As in previous years, as 2021 opens, this first post will consider what could keep us busy in the regulatory world of energy and commodity trading, focused on Europe.
More of the same or another wave of changes?
As discussed in last year’s opening post (see here), we could say that we have been in the “era of making it work” since MIFID II started to apply on 3rd January 2018. Since then, the major rule sets of EMIR, REMIT, MIFID II and MAR have “bedded down”, with changes such as EMIR REFIT requiring some work. Those either in the UK or with UK dealings will have been affected by Brexit, the transitional period ending on 31st December and in part supported by a new trade agreement (to be the subject of a further post).
In terms of what to expect, themes could include the following:
Continued focus on anti-abuse activity – As last year, the focus on anti-abuse activity in the form of organisation, processes and technology is likely to continue, given the time since rules such as MAR and REMIT started and the continuation of enforcement cases. We saw several high-profile REMIT fines last year (for example see here) and also a large number of fines worldwide, especially in the US (for example see here). There is no reason to think that this trend will not continue.
Improvements to internal monitoring – A growing proportion of the industry has been rolling out trade surveillance systems over the past years, driven by both regulations and enforcement cases. This is likely to not only continue in 2021, but also grow into different areas. These could include communications surveillance improvements (particularly in the light of COVID 19) and also in other ways. For example, several of the cases in 2020 involved fines for breaches related to physical notifications (for example see here). Methods to monitor for such breaches will need to be considered.
Major changes to existing rules – The end of last year saw the publication of a report on the new EMIR reporting formats (see here), which, although they will not apply yet in 2021, will likely occupy a great deal of time. The “quick fix” package relating to MIFID II (see here) will also, when it applies, require some change, although the outcome of those changes will likely see a drop in burden. Changes to REMIT and the bedding down of Brexit will also lead to a great deal of regulatory activity.
Continued change by precedent and announcement – In additional to major changes, the stream of precedents via cases and enforcements and announcements via documents such as questions and answers, only seem to grow with time. Those who have not already done so will need to improve their framework for dealing with such changes, be they related to reporting, anti-abuse measures, organisation changes or other aspects of compliance.
The impact of COVID–19 and also some new rules such as SFTR, which applies to Non-Financial EU entities from 11th January (see here) will also keep us busy.
Having said all of the above, one key lesson of 2020 has been to “expect the unknown”. It will be interesting to see which unexpected changes descend upon the industry.
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As in 2020, this blog will continue to be provided free of charge for 2021. There will be occasional posts announcing the commercial services of ETR Advisory who run this blog, although these will be limited and as before no sponsorship or other advertising will be permitted. Those who wish to have customised information as well as personalised support and updates would be welcome to find out more about ETR Advisory’s Regulatory Support Service (see here).
We look forward to once again continuing to share regulatory news as 2021 unfolds.