Navigating European Energy and Commodity Markets Regulation
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Regulatory Foundations: Financial Instruments, Venues and Trade Reporting
Aviv Handler
Section 1: Introduction
“Big Compliance” Hits Energy and Commodities
Regulatory Foundations: Financial Instruments, Venues and Trade Reporting
Section 2: Rule by Rule
EMIR
REMIT: The Energy Anti-abuse Rule
The Market Abuse Regulation: How Does it Apply to Energy and Commodities?
MiFID II: How Does It Apply to Energy and Commodities?
Other Regulations
Section 3: Architecture, Process and Summary
Technology Infrastructures Around Regulatory Compliance
Organisation, Process and Conclusion
Appendix A: Useful Links
Appendix B: Glossary
Appendix C: Determination of Trade Status
This chapter will cover three important concepts upon which many of the rules rest: what is a “financial instrument”? what are the types of trading venue? and what are the key issues around data reporting? It is important to understand these as they provide the basis for understanding a great deal of the legislation.
FINANCIAL VERSUS ENERGY
Chapter 1 included a brief overview of the difference between the financial regulation world and the wholesale energy regulation world. Each has a different set of regulations, regulators, rules and jurisdictions. The crucial factor in assessing the rule set under which an activity or a trade falls is whether it is impacted by financial legislation. Originally, MiFID11EC Directive 2004/39/EC. set the scope for this definition, with references made in various parts of the level 1 text to Annex I, in particular to Section C. This was amended in MiFID II, with some significant implications.
In principle, there are three “levels” of financial instrument that are relevant.
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Financial instruments: The superset of product types covered, which includes all clauses on MiFID II Annex I Section C.
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Derivatives: A subset of “financial
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