EEX and Powernext have announced that their current “non MTF” (Multilateral Trading Facility) venues will run with “Organised Trading Facility” status from the start of MiFID II, on 3rd January 2018. The full press release in German and English can be found here.
Under MiFID II, physical forwards in gas and power executed on an OTF can be subject to the “REMIT carve out” found in Annex I Section C6. The updated version of C6 states that:
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;
are “financial instruments”. The Delegated Act then goes on to define the circumstances under which the carve out is valid and conditions that members must adhere to in order for a contract to be considered “must be physically settled”. These include having a valid balancing agreement with the relevant TSO, which is also a requirement for using the highlighted OTFs. MiFID Article 20(6) together with the relevant questions and answers document on market structures (see here) defines the elements of a venue which permit it to be run as an OTF.
Trades benefiting from the carve out will not be considered financial instruments under either EMIR or MiFID II. This removes them, in most circumstances, from calculations such as those required by the Ancillary Activity test (see here) and also under EMIR. Since such contracts are not defined as commodity derivatives, they would also not be subject to position limits.