III.3.24.
Are derivative contracts traded on platforms in the EU relating to electricity or natural gas delivered outside the EU within the scope of REMIT?
Answer: Pursuant to Article 2(4)(b) of REMIT, the definition of wholesale energy product includes ‘derivatives relating to electricity or natural gas produced, traded or delivered in the Union’. Therefore, a derivative contract relating to electricity or natural gas delivered in the Union is not the only criterion. The scope of REMIT also includes derivatives relating to electricity or natural gas produced or traded in the Union. Such contracts are wholesale energy products irrespective of whether the related electricity or natural gas is delivered in the Union. However, the scope of REMIT and its prohibitions (e.g. prohibition of insider trading or market manipulation) and obligations (e.g. obligation to publish inside information) is wider than the scope of the reporting obligation under 8(1) of REMIT in connection with Commission Implementing Regulation (EU) No 1348/2014.
Article 3(1)(a)(viii) of Commission Implementing Regulation (EU) No 1348/2014 specifies that ‘options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the Union‘ are reportable.
Furthermore, the first sentence of Article 3(1)(a) of Commission Implementing Regulation (EU) No 1348/2014 limits the scope of reporting to the contracts that are wholesale energy products in relation to the supply of electricity or natural gas ‘with delivery in the Union’.
Therefore, from the group of derivatives of contracts related to electricity/natural gas (a) produced, (b) traded or (c) delivered in the Union, only those that also relate to the supply of electricity/natural gas with delivery in the Union shall be reported to the Agency pursuant to Article 3(1)(a)(viii) of Commission Implementing Regulation (EU) No 1348/2014.
In conclusion, if a derivative contract (i.e. wholesale energy product) is traded on a platform in the Union, but it relates to the supply of electricity or gas with delivery outside the Union, the above condition ‘with delivery in the Union’ is not fulfilled. For this reason, the market participant has no obligation to report this derivative contract to the Agency pursuant to Article 3(1)(a)(viii) of the Commission Implementing Regulation (EU) No 1348/2014. However, the Agency highlights that such contracts fall under the scope of REMIT and therefore other REMIT prohibitions and obligations remain applicable.