The definition of "market participant" applying within the REMIT Regulation compliance system has been precisely, however, broadly defined in REMIT itself.

         
          
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8 September 2023

European Parliament Report of 8 September 2023 on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 1227/2011 and (EU) 2019/942 to improve the Union’s protection against market manipulation in the wholesale energy market (A9-0261/2023) expands the definition of market participant to clarify that this term also covers distribution system operators, storage system operators and LNG system operators that enter into transactions in one or more wholesale markets.


16 November 2022

ACER explains that DMA clients are market participants under REMIT and have to register in CEREMP.

 

 
Placing an order in wholesale energy products is a self-standing leg of the definition - by placing an order the legal entity becomes a market participant even if it will not be a counterparty to the trade (ACER's Frequently Asked Questions (FAQs) on REMIT transaction reporting, 8 September 2015, Question 2.1.1).

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Market participant is any person, including transmission system operators, who enters into transactions, including the placing of orders to trade, in one or more wholesale energy market (Article 2(7) of REMIT).

 

At the end of 2022, the number of market participants registered in the European Register of Market Participants (CEREMP) was 16,110, which is 6% more than in 2021. The ratio between the actively reporting market participants and all registered market participants (61%) decreased by 4% compared to 2021. The gap between registered and reporting market participants concerns market participants only engaging in intragroup transactions and contracts for balancing services in electricity and natural gas who have to register, but do not need to report unless requested by ACER according to Article 4(1) of Commission Implementing Regulation (EU) 1348/2014 (REMIT Implementing Regulation), however the gap may partly also indicate inactivity or non-compliance with REMIT reporting obligations (REMIT Quarterly, Issue No. 31 /Q4 2022).

 

Significance of the notion of "market participant"

 

Agency for the Cooperation of Energy Regulators (ACER) in its Guidance on the application of REMIT recalled that the uniform understanding of the notion of market participant is crucial for following reasons:

1) the obligation to disclose inside information according to Article 4(1) of REMIT lies with the market participant;

2) according to Article 8(1) of REMIT, being a market participant entails the obligation to provide the Agency:

(i) with a record of wholesale energy market transactions, including orders to trade, by the market participant itself or through a person or authority listed in points (b) to (f) of Article 8(4) of REMIT (trade data) and

(ii) with the information described in Article 8(5) of REMIT (fundamental data);

3) pursuant to Article 9(1) of REMIT, market participants have to register with the competent national regulatory authority if entering into transactions which are required to be reported to the Agency in accordance with Article 8(1) of REMIT.

 

Examples of REMIT "market participants" in view of regulatory clarifications 

 

In the light of the ACER's understanding of the notions of wholesale energy market and wholesale energy products at least the following persons are market participants under REMIT if entering into transactions, including orders to trade, in one or more wholesale energy markets: 

  • Energy trading companies in the meaning of 'electricity undertaking' pursuant to Article 2(35) of Directive 2009/72/EC carrying out at least one of the following functions: transportation, supply, or purchase of electricity, and in the meaning of 'natural gas undertaking' pursuant to Article 2(1) of Directive 2009/73/EC carrying out at least one of the following functions: transportation, supply or purchase of natural gas, including LNG;
  • Producers of electricity or natural gas in the meaning of Article 2(2) of Directive 2009/72/EC and Article 2(1) of Directive 2009/73/EC, including producers supplying their production to their in-house trading unit or energy trading company;
  • Shippers of natural gas;
  • Wholesale customers in the meaning of Article 2(8) of Directive 2009/72/EC and Article 2(29) of Directive 2009/73/EC;
  • Transmission System Operators (TSOs) in the meaning of Article 2(4) of Directive 2009/72/EC and Directive 2009/73/EC;
  • Storage system operators (SSOs) in the meaning of Article 2(10) of Directive 2009/73/EC;
  • LNG system operators (LSOs) in the meaning of Article 2(12) of Directive 2009/73/EC, and
  • Investment firms in the meaning of Article 4(1) No 1 of Directive 2004/39/EC.


The crucial criterion for the assessment of whether a company is a market participant was considered the fact of entering into transactions, including the placing of orders to trade, in wholesale energy markets. 


Final customers

 

More information on the status of final customers under REMIT is available here.

 

Non-EU and non-EEA entities

 

Firms from non-EU and non-EEA countries are not excluded from the notion of "market participant" under REMIT rules, which means that they are subject to REMIT obligations to register and to report trade and fundamental data, if they enter into transactions in one or more wholesale energy markets.

 

 

ACER's clarification  on the scope of the notion of "market participant" with respect to derivatives contracts reporting

 

When a person only enters into transactions on derivatives traded outside the European Union that are only for financial settlement even though they are related to EU electricity or natural gas (for example a future or a swap that can only be financially settled) that person should not be considered a REMIT market participant and should not report those transactions, unless that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

For example, if a person enters into a transaction on a derivative contract related to EU gas and electricity (such as a futures contract only for financial settlement that is traded on exchange located outside the EU), that person will not be considered a REMIT market participant.

Another example is when a person enters into a transaction on an exchange traded (or bilaterally) financial swap on two floating gas prices for two monthly contracts i.e. (1) EU Natural Gas Futures contract and (2) U.S. Henry Hub Natural Gas Futures contract of the corresponding contract month, traded outside the EU, that person will not be considered a REMIT market participant.

However, if that person also enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets, e.g. enters on a physical trade (or derivative) for the delivery of gas or electricity (or transportation of gas or electricity) within the EU, that person is a market participant and has to report all the transactions on wholesale energy products including those trades outside the EU that are only for financial settlement.

If a person trades only REMIT-related financially-settled derivative contracts traded at organised market places outside the EU, that person is not a market participant and should not report those transactions.

Source: ACER's Trade Reporting User Manual (TRUM)

 

 

Transportation contracts - the export from the EU and import to the EU

 

In the Open Letter of 20 November 2020 (Ref. Ares(2020)6964593) the ACER explained also the issue of transportation contracts - the export from the EU and import to the EU. ACER reminded that Article 2(4)(c) of REMIT defines wholesale energy products as contracts relating to the transportation of electricity or natural gas in the Union, irrespective of where and how they are traded. In ACER’s understanding, as long as the contract for transportation of electricity or natural gas entails transportation in the Union (i.e. transportation between EU and EU, transportation between EU and non-EU, transportation between non-EU and EU), the concerned transportation contract is a REMIT-reportable wholesale energy product.

According to Article 2(7) of REMIT, a market participant is any person who enters into transactions in one or more wholesale energy markets (i.e. any market within the EU where wholesale energy products are traded). This applies irrespective of the location of the person. Accordingly, persons from non-EU and non-EEA countries are also covered by REMIT, provided that they enter into transactions in wholesale energy markets. Hence, parties to the above-mentioned transportation contracts (either concluded in primary explicit capacity allocation or on secondary markets) are REMIT market participants regardless of whether or not they are located outside the Union. Accordingly, the obligations to register with the competent NRA pursuant to Article 9(1) of REMIT and to report data to ACER according to Article 8(1) and (5) of REMIT also applies to such non-EU and non-EEA market participants. This stance has been later also acknowledged in ACER Q&As on REMIT as updated on 16 December 2020. 

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ACER Q&As on REMIT [updated on 16 December 2020]

Are gas and electricity transportation contracts for export from the EU and import to the EU reportable according to REMIT ?
If so, are the contracting parties of such contracts considered REMIT Market Participants, even if they can only accept / deliver energy on the NON-EU side of the border, where they are registered in ?

Article 2(4)(c) of REMIT defines wholesale energy products as contracts relating to the transportation of electricity or natural gas in the Union, irrespective of where and how they are traded.
In ACER’s understanding, as long as the contract for transportation of electricity or natural gas entails transportation in the Union (i.e. transportation between EU and EU, transportation between EU and non-EU, transportation between non-EU and EU) and as long as there is delivery in the EU at a given time, the concerned transportation contract is a REMIT reportable wholesale energy product.
According to Article 2(7) of REMIT, a market participant is any person who enters into transactions in one or more wholesale energy markets. This applies irrespective of the location of the person. Accordingly, persons from non-EU and non-EEA countries are also covered by REMIT, provided that they enter into transactions in wholesale energy markets. Hence, parties to the above mentioned transportation contracts (either concluded in primary explicit capacity allocation or on secondary markets) are REMIT market participants regardless of whether or not they are located outside the Union.
EU TSOs or third parties acting on their behalf shall report details of contracts referred to in Article 3(1)(b)(i) of the REMIT Implementing Regulation. The only exception concerns the gas transport capacity contracts related to upstream pipeline networks which are wholesale energy products but out of the reporting scope according to the interpretation given in Q&A III.3.40.


  

Distribution System Operators (DSOs)

 

The ACER understands electricity and gas distribution networks to be consumption units with regard to electricity or gas that is consumed in order to cover grid losses. Therefore, the Agency qualifies Distribution System Operators (DSOs) as a final customers and market participants under REMIT if the aforementioned grid losses are above the threshold of 600GWh per year (ACER's REMIT Q&A point III.3.16).

European Parliament Report of 8 September 2023 on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) No 1227/2011 and (EU) 2019/942 to improve the Union’s protection against market manipulation in the wholesale energy market (A9-0261/2023) also expands the definition of market participant to clarify that this term also covers distribution system operators, storage system operators and LNG system operators that enter into transactions in one or more wholesale markets.

 

Underground gas storage owners

 

Owners of underground storage are counterparties of transactions related to wholesale energy products under REMIT that must be reported to the ACER. Therefore, they will be required to register as market participants under REMIT (ACER's REMIT Q&A point II.4.31). ACER reasoned its stance with the fact that Article 3(1)(vi) of Commission Implementing Regulation (EU) No 1348/2014, refers to other contracts for the supply of natural gas with a delivery period longer than two days where delivery is in the European Union irrespective of where and how they are traded, in particular regardless of whether they are auctioned or continuously traded.

 
Citizen Energy Community (CEC)

 

According to ACER's Questions and Answers on REMIT (point II.3.9), Citizen Energy Community (CEC) "as a legal entity active on wholesale energy markets (but not necessarily each of its members separately), is considered a REMIT market participant. The same considerations apply to active consumers, as defined in Article 2 (8) of Regulation 2019/943".

 

Direct Market Access (DMA)

 

The definition of market participant does not specify if entering into transactions occurs directly or indirectly, hence small market players, adopting their own trading strategy via Direct Market Access (DMA), are market participants under REMIT and, as such, have to register in CEREMP (ACER document "Outcome of the consultation on the Transaction Reporting User Manual (TRUM) V.5.1 and its Annexes, including Annex II V.4.2, Annex III V.1.1, Annex V V.1.1, Annex VII V.1.1", 16 November 2022).

From the reporting perspective, the impact will be to indicate such DMA clients in the beneficiary field. TRUM states that Data Field (8) has to be considered in case that the trade is executed by a third party on behalf of a market participant. Hence, even if an entity enters indirectly (i.e. via a third party) into transactions on a wholesale energy market, it is considered a REMIT market participant.

The following explanation on direct market access has been added by the ACER to the TRUM: 

“Article 2 of REMIT identifies as market participants any person who enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets. Hence there is no distinction between entering into transactions in one or more wholesale energy markets directly or via a third entity.

The ACER is aware that market participants might decide to conclude transactions on organised market places via a third party account by virtue of a Direct Market Access (DMA) agreement. In such a case, the member of the OMP (DMA provider) allows a client (DMA client) to enter into transactions on or through the OMP on its own account and under its contractual arrangements.

When dealing with DMA, it is ACER's opinion that both the DMA provider and the DMA client falls under the definition of market participants under REMIT.

When the account of the DMA provider is used for the order lifecycle and for executing trades, then the DMA provider (not the DMA client), despite acting solely on behalf of third entities, is responsible for all trading activity and compliance with REMIT, and shall be reported in Data Field (1). DMA clients shall instead be identified using the Data Field (8) Beneficiary ID.”

 

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Based on the input provided by the industry, the ACER understands that the following parties may be involved in a regular trade cycle for concluding a derivative transaction:

  1. Exchange (Venue);
  2. Clearing House (CH);
  3. Exchange Members (EMs):
  4. Executing Brokers (EBs) which have some discretion on the placing of orders to trade on the exchange; or
  5. Firms providing Direct Market Access (DMA) to their clients (DMA provider).

• Client (A) of the Executing Broker or of the firm that provide DMA service, who is trading in its own discretion on behalf of itself or its clients (DMA client);

• Investment Manager (IM) which has investment discretion and is solely trading as agent on the account of clients through the Executing Broker;

• Client (1) of the Investment Manager (IM) who is the beneficiary of the transaction executed by the (IM);

• Clearing Broker (CB) of the Executing Broker (a clearing member of the Clearing House who is temporary clearing trades that an Executing Brokers executes on Exchange); and

• Clearing Broker (CB) of the Client (a clearing member of the Clearing House providing clearing services to end-clients).

 

 

EMIR/REMIT derivatives' reporting overlap

 

As REMIT uses the term market participant and EMIR uses the term counterparty to identify the reporting party, both terms are used in this context for the purpose of reporting. Thus, for the purpose of reporting, counterparty is considered equivalent to the market participant reporting the trade when entering into a transaction on a wholesale energy market. The other market participant is referred to as the "other counterparty".

Counterparty and the other counterparty within the EMIR reporting scheme is therefore considered equivalent of market participant and the other market participant for the purpose of reporting under REMIT. See the box for practical examples when for a party to a derivatives' contract is considered market participant within REMIT, and, in consequence, subject to REMIT reporting.

 

Brokers' interactions with REMIT

  

Clearing brokers and central counterparties (CCPs) are not considered "market participants" under REMIT as they do not enter into transactions in the REMIT sense i.e. do not enter into transactions in one or more wholesale energy markets (Annex III to the Trade Reporting User Manual, version 2.0, p. 3).

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Links:


Associations of energy market participants - Minutes from Roundtable meetings with the ACER

In the ACER's opinion this is in line with the meaning of entering into transaction according to Article 5 of MiFID I where the meaning of entering into transaction does not include actions related to option exercise, settlement or clearing. 

According to the regulators' view, executing brokers may act as principal before giving up the transaction for clearing and this seems to be the case for most of the transactions executed at regulated markets. As a consequence, executing brokers are considered as having entered orders to trade and having entered into transactions and, thus, they are REMIT market participants.

In this context the June 2020 edition of the TRUM (p. 18) contains the following clarification on the difference between a broker as an OMP and executing broker: 

"The Agency considers a broker a natural or legal person that arranges transactions between a buyer and a seller for a commission when the trade is executed. This is not necessarily an OMP. Broker platforms are mentioned as examples of OMPs, but this does not mean that all brokers automatically have to be considered OMPs. This will only be the case if they fulfil the OMP criteria stipulated in Article 2(4) of Commission Implementing Regulation (EU) No 1348/2014.

If a market participant places an order on an OMP through a broker (usually an executing broker) and this particular broker is the counterparty to the transaction, then the executing broker is a REMIT market participant and has reporting obligations for all its trades and orders to trade placed on the exchange, including those that the broker gives up.

An executing broker is a natural or legal person that executes transactions on an OMP on behalf of its clients. Since an executing broker places an order and executes it without bringing together “multiple third party” buying and selling side, the executing broker would not be considered an OMP.

In some circumstances, a broker (when considered a REMIT OMP) may offer the service of executing broker to their clients. The firm is providing two different services: one as OMP and one as executing broker. For the executing broker business the firm will be considered a REMIT market participant (please see Annex III to the TRUM available on the REMIT portal). This firm should register its executing broker business (and only that) as market participant with the relevant National Regulatory Authority.

Brokers (that are organised market places rather than executing brokers) are not market participants and should not appear as a counterparty."

 

ACER also underlines (Annex III to the Trade Reporting User Manual, version 2.0, p. 2), "the meaning of entering into transactions in EMIR is different than the meaning of entering into transaction in REMIT, where the latter refers to entering into transaction in "wholesale energy markets" and not to be counterparty to a contract, as CCPs or clearing members are."

 

Client relationship's treatment

 

Annex III to the TRUM ((version 2.0, p. 6) brings an important interpretation with respect to situation of indirect participation in the trading venue. ACER clarifies this with an example: 

Client (A) is NOT a member of the venue, but uses the trading systems of an Exchange Member (EM) to trade on the Central Limit Order Book (CLOB). In this particular case, the Agency believes that Client (A) is currently not considered a REMIT market participant entering into transactions which are required to be reported to the Agency in accordance with Article 8(1) of REMIT, unless it enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets (e.g. any other wholesale energy market). In this case the Exchange Member (EM) is the Market Participant and the (EM) shall report the transactions.

The above rule does not apply when Client (A) has its own membership of the exchange, but uses the trading systems of an Exchange Member (EM) to trade on the Central Limit Order Book (CLOB). In this particular case, the Agency believes that Client (A) is a market participant and has the obligation to report its transactions.

 

Agent's status under REMIT

 

If an entity acts in the pure agency capacity, it is not considered REMIT market participant, and, consequently, not burdened with REMIT reporting requirements. ACER's TRUM (version 2.0) explains this issue as follows (p. 40):

"For example, if party B is trading on behalf of party C, then party C is the beneficiary and party B is acting on behalf of C. As party B enters into a transaction in a wholesale energy market, or places an order to trade, party B is a market participant, unless party B always acts only as an agent. If party B always acts as an agent, in this case, it would not be a market participant according to REMIT and not appear in the report."

 
Also in the document "Outcome of the consultation on the Transaction Reporting User Manual (TRUM) V.5.1 and its Annexes, including Annex II V.4.2, Annex III V.1.1, Annex V V.1.1, Annex VII V.1.1" of 16 November 2022 ACER unequivocally stated: "if an agent never trades on its own behalf, then it is not considered a REMIT market participant and thus the beneficiary should appear in data Field (1)".

 

More detailed examples are set out in the TRUM Annex III:

 

Case 1: The Investment Manager (IM) has investment discretion with respect to the account of Client (1) and is acting solely as agent on behalf and on the account of its Client (1). The Investment Manager (IM) places an order to trade with the Executing Broker (EB), who trades on the Venue. Client (1) holds a clearing account with Clearing Member (CM). The Executing Broker (EB) and Clearing Member (CM) are the same legal entity. The Executing Broker gives up the trade to the Clearing Member. All parties involved are FCs/NFCs for purposes of EMIR.

ACER believes that the Executing Broker (EB) is considered to be a "Market Participant" under REMIT.

The Investment Manager (IM) is considered a market participant if it is itself a member of the exchange and Client (1) is currently not considered to be Market Participant unless Client (1) enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

If Client (1) is a Market Participant and the trade is reported to a Trade Repository under EMIR, its REMIT reporting obligation will have been met.

 

 

 

Case 2: The Investment Manager (IM) has investment discretion with respect to the account of Client (1) and is acting solely as agent on behalf and on the account of its Client (1). Client (1) holds a clearing account with Clearing Member (CM).
The Executing Broker (EB) and Clearing Member (CM) are not the same legal entity.
The Executing Broker gives up the trade to Clearing Member (CM).
All parties involved are FCs/NFCs for purposes of EMIR. If Client (1) is a Market Participant and the trade is reported to a Trade Repository under EMIR, its REMIT reporting obligation will have been met.

Same as for Case 1 above, ACER believes that the Executing Broker (EB) is considered to be a "Market Participant" under REMIT.

The Investment Manager (IM) is considered a market participant if it is itself a member of the exchange and Client (1) is currently not considered to be Market Participant unless Client (1) enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

Also in this case, if Client (1) is a Market Participant and the trade is reported to a Trade Repository under EMIR, its REMIT reporting obligation will have been met.

 

 

 

Case 3: The Investment Manager (IM) has investment discretion with respect to the accounts of Client (1) and Client (2), and is acting solely as agent on behalf and on the account of its clients. Client (1) holds a clearing account with Clearing Member (CM1) and Client (2) holds a clearing account with Clearing Member (CM2). After executing the trade, the Executing Broker (EB) gives up part of the trade to Clearing Member (CM1) and the other part to Clearing Member (CM2). Each Clearing Member will establish a back-to-back trade vis-à-vis the initial trade with Client (1) and Client (2) respectively. All parties involved are FCs/NFCs for purposes of EMIR with the exception of Client (2).

Same as for Case 1 above, the (EB) is considered to be a "Market Participant" under REMIT.

The Investment Manager (IM) is considered a market participant if it is itself a member of the exchange and Client (1) and Client (2) are currently not considered to be Market Participant unless Client (1) or (2) enter into transactions, including the placing of orders to trade, in one or more wholesale energy markets. If they are market participants, then they have to report the back to back transaction with the (CB).

 

This issue corresponds with the proper population of the Data Field (8) of the REMIT reporting standard regarding the beneficiary of the transaction. ACER's Trade Reporting User Manual (as updated in version 5.1) explains the population of the said Data Field (8) in the following way:

"This field indicates the ID of the beneficiary of the transaction, i.e. the identification of the entity on whose behalf the trading activity was carried out. Data Field (8) has to be considered in case the trading activity is carried out by a third party on behalf of another market participant. If the market participant reported in Data Field (1) coincides with the beneficiary of the transaction then Data Field (8) shall be left blank.

If the party reported in Data Field (1) is not the beneficiary of the transaction, the reporting market participant should identify the beneficiary in Data field (8) by a unique code registered in the European registry of market participants (CEREMP). For example, if market participant A is trading on behalf of party B, then party B is the beneficiary and market participant A is acting on behalf of B as an Agent, as defined in Data Field (10).

As market participant A enters into transactions on a wholesale energy market, party A is considered a market participant and has to be reported in Data Field (1). If party A always acts as an agent and does not enter into transaction in any of the EU wholesale energy markets on its own behalf, it is not considered a market participant according to REMIT.

In such a case, the identification code of party B should be reported in Data Field (1) and Data Field (8) shall be left blank. In this case party A should not appear in the report as market participant, unless the agreement between party A and party B foresees that the responsibility of the trading activity and the execution of the potential trades still lies with party A".


Legal status of branches under REMIT

 

 

Questions and Answers on REMIT (Question II.4.48)

 

Company 'A' from Member State X creates a branch office ('BO') in Member State Y. The BO obtains a licence to operate in Member State Y and Member State Z (licence is in the name of BO, not A). The BO is still the same legal entity as the mother company A, however, BO and A hold two distinct energy licences granted by the NRA. The BO operates in Member State Y and Member State Z and is an interface towards the NRAs and TSOs in these Member States. However, at the same time, A is the counterparty to all BO's framework agreements. Which entity should register as a market participant under Article 9(1) of REMIT: (i) company A, (ii) BO or (iii) both companies A and BO?

...

The obligation to register with the relevant NRA under Article 9(1) of REMIT applies to market participants (natural or legal persons) entering into transactions which are required to be reported pursuant to Article 8(1) of REMIT. Within a group of companies, all legal entities who enter into transactions that are required to be reported must register with the relevant NRA(s). In the present case, provided that the company A is always party to the contract used by the BO, only the company A has an obligation to register with the relevant NRA pursuant to Article 9(1) of REMIT.

 

 

ACER in its Questions and Answers on REMIT (Question II.4.48 - see box) underlined that within a group of companies, REMIT reporting requirement is placed on legal entities who enter into transactions (they in the first place must, obviously) register with the relevant National Regulatory Authority (NRA). Hence, in the situation where all the following conditions are met:

- the mother energy company establishes a branch office in another EU Member States, and

- the said branch office operates in the said another EU Member State and is an interface towards the NRA and TSOs in this Member State, and

- the branch office is the same legal entity as the mother company, and

- the branch office and the mother company hold two distinct energy licences granted by the NRAs in the above two different EU Member States,

- the branch office's licence is in the name of the branch office, not in the name of the mother company, and

the decisive element for establishing which entity should register and report under REMIT is the fact that the mother company is the counterparty to all branch office's framework agreements. 

Provided that the mother company is always a party to the contract used by the said branch office, only the mother company has an obligation to register with the relevant NRA pursuant to Article 9(1) of REMIT and report the respective trades.

 

 

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