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Regulations set to shake up energy trading in 2014

09 Jan 2014 10:43:18 | csd


A swathe of new regulations is set to change the trading landscape in 2014, with new hybrid trading platforms just one of the noteworthy changes traders will have to deal with.

The obligation to report trades under two different sections of EU legislation is another change energy companies will have to face up to in 2014.

From 12 February, energy trading firms will be obliged to report trades to one of six approved trade repositories under the European Market Infrastructure Regulation (EMIR) ( see EDEM 8 November 2013 ).

While the obligation to report trades will happen regardless, whether those trades count towards a €3bn clearing threshold is still up for debate ( see ESGM/EDEM 16 December 2013 ).

This is because the text of the updated version of the Markets in Financial Instruments Directive (MiFID II) has yet to be agreed.

The lack of agreement on definition of a financial derivative – and whether this includes physical power, gas and coal forwards – scuppered the latest round of talks on 18 December aimed at signing off the MiFID II text ( see ESGM/EDEM/CSD 19 December 2013 ).

Trading platforms such as Trayport and Griffin came up with a non-multilateral trading facility (non-MTF) to keep physical energy forwards from being swept into EMIR. The non-MTF model introduces an element of broker discretion.

Any trade on an MTF platform is automatically included in EMIR, and most brokers active in the energy market hold MTF licences, which is why the non-MTF model is needed ( see ESGM/EDEM 15 November 2013 ).

But the classification of non-MTF platforms has become a major sticking point to agreeing the text for MiFID.

The European Commission is pushing for the widest possible scope to the definition of financial derivatives, essentially to include physical energy forwards or trades on non-MTF platforms ( see ESGM/EDEM 19 September 2013 ). If the Commission gets its way, then the non-MTF model would not keep energy forwards from being included in EMIR. The next round of talks are on 14 January.


Energy firms will also likely have to start reporting trades under the Regulation of Energy Market Integrity and Transparency in 2014.

The regulation is expected to be adopted in Q2 next year, which would mean reporting obligations begin in Q4 ( see ESGM/EDEM 27 November 2013 ).

European energy companies will have to register on national platforms during Q1, but details of how trades should be reported under REMIT are still unclear.

Long-term, REMIT legislation will require standard and non-standard wholesale contracts to be reported, as well as consumer contracts of more than 600GWh. Fionn O’Raghallaigh

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