As market participants will not be allowed to trade until they are registered, it may potentially represent a barrier to trade in the internal energy market.
Registration will not be a one-off event, but rather an ongoing requirement due to obligation to keep information provided up-to-date. From the practical point of view it is therefore necessary to establish within corporate structures of market participants arrangements ensuring that new requirements will be properly and timely discharged.
It should be noted that market participants are under obligation to register even if they are located outside the European Union.
Another issue of potential significance for the wider market is the commercial exploitation for data contained in the part of the register publicly revealed by ACER.
On 18 April 2012 ACER has revealed Public Consultation Paper ‘REMIT Registration Format’ (PC_012_R_08). The document sets out preliminary views of the Agency with respect to the imminent registration for energy market participants.
Some of the information for REMIT Registration Format are quite basic and include:
o Legal entity name;
o Legal form;
o VAT number;
o Member State or country of establishment (head quarter);
Note - the issues referred to in this article have been subsequently specified in ACER Decision No 01/2012 of 26 June 2012 relating to the Registration Format pursuant to Article 9(3) of Regulation (EU) No 1227/2011, which can be accessed through the following link.
o Full address of establishment, including postal code;
o NRA which processes the registration;
o Energy Identifier Code (EIC, only if available);
o Bank Identifier Code (BIC, only if available);
o Other code used with TSOs, e.g. GS1: type and value (only if available);
o Legal Entity Identifier (LEI, only from when this new international code will be available);
o Place of publication of insider information;
o Website (URL).
Data on corporate structure
Registration with ACER will, however, also contain data on corporate structure needed to ensure the identification of “parent undertaking” and/or “related undertakings”. The type of relation will be established according to the Seventh Council Directive 83/349/EEC of 13 June 1983 (Articles 1, 2 and 12(1)).
The procedure will require the identification of each ultimate controller or beneficiary of the market participant’s trading activities. In that regard it is useful to note that the ultimate controller or beneficiary is not necessarily a market participant, (e.g. holding companies) and can be either a natural person or a legal entity.
ACER also points to the fact that according to Article 12(1) of the Seventh Council Directive 83/349/EEC of 13 June 1983, two undertakings are “related undertakings” if there is a unitary direction: this means that the proposed approach should catch intra-group relationships between two or more market participants, even when they are linked to each other only through a common parent undertaking not being a market participant itself. Such links among the registered operators must be recorded and updated in the European register.
The Agency believes that, for the purpose of REMIT, it is sufficient to require market participants to state the nature of any corporate relationship with other market participants already registered, selecting among the types listed in Directive 83/349/EEC. Practically, when a new market participant registers, the IT-system will notify the relevant National Regulatory Authority and the market participants already registered and identified by the new registrant as related or parent undertakings, of the relationship declared by the new registrant, in order to have their confirmation.
ACER considers that taking also into consideration the OECD recommendations for upfront disclosure mechanisms, further information must be collected for:
– Corporations, when a non publicly-traded corporation holds shares in a corporate entity, or when shares in the corporation are held by a trust or by a partnership, or in other few special cases;
– Trusts: in this case it is necessary to collect the identity of:
i. Individuals who furnish funds in the trust;
ii. The trust beneficiaries and the trustee;
iii. The persons who control the trust and make the investment decision.
– Partnerships: in this case it is necessary to collect the identity of:
i. The general partner as well as the limited partners;
ii. If a corporate entity is general or limited partner of a partnership, the ultimate beneficiary of the corporate entities.
– Foundation: in this case it is necessary to collect the identity of:
i. The designated beneficiaries of the foundation;
ii. The persons who are in control of the foundation and who are responsible for the allocation of its resources.
In fact, market participants not only have to register with a NRA before they can trade, but also have to update their registration profile in case of “any change which has taken place as regards the information provided in the registration form” (Article 9(5) of REMIT).
According to ACER the registration process could involve the following steps:
(a) The market participant submits its application for registration to the relevant NRA and provides the NRA with the data required in the registration format and, if the NRA so requires, a complementary set of country-relevant information or supporting documentation; it is the market participant’s responsibility to provide correct and complete information for the registration;
(b) The NRA performs (at least high-level) checks on the application, depending on national rules;
(c) After completing the checks, the NRA passes the information required by the registration format for the European register to the IT-system operated by the Agency;
(d) The Agency’s IT system will capture all registration information and issue an acknowledgement back to the requesting NRA. The acknowledgement will include the system identifier generated by the IT-system operated by the Agency;
(e) The NRA will complete the registration procedure and will inform the market participant accordingly;
(f) At the end of the procedure, the registration is simultaneously available in both the relevant national register and the European register.
Publication of the information recorded in the European register (or part of it)
According to Article 9(3), last subparagraph, of REMIT, “the Agency may decide to make the European register, or extracts thereof, publicly available provided that commercially sensitive information on individual market participants is not disclosed”.
The initial considerations by the ACER in that regard are that the publication of the European register (or part of it) is crucial, as ‘it enables organised markets, brokers and other categories defined in Article 8(4) to verify if the market participant is registered and can therefore be admitted to trading.’ ACER emphasises that registration does not provide any guarantee on the market participant’s creditworthiness or trading behaviour. This mention, is however, rather obvious.
The ambiguous issue may, however, be who would bear the responsibility for any inaccuracy of the information recorded in the European register. In ACER’s view the said liability should stay with the market participants who are the providers of their own information.
Information fields of the European register to be published
The ACER Agency intends to publish at least all information fields of the “basic information” section of the registration format. (i.e. points indicated at the outset under the heading ‘Basic information’).
The following points are, furthermore, regarded by the Agency as not suitable for publication:
• the information regarding the physical persons indicated as “Contact persons”;
• the information regarding corporate relationships with parent and related undertakings included in the “Corporate structure information” section (see above);
• the information on the “ultimate controller of beneficiary of the market participant’s trading activities”.
It will be up to National Regulatory Authority to decide on the publication of the information included in the “Country-relevant information” section (i.e. registration number in a local trade register (e.g. Chamber of commerce) and registration number issued by the relevant National Regulatory Authority (if already in place at national level).
Unique system identifier
There are several options for the setting up arrangements for unique system identifier necessary for using by market participants the IT system operated by the Agency. ACER mentions the following examples for system identifiers, capable of being exploited for this purpose:
• EIC is widely used in Europe – but not in all EU Member States – in dealing with TSOs, mostly in the electricity sector (e.g. balancing contracts); it is also widely used in brokered trading, but not universally; a point of complexity is that in some European countries, several different EIC codes (party codes or X-codes) are assigned to the same market participant, however each EIC code corresponds to one and only one market participant;
• In some EU Member States a code different from EIC is used in dealing with TSOs (according to an existing inter-TSO agreement, each TSO shall define either 1) the use of the EIC, or 2) the use of GS1 code, or 3) the use of both the EIC and GS1 scheme, except where national agreements exist on the use of a national coding scheme;
• BIC is used by financial regulators for the exchange of information on investment firms licensed under MiFID and is intended to be used under EMIR;
• LEI (Legal Entity Identifier) is still under development and is likely to be adopted in the future as world unique identifier, even though the timeline for full coverage is not yet defined;
• the VAT number has a full coverage throughout Europe (even though each Member State has its own structure for this code), but, at present, the VAT number is not adopted as unique identifier by most trading venues, as they use their own coding. Due to existence of “VAT-groups” in some Member States, it is questionable whether VAT number can be used as a unique identifier for the whole Europe.
Notwithstanding the choice between the multiplicity of existing classifications and the possibility for creating a new system specifically designed for REMIT needs, the IT-system operated by the Agency should be designed in such a way to generate, during the registration process, a unique system identifier to:
(a) Market participants;
(b) Entities listed in Article 8(4) of REMIT, under points (b) to (f), who can provide transaction data (third parties acting on behalf of the market participant, trade reporting systems, organised markets, trade matching systems and other persons professionally arranging transactions, trade repositories or competent authorities or ESMA);
(c) Providers of fundamental data, as foreseen by Article 8(5) of REMIT.
The Agency intends to keep totally separated the registration of market participants from the registration of other entities acting as transaction and fundamental data providers and therefore involved in REMIT reporting functions, but different from market participants. The Agency believes that these other entities acting as “data providers” should also register with the Agency, in order to be uniquely identified as transaction and fundamental data providers, but not as part of the market participants’ registration process.
State of play
ACER has currently invited all interested parties to provide comments to the consultation paper on REMIT Registration Format by 21 May 2012.
The format through which National Regulatory Authorities transmit the information on market participants to the ACER should be determined and published by 29 June 2012.