Romanian regulator’s reporting duties ‘stifling liquidity’ – multiple sources

LONDON (ICIS)–Energy companies active in Romania have slammed regulator ANRE for imposing multiple requirements which “confuse the market” and “stifle liquidity”.

Domestic and foreign companies complained of what they called heavy and unnecessary reporting duties.

Complaints also included an unpredictable environment where decisions can be taken by ANRE without prior consultation, as well as opaque practices, which leave non-resident companies struggling to keep pace with domestic market developments.

Only last month the European Federation of Energy Traders (EFET) said in a study that ANRE imposed “multiple time-consuming” reporting requirements with “little to no added value,” urging the watchdog to streamline operations.

ICIS invited the watchdog to address the concerns raised by domestic and non-resident companies last week, with a list of 16 specific questions. The regulator did not reply by publication time.

BARRIER TO ENTRY

An ICIS investigation found that requirements imposed by ANRE were considered so onerous by one major company that it abandoned attempts to enter the market.

Speaking to ICIS, the representative of the large EU-based company said his firm had been interested in becoming active in the Romanian gas market, but the sheer amount of paperwork required and the watchdog’s lack of transparency in publishing documents in English persuaded them to bypass Romania in favour of other regional markets.

INITIATING ORDERS

Gas traders also pointed to a recent example where ANRE unexpectedly decided to reject a number of bids and offers placed by companies on the screens of the exchange BRM as part of a gas release programme obligation introduced this summer. This was done without prior warning or consultation, they said.

Under this obligation, gas producers as well as suppliers are required to bid and offer 40% of their volumes on centralised markets such as BRM. Companies are expected to place bids and offers within certain price ranges for an hour on the forward market and for two minutes on the spot.

Even though there is a certain price range within which bids and offers are placed, the highest bid and lowest offer can still fluctuate within the given time span in line with market movements.

This means that if, for example, a company places a bid at a certain price, other companies may respond with close offers until the two match, leading to transactions.

But a second source told ICIS that ANRE has now decided to dismiss any matching orders from the bid-offer obligation imposed under the gas release program. They say the watchdog insists that the only bids and offers that would fulfill the requirement would be those seen to have “initiated” either a buy or a sell action.

It is not clear to ICIS why ANRE would adopt this approach.

He said market participants reacted furiously to ANRE’s announcement noting that they had not been informed that matching orders would be discounted.

“The bid-offer obligation was introduced in July but they [ANRE] only told us they would reject matching orders a few weeks ago,” a trader said. “We have already planned our [bid-offer] quotas for the year and thought we were abiding by requirements. It’s now a month until the end of the year and they tell us that what we’ve done so far won’t be taken into consideration,” he said.

In a letter sent to ANRE by BRM, and seen by ICIS, the exchange explained that matching orders were in fact new orders and therefore should be taken in consideration.

BRM said companies were acting in good faith, placing bids and offers, which respond to real-time market movements and insisted that any decision to reject buy or sell orders would penalise precisely those companies which are most active in the market, potentially throttling liquidity.

HEFTY REQUIREMENTS

A third trader said the latest ANRE decision was an example of excessive market intervention without prior consultation with participants.

He said companies in the electricity and natural gas sectors were also under constant pressure to submit monthly and annual reports, which often include data that ANRE could access anyway via the scheduling platforms of the electricity and gas grid operators Transelectrica and Transgaz.

The trader said ANRE could also access wholesale trading information which is already submitted under EU rules to the REMIT portal, a platform operated by the EU’s Agency for the Cooperation of Energy Regulators (ACER). It is unclear whether ANRE has developed a relevant platform that would allow it to access the REMIT portal.

Traders say ANRE requests that such data be submitted on a monthly basis to include all trades concluded on different platforms as well as broken down by counterparties.

Gas traders have the additional obligation to report bids and offers placed on centralised markets under the gas release program requirements.

“Hungary, for example, also has reporting obligations, but they are nowhere near as detailed as in Romania,” the trader said.

DIFFICULT COMMUNICATION

A fourth trader active in the gas market said companies had to input data on a platform which was outdated and difficult to use.

“It [the platform] is a grandmother-generation platform. It doesn’t even work in Google Chrome. You have to use older [Internet] Explorer versions to input the data,” he said, noting that ANRE also even asked companies to send the same information by post but many participants were refusing to do so for fear of spreading the Covid-19 virus.

A fifth trader said ANRE also requested annual reports where companies have to specify how many people they employ and what their academic background was.

“I understand they may want to see such data for distribution companies to ensure these have the right personnel to do the job, but why do they need this information for trading companies?” he said.

The fourth trader said many companies active in the gas market also had problems getting through to ANRE staff for guidance.

“They don’t answer the phone and when they do reply to e-mails they direct you to read their latest orders and regulations,” he said.

“That in itself is confusing because they [ANRE] issue so many documents which modify previous orders and regulations that you don’t even know which one was the latest version. If you can’t speak to anyone on the phone to guide you, you wouldn’t know what to make of all these documents, particularly if you’ve just joined the market,” he said.

TRANSLATION

Several non-resident companies said they found it difficult to keep pace with changes because most documents were published in Romanian, in pdf formats, which made it impossible even to translate them via online services. Understanding them would require paying for translation.

The EFET report published last month singled out ANRE, gas and electricity operators Transgaz and Transelectrica, as well as state-owned exchange OPCOM for failing to comply with English-language translation requirements.

A sixth trader said the sheer amount of paperwork requested by ANRE was consuming time and forcing companies to divert resources to address these requirements.

“If you don’t comply, you end up with hefty penalties,” he said. “It feels as though they [ANRE] are forcing us to submit information that is often unnecessary,” he said.

Q&A: EU data reporting requirements

Under EU rules companies active in wholesale trading are required to supply trading data to the REMIT portal, a platform operated by the Agency for the Cooperation of Energy Regulators (ACER). In this Q&A, ICIS explains the requirements, how national regulators interact with ACER on data sharing and whether national watchdogs may also request separate information from market participants.

Q: Under EU law, who exactly is required to report transactions data to the REMIT portal operated by ACER – exchanges only or also individual companies and brokers?

A: Market participants, or third parties acting on their behalf, are obliged to report records of wholesale energy market transactions, including orders to trade placed on organised markets. The details of the records to be reported are specified in the Commission Implementing Regulation (EU) 1348/2014. Organised market places (e.g. exchanges, brokers) are required to offer data reporting agreements on the request of market participants. ACER has currently 118 registered reporting parties which are reporting on behalf of around 15,500 market participants registered with National Regulatory Authorities.

Q: If data is submitted to ACER under REMIT is there a need for national regulators to require the same data from companies active in their markets or does REMIT cover all reporting requirements?

A: Data collection under REMIT is for the purpose of detecting and preventing trading based on inside information and market manipulation. ACER has put mechanisms in place to share the collected REMIT data with National Regulatory Authorities. Both REMIT and the REMIT Implementing Regulation specify that the collection of data by the agency is without prejudice to the right of national authorities to collect additional data for national purposes.

Q: What arrangements are in place to facilitate the communication between ACER and national regulators in terms of access to data? Do national regulators have to put in place a dedicated platform that allows them to access this information? If so, is it compulsory for national regulators to put in place such a platform?

A: ACER has established mechanisms to share information it receives with national regulatory authorities and gives access to the data sharing mechanisms to authorities which have set up systems enabling ACER to meet its operational reliability requirements of Article 12(1) of REMIT. This provision obliges ACER to ensure the confidentiality, integrity and protection of the information collected under REMIT. National regulatory authorities which have set up systems for data sharing purposes and which ensure the confidentiality, integrity and protection of the information which they receive from ACER will be able to receive access to ACER’s data sharing mechanisms.