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FAQs on transaction reporting – Question II.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:

In the Agency’s view that the delta trade performed with the same counterparty and reported under Table 1 is a separate transaction unless it is executed within the framework of a non-standard contract.

Last update: 24/03/2016   RSS_Icon Subscribe to this Page’s RSS