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FAQs on transaction reporting – Question II.3.3.1

I would like to discuss another trading example and ask you how to report it. Below you’ll find my reporting proposal.

Scenario:

  • buy, “strip of daily option”, gas, bilateral, physical settlement, price 0,5 €/MWh,
  • total deal volume 27.000 MWh within three month (December – February), exercising the option is just possible at 15 days per month on a day ahead basis,
  • December quantity 0-20 MW, volume = 7.200 MWh,
  • January quantity 0-25 MW, volume = 9.000 MWh,
  • February quantity 0-30 MW volume = 10.800 MWh,
  • strike price 30 €/MWh.

Could you please help me in that case?


Answer:

[UPDATED] based on additional input provided by the Agency’s stakeholders

Our understanding is that the option described above can be reported with Table 2 as a non-standard contract. Its executions shall be reported with Table 1.

Please see Q. 3.1.28 whether the execution should be reported as EXECUTION or BILCONTRACT contract, also considering that examples reported in Annex II to the TRUM are non-exhaustive.

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FAQs on transaction reporting – Question II.3.3.2

Reference to:

  • Article 3(1) of the Implementing Acts. List or reportable contracts: Options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the Union.
  • Option Details from ANNEX “Details of Reportable Contracts” in the Implementing Acts: Tables 1 and Table 2
  • TRUM, Table 1 #44: Option Exercise Date

“A European style option can only be exercised at the maturity date.”

  • TRUM, Table 1 #46: Option Exercise Date:

“This field identifies the date at which the option holder has the right, but not the obligation, to buy or sell the commodity or underlying instrument at a specified price on or before a specified date. In the case of an American, European or Asia option style, one exercise date is reported. In the case of a Bermudian option style, several dates may be reported.”

The issue:

1)  How should market participants report strip options?

2)  What is the reporting guidance from ACER for fields #44 Option Style and #46 Option Exercise date (Table 1) in regards to strip options? According to TRUM guidance, only Bermudian options can have more than one exercise date. For European option style, only one exercise date is required to be reported based on same text in TRUM.

Example:

Business Case: Market Participant A is trading strip options European style.

According to Market Participant A’s perspective, a strip option of the European style is a series of vanilla European options (a series of European puts or a series of European calls) on a number of consecutive contracts (e.g. January, February and March), each with the same strike price, but with a different expiry date.

Example: A strip option is concluded for delivery in January/February/March (three consecutive months). There are three exercise dates; each exercise date is two days before delivery start (e.g. 29th of December for delivery in January, 30th of January for delivery in February, 27th of February for delivery in March). Market Participant A has the right, but not the obligation, to exercise the option with delivery for January on 29th of December. In line with that, on 30th of January Market Participant A has the right, but not the obligation to exercise the option for delivery for February with the same strike price, and the same for delivery in March.

According to our current interpretation strip options are a kind of concatenated European style options, thus our interpretation is the report in the following manner:

  • Field #44 Option Style: Report as “European option style”
  • Field #46 Option Exercise Date: Report all relevant exercise dates of the strip option in this field, i.e. not just one exercise date as per the existing ACER guidance.

We would be grateful for ACER’s views on this envisioned approach, please.


Answer:

[UPDATED] to clarify Option Style of strip options

[Added] Since the introduction of the validation rule 2AODOEDR2x (in June 2017) – which prevents the reporting of records with a Contract Delivery Start Date prior to Contract Option Exercise Date unless the Option Style is ‘O’ for Other – strip options should be reported with Option Style ‘O’.

We understand that the option described above can be reported as:

  • Field #44 Option Style: “Other” “European option style”
  • Field #46 Option Exercise Date: the field should be repeated three times, where each value corresponds to a different exercise date, relevant to the individual delivery period (see below)
  • Fields #49 and #50 Delivery Start/End Date: these two fields should also be repeated three times, once for each corresponding delivery period (in this case it is one month per each delivery period).

The example below clarifies further the way to report the three fields above.

faqs-on-transaction-reporting-question-ii-3-3-2-table

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FAQs on transaction reporting – Question II.3.3.3

The issues relate to interpretation of the REMIT transaction reporting obligations with respect to our role, as an energy supplier within XX country, in contracting with end users.

Below is a high level summary of the types of contracts we enter into with end-users along with assumptions we are making and points of clarification we are seeking.

Fixed Price Supply Contracts:

Fixed price supply contracts include a commodity component within the unit rates charged for energy. This component is typically determined by the wholesale market price on the day of contract acceptance. Such “transactions” are understood to be in scope of REMIT transaction reporting obligation subject to the following:

  1. reportable only where the contract includes 1 or more sites with the capacity to consume more than 600GWh annually;
  2. it is the end users obligation to inform us, their supplier, if any of the contracted sites exceed this capacity limit.

Reportable in the non-standard format as:

  1. volume is not necessarily explicitly stated and, where it is, is an indication rather than a commitment to supply or consume the stated quantity;
  2. price is a tariff structure with rates including a number of both commodity & non-commodity (e.g. margin) components.

Reportable from Apr 16 and within 28-days of contract execution

Where the supply contract does not include any sites that meet criteria 1. (above) but the end user is a registered Market Participant, contracts are not deemed to be reportable

Flexible Supply Contracts:

Larger consumers within the I&C market for both gas & electricity, along with embedded generators (wind/solar farms, energy from waste producers) have an appetite to spread their risk over a period of time, rather than fixing 100% of their commodity costs on a single day.

To support this requirement XX energy supplier provides a variety of “Flexible” supply product offerings which allow customers to fix their energy price via a series of “price fixing” transactions for individual seasons, quarters, months, weeks, days (or even HH’s at their most granular level).

These transactions are conducted with the end user under the terms of their supply contract. They are not conducted under NBP97 or GTMA terms, nor are they conducted over a regulated market (MTF).

We are unclear as to the extent of the transaction reporting requirement for these types of contracts.

It is assumed the supply contract itself is reportable under the same criteria as a Fixed Price Supply Contract outlined above. If possible could you clarify which, if any, price fixing transactions would need to be subsequently reported? And whether these should be treated as non-standard also?


Answer:

In Section (2) of Annex II of the Transaction Reporting User Manual (TRUM) there are examples of transaction reporting for both standard and non-standard contracts including examples of non-standard contracts to be reported with Table 2 in the Annex of the REMIT Implementing Regulation (EU) No 1348/2014, and examples of executions under the framework of non-standard contracts reportable with Table 1 of the same annex.

In Annex II of the TRUM it is also available guidance on the timing of the reporting of standard and non-standard contracts as well as executions under non-standard contracts.

RSS_Icon Last update: 16/02/2016  

FAQs on transaction reporting – Question II.3.3.4

How should bilaterally traded contracts (with a floating price) and an option to fix the price be reported, once the fixing has been executed by the buyer?

Should the price fixing event be reported as lifecycle event update to the existing contract, or instead reporting the fixing as a separate ‘new’ contract?

Company X sells 20MW/h +/-10% Q116 gas to counterparty ‘XYZ’ @ TTF + 2 and counterparty ‘XYZ’ decides to fix 10MW/h Q116 at 24.  We then invoice each month 10MW/h at 24 and leftover consumed gas at arithmetic average of daily TTF quotations +2.


Answer:

Please see Annex II to the TRUM. In Section 2 of the annex there are several examples on how to report bilaterally traded contracts (with a floating price) and an option to fix the price that is being reported, once the fixing has been executed by the buyer.

For any of above types of optionality, such as the daily flexibility, there is no expectations of reporting on a daily or individual basis, but on an aggregated basis according to the guidance provided in Annex II to The TRUM.

RSS_Icon Last update: 16/02/2016  

FAQs on transaction reporting – Question II.3.3.5

Regarding the reporting of transactions with big energy consumers, does the exercise of a contractual right of a transaction already registered (e.g a “price switch” clause which allows the customer to modify the contractual price formula for part of offtaken quantities and contractual period) generate a new duty of reporting?


Answer:

Please see Annex II to the TRUM. In Section 2 of the annex are several examples on how to report bilaterally traded contracts (with a floating price) and an option to fix the price that is being reported, once the fixing has been executed by the buyer.

For any types of optionality, such as the daily flexibility, there is no expectations of reporting on a daily or individual basis, but on an aggregated basis according to the guidance provided in Annex II to the TRUM.

RSS_Icon Last update: 16/02/2016  

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