REMIT 2 is Published in the Official Journal of the European Union

The revision of the REMIT regulation, adopted by the European Parliament on 29 February 2024 (click here) and by the European Council on 18 March 2024 (click here), will enter into force on 7 May 2024, and introduce new measures to improve the protection of the EU, its businesses and citizens of market abuse. Note that certain provisions enter into force at a later date.

REMIT 2 Key Changes 

A number of new changes are introduced within REMIT 2 as follows:

1. Designation of a local EU representative for Market participants who are resident or established in a third country;
2. Alignment of market manipulation and inside information definitions between MAR and REMIT;
3. Broadening the scope of wholesale energy product definition;
4. Amendments to the scope of reporting obligations; 
5. Authorisation requirement for (Inside Information Platforms) IIPs and disclosure of inside information; 
6. Authorisation requirement for (Registered Reporting Mechanism) RRM; 
7. Reporting obligation by PPAETs; 
8. Notification of the use of algorithmic trading;
9. LNG price assessments, LNG benchmarks and LNG market data reporting; and
10. Increased investigative powers by ACER. 

Norton Rose Fulbright, a law firm, provides a helpful summary of the above changes (click here).

ACER Open Letter

ACER’s open letter covers several of the above REMIT changes and provides further compliance guidance to market participants on the following topics:

1. Modification of the definition of OMP and their obligations;
2. Declaration of natural gas and electricity storage contracts;
3. Declaration of balancing contracts;
4. Declaration of 'exposures' reporting pursuant to Article 8(1) of the revised REMIT Regulation;
5. Modification of the definition of wholesale energy products with regard in particular to single daily and intra-day coupling data (SDAC and SIDC) for electricity;
6. Notification of the use of algorithmic trading;
7. Notification when market participants provide direct electronic access (DEA) to an OMP;
8. Obligations of market participants established or resident in a third country outside the European Union;
9. New delegated acts on IIP and RRM; and
10. Introduction to the concept of PPAET and their obligations.

[1] Modification of the definition of OMP and their obligations.

OMP Definition. 

Article 2(4) provides an updated definition on an OMP as follows:

"'Organised Marketplace’ or ‘OMP’ means an energy exchange, an energy broker, an energy capacity platform or any other system or facility in which multiple third-party buying or selling interests in wholesale energy products interact in a way that may result in a transaction."

ACER provides additional guidance on OMPs and their obligations as follows:

• The new OMP definition specifically mentions that energy capacity platforms are considered as OMPs, in addition to energy exchanges and energy brokers which were also mentioned in the old definition.
• Persons professionally arranging transactions (PPATs) and trading venues are still to be considered as OMPs when they fall under the generic description of ‘other system or facility in which multiple third-party buying or selling interests in wholesale energy products interact in a way that may result in a transaction’ in the new definition.
• An OMP can be a system or facility in which multiple third-party buying or selling interests in wholesale energy products interact in a way that may result in a transaction. This may include systems or facilities where one seller interacts with many buyers or one buyer interacts with many sellers if the rest of the OMP criteria is fulfilled.

ACER noted that it does not expect ‘new OMPs’ (i.e. OMPs which only fulfil the OMP definition of the amended REMIT but did not fulfil the OMP definition of the REMIT Implementing Regulation) to commence reporting data not yet foreseen in the REMIT Implementing Regulation until the REMIT Implementing Regulation has been revised.

OMP Reporting Obligations. 

Paragraph (12) of the revised REMIT extends reporting requirements for all market participants and OMPs as follows:

"In order to improve the Agency’s wholesale energy market monitoring and make data collection more complete, the current reporting regime needs improvement. 

The data collected should be expanded to overcome gaps in the data collection and should include coupled markets, new balancing markets, contracts for balancing markets, allocated transmission capacities and products that have potential delivery in the Union. 

OMPs should be required to make available to the Agency data relating to the order book or, upon request, provide the Agency with access, without delay, to the order book. Order book providers should also be designated as persons professionally arranging transactions subject to the obligation to monitor and report suspected breaches of this Regulation."

Article 8(1a) of the amended REMIT requires the obligation for OMPs to report data relating to their order books as follows:

"For the purpose of reporting records of transactions in the wholesale energy market, including orders to trade, entered, concluded or executed at organised marketplaces, those OMPs, or third parties on their behalf, shall:

(a) make available to the Agency data relating to the order book, in accordance with the specifications set out in the Implementing Regulation (EU) No 1348/2014, thereby fulfilling on behalf of market participants their obligations pursuant to paragraph 1 of this Article; or,

(b) upon the Agency’s request, give the Agency access without delay to the order book so that the Agency is able to monitor trading on the wholesale energy market.

By ... [12 months from the date of entry into force of this amending Regulation], the Commission shall adopt implementing acts specifying the further details regarding the operation of this paragraph, including the specific arrangements for ensuring effective data reporting. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 21(2)."

Per ACER’s open letter,

According to point (a),

• OMPs shall report to ACER the data relating to the order book(s) for all market participants trading on the OMP, thereby fulfilling the market participants reporting obligations.
• Market participants are therefore not expected to keep reporting this data themselves, they would however still have to report data for the trading activity that takes place outside of an OMP, such as bilateral trading.
• ACER expects OMPs to start reporting data relating to the order book(s) for all the market participants trading on the OMP, on the basis of current reporting standards detailed in the REMIT Implementing Regulation.
• Order book reporting should be done following the Transaction Reporting User Manual (TRUM) and the Manual of Procedures. In particular, it is expected that orders and trades constituting an order book are reported to ACER via Table 1, as per the Annex of the REMIT Implementing Regulation.

According to point (b),

• ACER can, where necessary and proportionate, request OMPs to provide access to the order books.
• This would, for example, entail access to systems, applications and tools offered by OMPs to market participants enabling them to enter into transactions, including placing orders to trade.
• This also includes to provide ACER ad-hoc access to details on orders and trades stored in the OMPs systems during a specified time period, for market monitoring and data quality purposes.
• Regarding order book data that may already have been reported under Regulation (EU) No 648/2012 (EMIR) or Regulation (EU) No 600/2014 (MiFIR), the data must also be reported to ACER under the amended REMIT. Providing data relating to the order book(s) under the amended REMIT, including transactions already reported under financial regulations, will enable ACER and NRAs efficient market monitoring.

 RegTrail Insights

The expanded definition of an OMP to include an ‘energy capacity platform’ and ‘systems or facilities where one seller interacts with many buyers’ appears to infer that Transmission System Operator (TSO) systems will now be in scope of REMIT reporting.

Reporting requirements for new OMPs will not take effect until the new ACER Implementing Regulation takes effect which is anticipated by the end of 2024.

In addition to OMP reporting obligations, the disclosure of order books by OMPs to ACER will amplify its surveillance monitoring capabilities. This in turn will increase the demand on market participants to access and incorporate additional order book market data into their surveillance monitoring capabilities.

That being said, it is not clear how order book data from smaller OMPs will become readily available to market participants and rather may only be transparent and available to ACER and NRAs for regulator level surveillance monitoring purposes.

[2] Declaration of natural gas and electricity storage contracts. 

Article 2 definitions for in scope contracts was expanded to include storage contracts for natural gas and electricity. ACER provides further guidance on reporting of these new obligations noting that until the updated REMIT Implementing Regulation, expected to be published by the end of 2024, reporting of storage as fundamental data (as per Article 9 of current REMIT Implementing Guide) will continue.

• Storage contracts and related derivatives will be considered wholesale energy products. However, details for the reporting of storage contracts and related derivatives on a regular basis are currently not included in the REMIT Implementing Regulation, these details must thus be included in the yet to be amended REMIT Implementing Regulation.
• The reporting of storage as fundamental data on the basis of Article 9 of the REMIT Implementing Regulation will continue until the REMIT Implementing Regulation has been revised.

[3] Declaration of balancing contracts. 

ACER notes that both balancing market data and reporting of contracts for balancing services will be reported by OMPs through their reporting of detailed order books. Until the updated REMIT Implementing Regulation is released, ad-hoc reporting of contractors for balancing services will continue (as per Article (4) of the current REMIT Implementing Regulation).

• It is expected that balancing market data will be reported through OMPs reporting details of the order books.
• Details for the reporting of balancing market data on a regular basis are currently not included in the REMIT Implementing Regulation, these details must thus be included in the yet-to-be amended REMIT Implementing Regulation.
• The possible ad-hoc reporting of contracts for balancing services on the basis of Article 4 of the REMIT Implementing Regulation will continue until the REMIT Implementing Regulation has been revised.

[4] Declaration of 'exposures' reporting pursuant to Article 8(1) of the revised REMIT Regulation.

Article 8(1) is updated to include reporting of a market participant’s exposures including those that are over the counter (OTC) as follows:

"Market participants, or a person or an entity listed in paragraph 4, points (b) to (f) acting on their behalf, shall provide the Agency with a record of wholesale energy market transactions, including orders to trade. 

The information reported shall include the precise identification of the wholesale energy products bought and sold, the price and quantity agreed, the dates and times of execution, the parties to the transaction and the intermediate or final beneficiaries of the transaction and any other relevant information. 

Market participants shall include information about their exposures, detailed by product, including the transactions that occur over the counter."

ACER again noted that details for the reporting of exposures are currently not included in the current REMIT Implementing Regulation and thus must be included in the yet to be amended REMIT Implementing Regulation due later this year. 

[5] Modification of the definition of wholesale energy products with regard in particular to single day-ahead and single intra-day coupling data (SDAC and SIDC) for electricity.

Paragraph (19) of the revised REMIT outlines the updated definition of wholesale energy products to include those trades and orders placed in the SDAC and SIDC markets, by market participants inside the European Union and residing in a Third Country as follows:

"(19) Commission Regulation (EU) 2015/1222 (12) provides for the possibility for third-country participation in the Union single day-ahead and intraday coupling in the electricity sector. 

Since market-coupling operators use a specific algorithm to match bids and offers in an optimal manner, this may result in orders to trade being placed in a third country participating in the Union single day-ahead and intraday coupling but resulting in a contract for the supply of electricity with delivery in the Union. 

The placing of such orders to trade in third countries participating in the Union single day-ahead and intraday coupling that may result in delivery in the Union should be covered by the definition of wholesale energy products pursuant to this Regulation."

ACER provides further clarification noting that all market participants trading on SIDC or SDAC will need to register and report their trading activities on these markets as follows:

• Contracts and related derivatives for the supply of electricity which may result in delivery in the Union, as a result of single day-ahead and intraday coupling, will be considered as wholesale energy products.
• ACER expects all market participants, including third country market participants trading on SIDC or SDAC to register following Article 9 of REMIT and report their trading activities on these markets.
• ACER expects these contracts to be reported on the basis of current reporting standards in line with the REMIT Implementing Regulation and in compliance with the order book reporting requirement explained above.

[6] Notification of the use of algorithmic trading.

Article 5(a) sets out conditions for market participants to follow when notifying both NRAs of the Member States where they are registered as well as to ACER on their algorithmic trading activities.

Paragraph (1) provides an overview of ACER’s expectations for market participants who engage in algo trading as follows:

"A market participant that engages in algorithmic trading shall have in place effective systems and risk controls suitable to the business it operates to ensure that its trading systems are resilient and have sufficient capacity, are subject to appropriate trading thresholds and limits and prevent the sending of erroneous orders to trade or otherwise function in a way that may create or contribute to a disorderly market. 

The market participant shall also have in place effective systems and risk controls to ensure that the trading systems comply with this Regulation and with the rules of an OMP to which it is connected. The market participant shall have in place effective business continuity arrangements to deal with any failure of its trading systems and shall ensure that its systems are fully tested and properly monitored so that they meet the requirements laid down in this paragraph."

Paragraph (2) provides further detail into the type of information that market participants may need to provide to their respective NRA as follows:

"The national regulatory authority of the Member State where the market participant is registered pursuant to Article 9(1), may require the market participant to provide, on a regular or ad hoc basis, a description of the nature of its algorithmic trading strategies, details of the trading parameters or limits to which the trading system is subject, key compliance and risk controls that are in place to ensure that the requirements laid down in paragraph 1 of this Article are satisfied and details of the testing of its trading systems."

ACER provides clarification guidance on algo trading notifications to NRA and ACER as follows:

• Market participants that engage in algorithmic trading shall notify both the NRA in the Member State where they are registered as well as ACER. Market participants will need to provide the notification as of entry into force of the amended REMIT.
• Once the amended REMIT has been published in the Official Journal of the European Union, ACER will enable market participants to provide this notification through CEREMP, thereby notifying both the relevant NRA and ACER.
• Please note that market participants registered in Italy, Romania and Slovenia will have to notify the relevant NRA directly, and by doing so they will be considered to have notified also ACER.

The requirement to notify ACER and the NRAs of their algo activities does not leave firms much time to act given the May deadline.

[7] Notification when market participants provide direct electronic access (DEA) to an OMP. 

Paragraph (18) of revised REMIT outlines that providers of DEA services are considered PPAT as follows:

"Persons professionally arranging or executing transactions should have the obligation to report suspicious transactions in breach of Regulation (EU) No 1227/2011 with regard to insider trading and market manipulation and, in order to enhance the possibility of enforcement of such breaches, should also have the obligation to report suspicious orders and potential breaches of the obligation to publish inside information. 

Direct electronic access providers and order book providers are considered to be persons professionally arranging transactions."

Market participants providing direct electronic access to an OMP must report this to ACER and to the National Regulatory Authority of the Member State where the market participant is registered pursuant to Article 9(1) of the amending regulation. The definition of direct electronic access and OMP appears in Article 2.19 and 2.20 of the amending regulation.

ACER clarifies the notification approach using CEREMP as follows:

• Market participants that provide direct electronic access to an OMP shall notify both the NRA in the Member State where they are registered as well as ACER.
• Market participants will need to provide the notification as of entry into force of the amended REMIT. Once the amended REMIT has been published in the Official Journal of the European Union, ACER will enable market participants to provide this notification through CEREMP, thereby notifying both the relevant NRA and ACER.
• Please note that market participants registered in Italy, Romania and Slovenia will have to notify the relevant NRA directly, and by doing so they will be considered to have notified also ACER.

[8] Obligations of market participants established or resident in a third country outside the European Union.

Paragraph (24) of the revised REMIT explains the definition of a market participant who does not reside in the European Union but transacts in European wholesale energy markets as follows:

"(24) Where a market participant that is not resident or established in the Union is active within the Union, it should designate a representative in the Union. The representative should be explicitly designated by a written mandate of the market participant to be authorised to act on its behalf. It should be possible for the national regulatory authorities or the Agency to address the representative with regard to the obligations laid down in this Regulation."

Article 9 is amended in the revised REMIT as follows:

"By 8 November 2024, market participants established or resident in a third country that enter into transactions that are required to be reported to the Agency pursuant to Article 8(1):

(a) shall designate a representative in a Member State in which the market participants are active on the wholesale energy markets, and shall register with the national regulatory authority of that Member State. The representative shall be designated by a written mandate and shall be authorised to act on the market participants’ behalf;

(b) shall mandate their designated representative for the purpose of being addressed in addition to or on their behalf, by the national regulatory authorities or the Agency, on all issues necessary for the receipt of, compliance with and enforcement of decisions or requests for information issued in relation to this Regulation; 

(c) shall provide their designated representative with the necessary powers and means to guarantee their efficient and timely cooperation with the national regulatory authorities or the Agency and to comply with the decisions and requests for information of the national regulatory authorities or the Agency issued in relation to this Regulation, including providing access to the requested information; and

(d) shall notify the name, email address, postal address and telephone number of their designated representative to the national regulatory authority of the Member State where that designated representative resides or is established and to the Agency."

ACER provides further clarification on the process market participants must follow when designating a representative in a Member State:

• Market participants resident or established in a third country that enter into transactions which are required to be reported to ACER in accordance with Article 8(1) shall designate a representative in a Member State in which they are active and register in that Member State.
• This means the registration and designation must be in the same Member State, however, ACER considers it sufficient to be registered and have a designated representative in one Member State only for the whole of the European Union.
• The market participant shall also notify the name, email address, postal address, and telephone number of their designated representative to ACER and to the NRA of the Member State where that designated representative resides or is established.
• Before the entry into force of this obligation, ACER will enable market participants to provide this notification through CEREMP, thereby notifying both the relevant NRA and ACER.
• Please note that market participants registered in Italy, Romania and Slovenia will have to notify the NRA directly, and by doing so they will be considered to have notified also ACER.

[9] New delegated acts on Inside Information Platforms (IIP)/ Registered Reporting Mechanism (RRM). 

By 8 May 2025, ACER shall develop and operate a platform serving as a sector-specific electronic access point for inside information disclosed. Until this platform and the associated delegated REMIT acts are adopted, no new IIPs and RRMs will be able to register and become authorised. All current IIP and RRM platforms will be permitted to continue operating until ACER adopts a decision regarding updated authorisation processes.

Below is a summary of ACER’s clarification observations:

• Articles 4a and 9a of the amended REMIT foresee new delegated acts. The new obligations on IIPs and RRMs stipulated in Articles 4a and 9a respectively will not enter into force until these new delegated acts have been adopted, in accordance with Article 22 of the amended REMIT.
• The authorization processes for IIPs and RRMs will therefore not start until the new delegated acts have been adopted.
• IIPs and RRM’s currently registered by ACER and included in the ACER’s list of IIPs and RRM’s will be allowed to continue operating until ACER adopts a decision regarding their authorization.

[10] Introduction to the concept of Persons Professionally Arranging or Executing Transactions (PPAET) and their obligations.

A new definition for PPAET is introduced in the revised REMIT under Article 2 (8a) as follows:

"‘Person professionally arranging or executing transactions’ means a person professionally engaged in the reception and transmission of orders for, or in the execution of transactions in, wholesale energy products."

ACER spends considerable effort providing guidance on the new definition and calls out new obligations for PPAETs under Article 15.

Recitals 12 and 18 of the amended REMIT also make reference to the concept of PPAETs, with the underlying objectives to improve the Agency’s market monitoring and data collection regimes and to make them more complete, as well as to enhance the possibility of enforcement of market abuse breaches.

ACER notes that existing guidance on PPAT available in the ‘6^th Edition of the ACER Guidance on application of REMIT’ provides examples and obligations that will be expanded on later this year to address PPAET obligations. Updated guidance on application of obligations for PPAETs will be issued by ACER over the course of 2024.

In addition, ACER outlines new PPAET obligations based on Article 15 as follows:

• PPAETs will have an obligation under Article 15 paragraphs 1 and 2 to notify ACER and the relevant NRAs (NRA of the Member State in which the market participant involved in the potential breach is registered, and the NRA of the Member State where the wholesale energy product is to be delivered) about any potential breaches of Articles 3, 4 or 5 of REMIT.
• Article 15 paragraphs 1 and 2 of the amended REMIT specify that the PPAETs who reasonably suspect that an order to trade or a transaction, including any cancellation or modification thereof, whether placed on or outside an OMP, could breach Article 3, 4 or 5 of of REMIT shall notify ACER and the relevant national regulatory authority and that such notifications must be carried out without further delay and in any event no later than four weeks from the day on which that person becomes aware of the suspicious event.
• ACER will update the 6th Edition of the ACER Guidance on the Application of REMIT to provide additional clarity on this new obligation.
• Article 15(2) imposes obligations on any Persons Professionally Executing Transactions (PPETs - a term not defined by the revised REMIT) under Article 16 of Regulation (EU) No 596/2014 (MAR) who also executes transactions in wholesale energy products that are not financial instruments.
• To this end, and by analogy to ESMA’s interpretation of the definition of ‘persons professionally arranging or executing transactions’ laid down in point 28 of Article 3(1) of MAR, in the absence of any reference in the definition that would limit the scope and exclude particular categories of persons regulated by other financial or energy European legislation, ACER considers that the obligations stipulated under Article 15(2) apply broadly.
• The 6th Edition of the ACER Guidance on the application of REMIT will be updated in the course of 2024 to reflect the new obligations related to PPETs in the amended REMIT.
• ACER acknowledges that monitoring obligations by PPAETs pursuant to Article 15 paragraphs 1 and 2 should be reasonable and proportionate and not go beyond publicly available information and the data available to the PPAET.
• The amended REMIT envisages that obligations for PPATs in Article 15 (1) shall apply upon the entry into force of the amended REMIT. Notably, on the 20th day following the publication in the Official Journal of the European Union. However, obligations for PPETs under Article 15 (2) shall apply from six months upon the entry into force of the amended REMIT Regulation.

 RegTrail Insights

The updated PPAET definition will likely require many energy trading firms active on venues like EPEX Spot and Nord Pool to have surveillance in place in order to detect and report suspicious trading activity as well as potential violations of the obligation to disclose insider information.

Article 3 (c) notes that “Article 1, point (18), as regards Article 15(2) of Regulation (EU) No 1227/2011, shall apply from 8 November 2024” meaning firms have until November to review and implement systems or expand the coverage of existing systems.

Article 15(2) specifically stipulates that market participants who also trade in financial instruments must report their own suspicious energy transactions and orders to the relevant NRA and to ACER, via ACER’s notification platform.

Any firm who is in scope of REMIT will now require systems to monitor for suspicious transactions, a significant step change for many firms who may have only previously provided light touch surveillance using manual monitoring procedures.

There does however appear to be a notable qualifier in 15 (2) "Any person professionally executing transactions under Article 16 of Regulation (EU) No 596/2014 who also executes transactions in wholesale energy products that are not financial instruments". It implies that for 15 (2) to apply, a firm must also professionaly execute transactions in financial instruments falling under MAR however no further qualificaton is provided. 

Whilst the vast majority of energy trading firms will already trade such instruments by virtue of trading on Regulated Markets such as ICE Endex or EEX, smaller physical-only traders may also be caught in scope were they trading FX or interest rate derivatives falling under MAR. The term "professionaly" may preclude this but no clarification is provided by ACER on this topic.