The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021

JurisdictionUK Non-devolved
CitationSI 2021/484

2021No. 484

CLIMATE CHANGE

The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021

Made21stApril2021

Coming into force22ndApril2021

CONTENTS

PART 1

General Provisions

1. Citation and commencement

3

2. Interpretation

4

3. Meaning of UK ETS authority

7

PART 2

Auction Design

4. Auctioned products

7

5. Submission and withdrawal of bids

7

6. Auction clearing price and resolution of tied bids

8

7. Auction clearing price

8

PART 3

Auction Calendar

8. Calendar for individual auctions

9

9. Annual volumes of allowances

9

10. Adjustments of the auction calendar

10

11. Circumstances preventing the conduct of auctions

11

12. Cost containment mechanism

11

PART 4

Access to Auctions

13. Persons who may submit bids directly in an auction

12

14. Means of access

13

15. Training and helpline

13

16. Persons eligible to apply for admission to bid 13 17. Requirements for admission to bid

14

18. Submission and processing of applications for admission to bid

15

19. Refusal, revocation or suspension of admission

17

PART 5

Appointment of the Auctioneer and its Functions

20. Appointment of the auctioneer

18

21. The auctioneer's functions

18

PART 6

Appointment and Functions of Auction Platform

22. Appointment of the auction platform

19

23. Functions of the auction platform

19

PART 7

Appointment Requirements for the Auctioneer and the Auction Platform

24. Appointment requirements applicable to the auctioneer

20

25. Appointment requirements applicable to any auction platform

20

PART 8

Reporting on Transactions

26. Obligation to report transactions

22

PART 9

Payment and Transfer of the Auction Proceeds

27. Payment by successful bidders and transfer of proceeds

22

28. Consequences of late or non-payment

22

PART 10

Delivery of the Auctioned Allowances

29. Transfer of the auctioned allowances

23

30. Delivering the auctioned allowances

23

31. Late delivery of the auctioned allowances

23

PART 11

Management of Collateral

32. Collateral given by the bidder

24

33. Collateral given by the auctioneer

24

PART 12

Fees and Costs

34. Structure and level of fees 24 35. Costs of the auction process

24

PART 13

Auction Surveillance, Remedial Measures and Sanctions

36. Monitoring of auctions

25

37. Monitoring the relationship with bidders

25

38. Notification of money laundering, terrorist financing or other criminal activity

26

39. Notification of market abuse

27

40. Maximum bid-size and other remedial measures

27

41. Market conduct rules or any other contractual arrangements

27

42. Conduct rules for other persons authorised to bid on behalf of others

27

PART 14

Transparency and Confidentiality

43. Publication

29

44. Announcement and notification of the auction results

29

45. Protection of confidential information

30

46. Language regime

32

PART 15

Final Provisions

47. Right of appeal

32

48. Correction of errors

32

SCHEDULE — List of the elements referred to in regulation 18(5)

33

The Treasury, in exercise of the powers conferred by section 96 of the Finance Act 2020( 1), make the following Regulations.

In accordance with section 96(6) of that Act, a draft of this instrument has been laid before and approved by the House of Commons.

PART 1

General Provisions

Citation and commencement

1.—(1) These Regulations may be cited as the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021.

(2) They come into force on the day after the day on which these Regulations are made.

Interpretation

2.—(1) In these Regulations—

“affiliated undertaking” means any undertaking within a group;

“allowance” means, except where the context requires otherwise, an allowance created under the Trading Scheme Order( 2) to emit 1 tonne of carbon dioxide equivalent;

“appointed auction platform” means the auction platform appointed by the Treasury under regulation 22(1);

“auction process” means the process encompassing the setting of the auction calendar, the procedures for admission to bid, the procedures for submission of bids, the conduct of the auction, the calculation and announcement of the auction results, the arrangements for payment of the price due, delivery of the allowances and management of the collateral needed to cover any transaction risks, as well as the surveillance and monitoring of the proper conduct of the auctions by recognised auction platform;

“auctioned product” has the meaning given in regulation 4(1);

“auction reserve price” has the meaning given in regulation 6(9);

“auctioneer” means any public or private entity appointed by the Treasury, to auction allowances;

“beneficial owner” has the meaning given in regulation 3(1) of the Money Laundering Regulations;

“bid” means an offer in an auction to acquire a given volume of allowances at a specified price;

“bidding window” means the time period during which bids may be submitted;

“central counterparty” means an entity which interposes either directly between an auctioneer and a bidder or its successor in title, or between intermediaries representing them, that acts as the exclusive counterparty to each of them guaranteeing the payment of the auction proceeds to the auctioneer or an intermediary representing it or the delivery of the auctioned allowances to the bidder or an intermediary representing it, subject to regulation 31;

“clearing system” means any infrastructure connected to the auction platform that can provide clearing, margining, netting, management of collateral, settlement and delivery, and any other services, carried out by a central counterparty, accessed either directly or indirectly through members of the central counterparty who act as intermediaries between their clients and the central counterparty;

“clearing” means all processes preceding the opening of the bidding window, during the bidding window and following the closing of the bidding window until settlement, involving the management of any risks arising during that interval, including margining, netting, or novation, or any other services, that may be carried out by a clearing or settlement system;

“collateral” means the forms of collateral security referred to in regulation 2(1) of the Financial Markets and Insolvency (Settlement Finality) Regulations 1999( 3), including any allowances accepted as security by the clearing system or settlement system;

“credit institution” means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account;

“criminal activity” means any kind of criminal involvement in the commission of any of the offences referred to in—

(a) Schedule 3 to the Anti-Terrorism, Crime and Security Act 2001( 4),

(b) Schedule 3 to the Money Laundering Regulations,

(c) Regulations made under section 1 of the Sanctions and Anti-Money Laundering Act 2018( 5), or

(d) Part 3 of the Counter-Terrorism (International Sanctions) (EU Exit) Regulations 2019( 6);

“customer due diligence measures” has the meaning given in regulation 3(1) of the Money Laundering Regulations;

“FCA” means the Financial Conduct Authority( 7);

“five-day futures” means allowances auctioned for delivery at an agreed date no later than the fifth trading day from the day of the auction;

“group”, in relation to undertakings, means a parent undertaking and all its subsidiary undertakings;

“investment firm” has meaning given in as in Article 2(1A) of the Markets in Financial Instruments Regulation;

“margining” means the process by which collateral is to be pledged by an auctioneer or a bidder, or one or more intermediaries acting on their behalf, to cover a given financial position, encompassing the entire process of measuring, calculating and administering the collateral put up to cover such financial positions, intended to ensure that all payment commitments of a bidder and all delivery commitments of an auctioneer or one or more intermediaries acting on their behalf can be met within a very short period of time;

“market abuse” means behaviour prohibited by Articles 14 and 15 of the Market Abuse Regulation;

“Market Abuse Regulation” means Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16th April 2014 on market abuse (Market Abuse Regulation);

“Markets in Financial Instruments Regulation” means Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15th May 2014 on markets in financial instruments;

“money laundering” has the meaning given by section 340(11) of the Proceeds of Crime Act 2002( 8);

“Money Laundering Regulations” means the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017( 9);

“nominated bank account” means a bank account designated by an auctioneer, a bidder or its successor in title for the receipt of payments due under these Regulations;

“nominated holding account” means one or more holding accounts, of whatever type, provided for paragraphs 11 to 13 of Schedule 5A to the Trading Scheme Order for the purposes of participating in or conducting the auction process including the holding of allowances in escrow, pending their delivery under these Regulations;

“parent undertaking” and “subsidiary undertaking” have the same meanings as in the Companies Act 2006( 10) (see section 1162 of, and Schedule 7 to, the Companies Act 2006);

“recognised auction platform” has the meaning given in regulation 22;

“recognised investment exchange” means an investment exchange in relation to which a recognition order is in force under section 290 of the Financial Services and Markets Act 2000( 11), but does not include an overseas investment exchange (within the meaning of section 313 of that Act);

“the registry” means the electronic system established by the UK ETS authority under paragraph 5 of Schedule 5A to the Trading Scheme Order;

“registry administrator” has the meaning given in article 8A of the Trading Scheme Order;

“secondary market” means the market in which persons buy or sell allowances either before or after they are...

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