The Wierzbowski Eversheds Sutherland energy and banking and finance teams, in cooperation with PwC, have advised the Polish Power Exchange (Towarowa Giełda Energii SA) on comprehensive implementation of the MiFID II package. Łukasz Jankowski, the partner managing the energy law practice, Dr Konrad Zacharzewski, of counsel on the banking and finance team, and Michał Markowski, senior associate in banking and finance, were responsible for the project.
Wierzbowski Eversheds Sutherland’s work included an analysis of the degree of adaptation of PPE’s operations to the requirements for implementation of the directive, which will enter into force on January 3, 2018. The firm’s comprehensive advice focused on the impact of MiFID II on the markets operated by PPE and the requirements for its organized trading facility (OTF). PPE’s situation required a unique analysis, as the company operates both a commodities exchange and a regulated market under the Act on Trading in Financial Instruments.
The project required advanced knowledge and practical insight into PPE’s activity, and in-depth knowledge of the markets operated by the exchange. The team dedicated to the project combined expertise in capital market law, securities law and banking law with practical and regulatory aspects of trading in electricity and natural gas. Wierzbowski Eversheds Sutherland lawyers have considerable scholarly achievements in this field. Dr Konrad Zacharzewski co-authored a commentary on the Act on Trading in Financial Instruments (Capital Market Law: Commentary, ed. M. Wierzbowski, L. Sobolewski & P. Wajda, C.H. Beck, Warsaw 2014) and is currently working on the 3rd edition, taking into account the MiFID implementation of 2014. He also co-authored the 4th volume of The Commercial Law System, entitled The Law of Financial Instruments (ed. M. Stec, C.H. Beck, Warsaw 2016), exploring the whole area of trading in financial instruments. Łukasz Jankowski is one of the authors of a commentary on the Energy Law published by C.H. Beck, where the issues he covered included the exchange obligation.
The PPE project is one of several the firm has carried out in conjunction with PwC.
As Łukasz Jankowski points out, energy markets are covered by financial regulations because of a change in Annex 1 to MiFID II, specifically Section C points 6, 7 and 11. As a rule, derivative contracts for commodities that can be physically settled, apart from the REMIT carve-out, have become regarded as financial instruments, as have emission rights. This entails a number of responsibilities for both the exchange and its participants. The directive provides for a position limits system, reporting duties and transparency.
As a new form of trading system market, OTF is a significant issue for the architecture of the energy market. This is due to the exclusion for wholesale energy products (the subject of trading on the OTF) which must be physically settled, i.e. the REMIT carve-out.
From a practical point of view, another key aspect is the availability of exemptions from MiFID II for certain entities, in particular the ancillary activity exemption. According to the Q&A published in October by the European Securities and Markets Authority, applications for this exemption in 2018 must be submitted by January 3, 2018. “So there is very little time left,” said Łukasz Jankowski.