Carbon Regulatory Update – MiFID II Compliance

Find out more about the Markets in Financial Instruments Directive II (MiFID II) that came into effect on 3 January 2018 and how these changes may affect you.

02 February 2018

What is the MiFID?

The Markets in Financial Instruments Directive II (MiFID II) came into effect on 3 January 2018. MiFID II is a revised version of the MiFID which is a  European legislative framework introduced in 2007 and built to encourage fairer, safer and more efficient financial markets and also to facilitate greater transparency for all its participants. MiFID II extends the original scope of the MiFID to cover all financial instruments. 

What are the obligations of MiFIDII?

Emissions allowances have been redefined by MiFID II to become financial instruments from 3 January 2018. Although operators with compliance obligations under EU ETS can rely on exempted transactions under MiFID II, the reclassification of emissions allowances under MiFID II means that EMIR reporting obligations will become applicable. The EMIR obligations are: Transaction Reporting, Timely Confirmation, Portfolio Reconciliation and Dispute Resolution.  To our knowledge, there is currently no exemption which can be applied to not perform these EMIR obligations which means all operators with compliance obligation under the EU ETS, except when dealing in the Spot market, will have to comply with these EMIR Obligations.

How will that impact you?

All Emission allowances transactions, except for Spot Trades, will have to be reported under EMIR.  Of course, Gazprom Energy can act as your reporting delegate to facilitate your new reporting obligations. For this we would ask you for your Legal Entity Identifier (LEI) which is a code to uniquely identify the legal entities that engage in financial transactions. If you don’t have an LEI code please contact us and we will be happy to inform you on how to obtain one.

The re-classification of emissions allowances as a financial instrument, except on Spot market, means that Gazprom Energy is required to comply with new financial obligations. As a result all our counterparties, not trading on Spot, will have to undergo further enhanced KYC checks hence we may ask you to provide us with information about your company to comply with our due diligence responsibilities. We’ve also changed our trading agreements to accommodate and comply with the new MiFID II obligations.

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