The general news around Brexit has been very active in the last few days (for example, see here on the BBC web site). There have also been developments relevant to the energy and commodity trading world since our last post here.
On Tuesday, Ofgem issued this open letter covering contingency arrangements in the event of a “hard Brexit” around REMIT. The letter makes some new points and also reiterates others. These include:
- Since REMIT will be transposed into UK law, the inside information related rules and anti manipulation rules will continue to apply.
- Ofgem and UREGNI will continue to have the same legislative powers as before.
- Those registered in the central “CEREMP” database via Ofgem or UREGNI, who trade wholesale energy products for delivery in the EU27, will need to re register via an EU27 National Regulatory Authority.
- Those trading wholesale energy products for delivery in the UK, wherever they are based, will not have to re register in a new UK version of the CEREMP for the time being.
- Those trading wholesale energy products for delivery in GB, wherever they are based, will, for the time being, not need to report the transactions either under the EU REMIT or the UK REMIT.
The last two points are new information, and may well be temporary, although there is a commitment in the letter to provide at least 3 months’ notice before the start of reporting. Ofgem will continue to collect data directly from trading venues, with a possible increase in the frequency of collection.
In the meantime, there are continuing discussions on the impact of the various Brexit scenarios on the operation of the wholesale energy market, and emissions certificates. For example, this article on climate change news reports on a House of Lords committee meeting where the government did not provide full details on the impact of the UK leaving the Internal Energy Market. It also discusses the possible impact on the ISEM market in Ireland of the UK’s possible departure form the Emissions Trading Scheme. The UK would temporarily impose a carbon tax in such a case. The issue of the UK leaving the ETS is also discussed in this article on FT.com. The NEMO link has also opened a consultation on the impact of Brexit, which can be found here.
The FCA has produced this EU Withdrawal Impact document which looks at both a “no deal” scenario, whether it takes place at the Brexit point or at the end of a transitional period, as well as the impact of the Withdrawal Agreement coming into effect. The FCA has also launched a second Brexit consultation, which can be found here. It includes proposed changes to support the temporary permissions regime, as well as changes to the credit rating agency and trade repository regimes. A fuller description of the changes can be found here on the Norton Rose Fulbright web site. The UK’s Department for Exiting the EU (DexEU) has issued this economic assessment of the long term impact of Brexit. it includes a section (3.2.4) on Financial Services.
ESMA has also issued this statement, welcoming the proposals to mitigate some of the effects of a “hard Brexit” announced previously by the European Commission. A draft RTS to make the appropriate changes has been issued. This article on Bloomberg reports that venues and clearing houses require legal certainty of the arrangements by 29th December to leave sufficient time to avoid having to trigger cessation procedures, which require 3 months’ notice.
The coming days will see many political discussions around Brexit. Until there is agreement, and even if there is, market participants will leave to continue their preparations based on available guidance and documentation.