"MIFID II - Overwhelming regulatory wave that would lead to a domino effect of changes in the energy market"

December 16, 2016

 

 

With MIFID II looming, now the intensity is on energy traders to ensure that they are completely in scope.

 

Statkraft Energi’s Senior Advisor in Regulatory Affairs and Compliance, Anya Bissessur, gives us a sneak peak of what she will be talking about at ETRC on commodity traders and MIFID II. Do energy companies need to get a license or not? That is the question.

 

 

Please tell us briefly about your role at Statkraft along with current priorities

 

I’m working as a Senior Advisor in Regulatory Affairs and Compliance in Statkraft Energi AS. This role has two components:

 

On the regulatory side while my position is closely linked to our market operations, I have the responsibility of ensuring that the whole Statkraft Group and our trading entities in particular are provided with the best possible overview of the upcoming regulations within my field of expertise that are of interest to us.

 

On the other hand, I assist our Compliance Officer in the implementation and in the preparation of the Statkraft Group to new regulatory requirements with a primary focus on MIFID II, MAR and EMIR (which is now being implemented in Norway). Compliance with MiFID II especially requires an intensive review and perhaps overhaul of internal processes and operations to ensure readiness for the 03.01.2018.

 

In the current regulatory turmoil we also need to keep track of other initiatives that are of a more structural nature such as the capital requirement regulation or the work currently undertaken by the European Commission in its REFIT program, without forgetting foreign legislation with extraterritorial effects.

 

All in all we need to get it right and ensure that we comply!

 

With the sheer amount of speculation, interpretation and commentary regarding regulatory matters, how do you ensure you’re best informed?

 

This is probably one of the most challenging tasks in particular due to the uncertainty linked to crucial parts of the regulations that could affect our firm.

 

I would say that it is essential to keep in permanent contact with the right people. I find it very useful in this context to actively participate in the work of industry associations such as EFET: it’s a good forum to highlight, discuss and address issues.

 

Of course being informed obviously implies reading hundreds of pages of consultation papers, guidelines, drafts, opinions and various documents primarily coming from the EU institutions … and then sorting out what can be relevant for our activities. It’s not always a straight forward process due to parallel initiatives and intertwined regulations which leverage on one another.

 

In regards to MIFID II, could you give us a quick overview of your presentation at ETRC?

 

I personally think that MIFID II could be an overwhelming regulatory wave that would lead to a domino effect of changes in the energy market and for certain market participants individually. Physical players whose main line of business is the production and trading of energy now understand that they might become regulated under the same framework as banks. The financial regulations started to catch up with real economy firms when EMIR came into force in 2012. But EMIR “only” imposed a new compliance and documentation regime for certain transaction types, without any need for structural changes.  For most energy firms, we see retrospectively that the EMIR requirements could be readily satisfied (at a cost, of course!) by implementing new operational processes. The changes brought along by MIFID II are of a more fundamental nature. They will first of all have an impact on a firm’s internal processes, and in the “worst case scenario” they may lead to an obligation to become an investment firm to continue operations. MiFID II will also impact other existing regulatory frameworks leading to necessary internal adaptations.

 

I wanted to provide a glimpse of these changes, from a utility’s point of view.  

“Physical players whose main line of business is the production and trading of energy now understand that they might become regulated under the same framework as banks.”

What do you make of the notion that it’s a matter of time that energy trading units are forced to act like banks?

 

That would be frustrating. I understand that there is a need for increased or better regulation in certain sectors to prevent or mitigate a new global financial crisis. Stronger and better supervision is not necessarily something bad. This being said, we should not forget that energy market participants are real economy firms which are fundamentally different from banks in their business model, organisation, financing and operations. Energy firms typically have less financial leverage than banks and their presence in the markets is primarily motivated by the necessity to commercialise their production. The energy market and the financial markets would not likely be disrupted upon the default or bankruptcy of a major trading house. This has been shown in the ENRON bankruptcy and we shouldn’t tend to forget that. I believe that regulation is necessary but an excess of wrongly calibrated regulation would endanger a market that generally functions well today and which enables all of us to turn on and off the lights in our workplaces and homes every day.

 “I believe that regulation is necessary but an excess of wrongly calibrated regulation would endanger a market that generally functions well today and which enables all of us to turn on and off the lights in our workplaces and homes every day.”

What do you think?

 

Is MIFID II that significant of a legislation that it will have such an effect on the energy market? Or is it just pre-implementation day jitters?

 

Let us know on!

 

Twitter: Commodities_ppl

Linkedin: Commodities People

 

  • Master’s degree in private law, University of Strasbourg (France)

  • Called to the Bar, Strasbourg, France. Worked as in a private practice in Strasbolawyerurg for 7 years.

  • Moved to Brussels. In-house legal counsel for leading payment service provider

  • Moved to Oslo. Commercial lawyer at Statkraft

  • Now Senior advisor regulatory affairs and compliance at Statkraft.

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