Keeping up with the MiFID IIs, the REMITs, the EMIRs, and all the usual suspects | Part 3/3

November 24, 2017

 

An interview with Aviv Handler, Managing Director of ETR Advisory

Read part 1 here »
Read part 2 here »
 

In most cases, EMIR is made easier by these changes. There are two things to bear in mind though:
- These changes require money to be spent and investment to be made in meeting them, having already spent money on the 1st November changes.- Although you will no longer have to report exchange rate derivatives and there will be enforced delegations through a financial counterparty, there is still a data handling issue, in that, for example, if someone reports an exchange rated deal in your behalf, there’s still data such as the hedge spec flag which the party who’s reporting is going to have to find out and get from you. We have this problem at the moment in position reporting under MiFID II (which is coming in on the 3rd of January), which is that non-investment firms, -most energy companies are non-investment firms- do not have to do position reporting, the venue has to do it for them. But there’s a lot of data you have to get to the venue so that they can do it and that’s causing quite a lot of work at the moment. These EMIR review changes have a similar issue: although on the surface they do make life easier, it’s not as quite easy as it looks.

“The energy industry is waking up to the fact that it’s important to comply with the conduct side of REMIT and MAR.”

5) During your ETOT session, you will panel on “Trade surveillance – How compliant are you?”. Could you please give us a quick preview of your session?

 

At the moment the energy industry is waking up to the fact that it’s important to comply with the conduct side of REMIT and MAR, and to have a capability to monitor whether you are breaching any of the market manipulation or insider trading rules. In the past, in the energy industry, most companies did not have a monitoring capability or a surveillance capability, and that’s changing. Why is that changing? On the surface, it’s because of the Market Abuse Regulation which came in in the middle of last year, which requires that for certain trades you have a monitoring capability; therefore, suddenly there was a mandatory responsibility to do some sort of monitoring. This was the initial driver. However, there’s now a bigger driver which is REMIT. Despite the purpose of REMIT being anti-abuse, the industry focused on the reporting side of REMIT for quite a long time. REMIT is more relaxed about the requirement to monitor, but REMIT also makes it the case that it’s much better to monitor. There are more REMIT cases coming up, the regulators are collecting data and monitoring the markets. You see a lot of bodies starting to issue best practice papers, and that whole area of monitoring conduct is receiving greater attention and energy. So question number one is: are you compliant in terms of monitoring, and question number two is: even if you’re technically compliant, is your monitoring at such a level that you can be sure that the rest of your company is compliant and not manipulating the market?

 

Read part 1 here »
Read part 2 here »

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