By Collette O'Gorman, manager in Baringa Partner's
markets and trading practice
Emir has dominated recent headlines, and its implementation is
fresh in everyone's mind. But Remit is a different proposition.
While the two regulations are often mentioned in the same
breath, the industry would do well to consider their
The first is the driver behind each regulation. Emir was drawn
up in reaction to the credit crunch, with a focus on
understanding and managing the financial risk exposures arising
from transacting specifically in derivative financial
Remit’s primary focus is on market abuse and
market manipulation – it mandates increased
transparency in order to minimise abuse opportunities and data
collection to enable market monitoring. Whilst Emir requires
the reporting of trade data, there is not any specific Emir
obligations on behalf of Esma or national regulators regarding
the usage of the data. This contrasts with Remit, where there
is a specific obligation on Acer (Agency for the Cooperation of
Energy Regulators) to monitor the market.
The driver behind the regulation gives rise to the second
significant difference to Emir: the breadth and depth of data
which Acer is seeking to collect.
This includes data on market orders, standard and non-standard
trades and contracts, the availability, contracted capacity and
use of infrastructure and facilities, as well as data on supply
contracts to large consumers. Moreover, the exemptions on this
data collection are looking very limited.
The third difference is the scope of the regulation. Emir
applies to EU-registered companies regardless of the geographic
nature of their trades (e.g. a North American electricity swap
is in scope), whereas under Remit any wholesale trade, contract
(physical or financial) or infrastructure utilisation related
to an EU delivery point falls within scope, regardless of the
location of the counterparties. Non-EU companies outside of
Emir’s reach can easily be caught by
The impact of Remit will vary depending on each individual
organisation’s role within the market.
Nevertheless, some broad concerns will touch most, if not all,
Firstly, the definition of 'market orders’ is
still to be finalised. Participants are generally taking these
to mean orders placed through exchanges or brokers which are
made available to other market participants.
The general view is that exchanges and brokers are best placed
for reporting orders, though there remains concern over the
responsibility of organised marketplaces to do this and the
residual liability of participants.
The breadth of Remit reporting includes companies who aren't
perceived as "participating" in wholesale trading markets, such
as large consumers and small generators without direct market
access. These companies need to be educated on the implications
of Remit reporting for their business, but putting this into
practice may be difficult.
Under Emir, banks would often educate counterparties and
clients about reporting obligations, despite having no
obligation to do so. The question remains as to whether a
similar practice will be adopted by the larger participants in
the electricity and gas markets.
Once the IAs come into effect, REMIT sets a deadline of six
months for reporting to commence. Experience from other
reporting obligations is that the devil is in the detail when
it comes to full implementation. A window of six months is very
narrow for participants, trade repositories and RRMs to build,
test and go live - and that’s without mentioning
the impact of Christmas if the Act comes into force later this
The industry must hope that the IAs and the associated ACER
reporting documentation will be available in final form with a
much longer lead time.
Whilst much of the detail on Remit reporting is still to be
finalised, there is probably enough of a framework for market
participants to be undertaking an initial scoping analysis of
where and how their business may be impacted by the
Market participants will also need to decide how to structure
their implementation programmes, which may vary according to
their internal organisation, commercial arrangements, systems
One thing’s for certain: the implementation of
Remit is gathering pace.