EEX and Powernext have confirmed the date on which their new “non-MTF” venues will start to operate, on the 1st July 2016, according to this press release. This follows an initial announcement earlier this year. The venues will be classified as “non MTF” and eventually as “OTF”s (Organised Trading Facility), once MiFID II starts on 3rd January 2018.

“Financial Instruments” are defined under MiFID in Annex I Section C. The definition is used not only for MiFID but also for scoping EMIR. The current definition is

Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market and/or an MTF.

However, MiFID II alters this text to be:

Options, futures, swaps, and any other derivative contract relating to commodities that can be physically settled provided that they are traded on a regulated market, a MTF, or an OTF, except for wholesale energy products traded on an OTF that must be physically settled.

The “REMIT carve out” removes gas and power forwards executed on an OTF from the financial instrument  definition, so long as they “must be physically settled”. The latest definition of this term and application of the text is to be found in the MiFID II Delegated Act, published on 25th April 2016.

Until MiFID II starts, trades executed on the new venues  will not be financial instruments, and therefore not in EMIR or MiFID. If the venues also qualify for the REMIT carve out, such trades will continue to be excluded, and will also not be part of the Ancillary Activity Test that market participants need to perform, as well as threshold calculations under EMIR.