platform developed by ACER and the NRAs called the “Centralised European Registry for Energy Market Participants” (CEREMP)7.
The MP can complete the registration form on its own or it may allow a third party to submit its registration information on its behalf.
When using the CEREMP system, an individual will first need to register as a user of the CEREMP system and will then receive a User ID that will allow them to log into the system.
Once this User ID has been received, the individual will then be able to register MPs on the CEREMP system.
5. By when do MPs need to register? The registration process must be completed before the MP can enter into any transaction which is required to be reported to ACER under REMIT. Although the REMIT reporting obligation starts on 7 October 20159, it is technically possible for an MP to enter into a reportable trade before this date. This is because under a “backloading” reporting requirement, trades entered into before the reporting start date are reportable if they are still outstanding on the reporting start date for that type of trade. These trades must be reported within 90 days of the relevant reporting start date.
So, for practical purposes, MPs should regard 17 June 2015 as their effective deadline to submit registration information to their NRA10.
6. What information do MPs need to provide? The registration process consists of five sections11 of information that need to be completed by or on behalf of the MP:
Section 1: Data about the MP
Section 2: Data about natural persons linked to the MP
- To be completed for each natural person having a management role responsible for trading decisions, operational decisions or if they are the contact person for communications for the MP
Section 3: Data about the ultimate controller of the MP
- To be completed for each of the MP’s ultimate controllers or beneficiaries
Section 4: Data about the corporate structure of the MP
- To be completed for each related undertaking of the MP
Section 5: Data about the delegated parties for reporting on behalf of the MP12
- For those MPs who will be delegating reporting to a third party, this is to be completed for each third party delegated to report on behalf of the MP
MPs are required to submit all of the information related to Sections 1, 2, 3, and 4 and Section 5 (if applicable) before the registration form can be considered to be correctly submitted to the NRA. Only once these sections have been completed will MPs receive their ACER code.
7. Ongoing Requirements MPs are required to update their registration form with “any change which has taken place as regards the information provided in the registration form”13.
If this information is not updated promptly, the MP’s registration may be considered incomplete and the MP may be found to be in breach of Article 9 of REMIT14.
What should I be doing now?
- Review activities of non-EU and EU entities to determine which are regarded as MPs under REMIT and who needs to register. It is the entity, and not the group, which is required to be registered. An entity needs to register even if its parents and/or subsidiaries are registered.
- Determine in which EU member states entities must be registered and where there is an option, review the local implementation of REMIT to decide in which jurisdiction to register.
- Begin to collect the information required for the registration process.
- REGISTER by 17 June 201515.
Some other useful links:
REMIT REGISTRATION AND TRANSACTION REPORTING TIMELINE
Click here to view table