In response to the TSO Y request, exchange X is planning to launch 14 Demand Side Response (DSR) markets for balancing purposes during emergency situations, in Q4 2016.
The TSO is responsible for the stability of the gas grid. The TSO has requested us to introduce 14 DSR markets, as extra instruments used for balancing the system in emergency situations.
The normal status of a DSR market is ’pre-open’. Market participants can submit orders (to refrain from off-taking already contracted gas, no bids) for the event of an emergency (only when the system is short) from up to 7 days in advance to intraday orders. These orders are not visible to other market participants or TSO and expire automatically at the end of each day.
It is only when the TSO requests that the DSR markets be open that the orders become visual to the whole market and the TSO; however it is only the TSO that can lift on these orders. For avoidance of doubt, other market participants cannot lift on those orders.
It must be emphasized that there is a number of specific conditions that need to be met before the TSO can request the DSR markets be opened and the expectation is that the markets will be opened very rarely.
Are orders and trades in the DSR markets considered reportable under REMIT? Or, are these orders and trades exempt from REMIT reporting obligations due to their unique nature of being only for balancing purposes in emergency situations?
It is our understanding that these transactions, including orders to trade, executed on the DSR markets are not reportable under REMIT because they are executed outside of an organised market place, solely for the system balancing purposes.
Firstly, even though exchange X is the platform provider, the DSR markets are purely balancing mechanisms requested by the TSO with the sole purpose of bringing the gas system to equilibrium as per the BAL NC.
Secondly, because the trades can only be executed unilaterally by the TSO at its sole discretion, the DSR markets do not fall under the definition of an organised market place in the Regulation 1348/2014 which requires that multilateral third-party buying and selling takes place.
In addition, since only the TSO can trade with Market Participants there is no possibility of market abuse.
It is our view that, the TRUM, available on the REMIT Portal, already addresses this question. Specifically, on page 16 of the TRUM the Agency provides the definition of organised market place, stating that multilateral systems that procure or sell energy on behalf of TSOs only for balancing purposes should not be considered organised market places if those systems act solely on behalf of the TSOs.
In addition, as already stated in Question 1.1.5 of the FAQs on transaction reporting if the platform is not a multilateral system in which multiple third-party buying and selling interests in wholesale energy products are able to interact in a way that results in a contract and therefore not an Organised Market Place has to be assessed by the person who runs the system.