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.
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.