you're reading...

Examining ACER’s guidance note on the concept of a “PPAT”

ACER have recently issued a guidance note on the concept of a “PPAT”, a Professional Person Arranging Transactions. The note can be found here.

A PPAT has certain obligations under REMIT that non-PPATs do not, in particular the rules contained in Article 15 of REMIT around monitoring for suspicious activity. As we are reminded in the recent REMIT Quarterly.

To fulfil their obligation to notify NRAs, Article 15 of REMIT imposes on PPATs the obligation to establish and maintain effective arrangements and procedures to identify breaches. 

Such arrangements may involve setting up active software aided surveillance systems,
passive process based mechanisms to detect and notify potential market abuses, as well as organisational mechanisms to avoid possible conflicts which may arise between commercial and compliance interests.”

So, if a Market Participant is a PPAT, a surveillance process is mandatory, rather than only recommended.

PPAT Definition
The note starts off by pointing out that the concept of a PPAT encompasses Organised Market Places and Trade Matching Systems. However even if an entity does not fall under this category, they may still be a PPAT.

The note looks at two criteria that defines whether a Market Participant is “arranging transactions” as follows:

  • Enables or assists third parties in a way that brings about a transaction  OR
  • Provides a facility that supports third parties in entering transactions

It then goes on (page 5) to talk of further considerations which include:

  • The key factor is the intermediary role. The legal form of the entity, and the type of trade being transacted, are irrelevant to status.
  • Arranging may include only part of the life-cycle. A party acting as intermediary in only part of the cycle may therefore be a PPAT.
  • A party may be PPAT only for some transactions.

The note concludes with some examples. Of particular interest is the example of sleeving. It is stated that carrying out sleeving only results in PPAT status if it also involves actually arranging a trade, for example providing access to a venue. There are of course many companies who carry out this activity.

There will be many market participants who are carrying out some of the activity described in the note. As a consequence, those parties will be PPATs and will need to carry out surveillance under REMIT. It is worth considering your status sooner rather than later, in order to sensibly consider a surveillance strategy if appropriate.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s