When a deal was hammered out between EU lawmakers that exempted physical power and gas trades from counting as a derivative, the energy industry breathed a sigh of relief as it looked like it had avoided costly mandated clearing. But as this blog will show, that exemption doesn’t leave energy in the clear from regulations such as EMIR and MiFID II. Other traps exist in the wording of those regulations and directives that can pull energy companies within their scope. Beyond that, yet to gain much attention in energy is the Capital Requirements Directive, something some of the big hitters might have to watch out for.
And as the responses to a consultation show, the exemption for physical power and gas forwards has a way to go, with tricky semantics involved to defining what is a physical forward – can it be or must it be physical settled? This blog will write about the introduction of financial-style regulation on the European energy sector from REMIT to MiFID and onto criminal sanctions of market abuse, showing how their impact is really yet to be felt, and explain what it means for the everyday working practices of different parts of the industry. Regulation is a complex area. This blog will delve into the rules of the game.