Gas Trading – Inspection, Enquiries & Enforcement In Nigeria
This article is focused on the provisions of the regulations of the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA) on gas trading, specifically the topics of inspection, enquiries and enforcement.
What are the provisions of the NMDPRA regulations on market oversight?
– The NMDPRA may cause an investigation into the affairs of a gas exchange or clearing house to maintain market oversight & surveillance as well as to check market integrity.
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– An investigation shall be conducted where the authority reasonably suspects that there has been :-
a). Manipulative or attempted manipulative activity.
b). Anti-competition and anti-competitive behaviour.
c). Transactions that are misleading or deceptive, or are likely to mislead or deceive.
d). Unwarranted speculation leading to market volatility.
e). Price distortions.
f). Any form of cartelization.
g). Any form of market abuse.
h). Abuse of dominant position by any market participant.
– The NMDPRA may after investigation issue directives, as it considers appropriate to maintain market oversight & surveillance to check market integrity.
What are the other circumstances requiring intervention by the NMDPRA?
– The NMDPRA may, by an order, give such directives as may be necessary when it is satisfied that any of these circumstances exist or is likely to occur in the market :-
a). Abnormal increases or decreases in the price of gas.
b). Sudden or unreasonable fluctuations or unwarranted changes in the prices of gas and high volatility.
c). Sudden high transaction volumes on a gas exchanges.
– The NMDPRA may, without prejudice to the first paragraph above, by order in writing –
a). Suspend transaction activities for a cooling off period, in case of increased volatility.
b). Suspend transaction of any specific contract in the gas exchange.
c). Increase the margin for contracts transacted on gas exchanges, in a case of high volatility of prices or high speculation.
d). Allow trade only for trade settlement.
What are the provisions of the regulations on the power to demand for information?
– The NMDPRA may demand for any information, documents or records from a gas exchange or clearing house.
What is the provision of the regulations on the power of inspection?
– The authority may at any time undertake inspection, conduct inquiries and audit of any gas exchange or clearing house, or/and any associate or affiliate of such exchange or clearing house.
Do the regulations confer any further power on the NMDPRA regarding interim orders?
– Where during an investigation or intervention, the NMDPRA is satisfied that an act in Contravention of these regulations has been committed or continues to be committed or that such act is about to be committed, the authority can by order, temporarily restrain any person from carrying on such act until the conclusion of such investigation or intervention or until further orders, but such order shall not be made without giving notice and opportunity of being heard to such a person.
The Governance Structure of Gas Exchanges & Clearing Houses in Nigeria
This article will be looking at the provisions of the Nigerian Midstream Downstream Petroleum Regulatory Authority NMDPRA Regulations on the Governance Structure of The Gas Exchange in Nigeria.
What is the governance structure of the exchange under the regulations?
– The governance structure of the gas exchange shall be in compliance with the rules and regulations governing the registration and operation of an exchange as prescribed by the Securities and Exchange Commission (SEC).
What are the provisions of the NMDPRA regulations on disclosure and corporate governance norms?
– The disclosure requirements and Corporate governance norms provided in the regulations shall apply to a gas exchange and a clearing house in addition to those specified by the Securities and Exchange Commission (SEC) for listed companies.
– The board or directors of a gas exchange or a clearing house shall confirm compliance with these regulations in writing on a quarterly basis to the NMDPRA within 2 months from the end of each calendar quarter.
– A gas exchange and clearing house shall disclose to the NMDPRA its resources committed towards strengthening regulatory functions and ensuring compliance with regulatory requirements applicable to the gas exchange or clearing house, as the case may be.
-The fees and charges levied by a gas exchange or a clearing levied by a gas exchange or clearing house shall be placed for review and approval before the oversight committee of such gas exchange or cleaning house.
What is the default remedy mechanism on gas exchanges and clearing houses under the regulations?
– A member may be declared a defaulter by direction or circular of the gas exchange or clearing house, if the member :-
a). Is unable to fulfill its clearing or settlement obligations.
b). Admits or discloses its inability to fulfill or discharge its duties, obligations and liabilities.
c). Fails or is unable to pay within the specified time the damages and the money difference due on a closing-out effected against him under the bye-laws of gas exchange or clearing house.
d). Fails to pay any sum due to the gas exchange or clearing house which may be prescribed by the authority competent for such purpose.
– In the event a member is declared a defaulter and the member fails to meet Its clearing and settlement obligations, upon crystallisation of claims in accordance with the bye-laws of the gas exchange, or jr claim amount shall be set aside from deposits of the defaulting member and the recovered amount shall be distributed fairly and proportionately among the affected parties including transporter, seller, buyer, pipeline system operator and gas exchange or clearing house, from the deposits of the member or client.
What is the prescribed delivery procedure under the NMDPRA regulations?
– The scheduling and delivery of contracts on the gas exchange shall be in accordance with the network code, pipeline and virtual pipeline system rules.
– Subject to the provision of these regulations, operationalisation of scheduling of transactions through the gas exchange shall be in accordance with the detailed procedure issued by NMDPRA under the network code or virtual pipeline system rules.
– The charges or penalties for defaults shall be in accordance with the network code or other rules issued by the NMDPRA.
What is the grievance redressal mechanism stipulated by the regulations?
– The NMDPRA may call for information on the redressal of any specific complaints and grievances by the gas exchange.
Notable Regulatory Provisions on Gas Trading Licenses & Clearing House Authorizations
This article is focused on the regulatory framework governing gas trading licenses and clearing house authorisations, from license applications to renewals.
What is the regulatory agency in charge of gas trading and clearing house authorisations?
Gas trading licences and clearing house authorisations are under the jurisdiction of the Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA).
What are the provisions of the NMDPRA on the duty to obtain licenses or authorisations?
– A person shall not establish or operate a gas exchange without a gas trading license issued by the NMDPRA in accordance with its regulations.
– A person shall not act as a clearing house for a gas exchange without the prior authorization of the NMDPRA.
– A qualified person under the NMDPRA regulations shall only be entitled to participate in the exchange where the person holds a valid and approximate license or permit issued by the NMDPRA.
What are the provisions of the NMDPRA on applications for licenses or authorisations?
– An application for a gas trading license or clearing house authorisation shall be submitted to the NMDPRA in the form as prescribed in guidelines issued by the Authority, subject to compliance with its regulations.
What are the conditions for granting a gas license?
– An application for a gas trading license in the NMDPRA regulations shall comply with the rules of the Securities and Exchange Commission (SEC) in relation to commodities trading.
– An applicant for a gas trading license shall :-
a). Be a company limited by shares
b). Be demutualised
c). Ensure its directors are fit and proper persons as specified in these regulations
d). Satisfy the requirements relating to the ownership and governance structure specified in these regulations and other appropriate government regulations
e). Satisfy financial & technical capabilities
f). Have the necessary infrastructure for the orderly execution of trade
g). Have an online screen-based trading system
What are the conditions for granting a Clearing house authorisation?
– An applicant seeking authorisation as a clearing house shall –
a). Have necessary infrastructure and resources to ensure timely clearing and settlement of trades.
b). Have adequate risk management mechanisms.
c). Have the capacity to establish and publish a settlement procedure including netting, novation and guarantees for settlement of trades in place, as specified by the NMDPRA.
d). Demonstrate the establishment of an applicable settlement guarantee fund to guarantee settlement of trades.
e). Demonstrate a wide network of clearing members and have adequate facility to admit and regulate its members.
f). Have the facility to disseminate information about trades, quantities and quotes in real time.
g). Establish connectivity with the clearing banks, gas exchange and clearing members.
h). Satisfy other conditions as may be specified by the NMDPRA.
What is the extent of the NMDPRA’s power go make inquiries & call for information?
– The NMDPRA may , before granting a gas trading license or clearing house authorisation, make inquiries and require the applicant to furnish such further information or documentation as it may deem necessary.
What is the duration of a license in this regard?
– The validity of a gas trading license shall not exceed 10(Ten) years from the date of issuance unless such license or authorisation is withdrawn or cancelled.
What is the provision of the NMDPRA regarding license or authorisation renewal?
– A gas exchange or clearing house, desirous of renewing its license or authorisation may make an application not later than 12 months before the expiration of the validity period of such license or authorisation, in the manner prescribed by the NMDPRA.