MiFID II interpretation undermines the EU Internal Electricity Market? The European energy regulators ACER and CEER unanimously argue this way and disagree with ESMA.
What sparked the fiercest discussion is whether the "REMIT carve-out" will be available to intermediaries without production, consumption or storage capabilities.
Considering, electricity changes hands multiple times before it reaches the final consumer, it is, however, extremely important to clear unequivocally whether intermediaries are able to conclude contracts which "must be physically settled" (the "REMIT carve-out" second constituent).
No doubt, electricity market is governed by specific rules. The current dispute is centered around whether actions like scheduling or nomination to the operator of the electricity supply network mean per se that contract "must be physically settled", or not.
This determination, involving the very mechanics of the electricity markets, impacts heavily on the product's status under MiFID II - i.e. whether the product at issue represents a financial instrument and, consequently, whether the counterparties involved are covered by financial regulation.