FAS explained changes in registering off-exchange transactions to market participants
On 19 January 2016, at St Petersburg International Mercantile Exchange, the Federal Antimonopoly Service (FAS Russia) answered questions from participants of the oil, petrochemicals, natural gas and coal markets about the procedure of submitting information on off-exchange contracts to the Exchange.
Overall, the meeting with market participants focused on coming into force the changes made by No.764 Decree of the Government of the Russian Federation “On introducing changes to the Regulations on submitting information about the contracts concluded by the parties not through organized trading, obligations on which provide for transferring the rights of ownership to the goods allowed for organized trading and on keeping the Register of such contracts and providing information from the Register” of 28 July 2015.
“As of today, in its answers to enquiries filed by market participants, FAS gave explanations to more than 50 issues related to registering off-exchange transactions at the Exchange. We tried to discuss whatever was not covered at the face-to-face meeting with the market participants that have to register contracts under the new rules from 30 January 2016”, said Deputy Head of FAS Department for Control over Financial Markets, Alexander Razin.
One of the most frequently raised questions was determining all information with regard to off-exchange transactions registered at the Exchange and the types of documents that determine such information.
“We clarified that an obligation to register an off-exchange contract emerges when all data listed in a particular Clause of the Regulations approved by the Government Decree, including the price and volume of the goods are determined by the parties. It does not matter which document defined such information: a contract, an additional agreement to it, or any other document drawn up by the transaction parties. Often a contract specifies nearly all items required to register a contract at the Exchange, lacking just a few, for instance, goods price of volume that are determined additionally. The period for registering a contract at the Exchange starts from the date when the parties determined the missing information, the date of the document that determines it”, explained Alexander Razin.
A lot of participants were also interested how to handle different batches of goods supplied under the same contract. Should they be registered separately or the batches should be totaled and then the consolidated contract data should be registered at the Exchange? Should a framework agreement be registered at all?
“Our position is quite simple and clear. If a contract does not include all conditions necessary for registering the contract at the Exchange but specifies only some general conditions (a so-called framework agreement), goods within the contract are supplied in batches, each of which is drawn up in a separate document that contains information required for registration, such batches must be registered as separate contracts. These are the so-called goods items within the same framework agreement that originally is not subject to registration since it contains insufficient data”, pointed out Alexander Razin. “If from the very beginning a contract contain all information enabling to register it and then the parties change the contract terms and conditions and formalize it in a particular document, the contract is registered within the designated period from the date of concluding the contract, and information about adjusting the original contact conditions must be submitted to the Exchange as amendments to the contract”.