Question 3.1.11

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Question 3.1.11

If a non-standard trade is transacted and reported under Table 2, and a Day 1 cross delta trade is also performed with the same counterparty and reported under Table 1, does the Table 1 trade need to be linked to the Table 2?

Also is the Table 1 trade classed as an execution and therefore reported each month after invoicing, or just reported once as a bilateral trade?

We enter into a non-standard trade which is a Calendar strip of monthly options to purchase a physical spark spread position – i.e. similar to the example provided in Appendix A. The non-standard option deal will give a delta of being Long Power / Short Gas.

To hedge the position, we therefore at the same time enter into a fixed price physical transaction with the same counterparty to Sell Power & Buy Gas.

Whilst the 2 trades are booked independent as the flow of one is not dependent to the other, they are still linked in the sense that the second trade is a direct hedge of the first trade and performed with the same counterparty.

Our interpretation is that the non-standard trade would be reported using Table 2. The fixed price physical hedge would then be reported under Table 1, and linked to the Table 2 trade via Field 32. However the Table 1 trade would be classed as a bilateral trade and not an execution trade and therefore only reportable once (assuming no lifecycle events) and not each month the trade deliveries.


Answer

We agree with the interpretation. The non-standard trade would be reported using Table 2. The fixed price physical hedge would then be reported under Table 1, and linked to the Table 2 trade via field 32. However, the Table 1 trade would be classed as a bilateral trade and not an execution trade and therefore only reportable once (assuming no lifecycle events) and not each month the trade deliveries.

Updated: 
30/06/2020