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ACER Publishes Second Edition of Guidance on REMIT

 by Prajakt Samant, Thomas Morgan and Simone Goligorsky

On September 28, 2012, the Agency for the Cooperation of Energy Regulators (ACER) issued the second of two pieces of non-binding guidance on the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT).  REMIT imposes requirements aimed at preventing and detecting market abuse, and more specifically, market manipulation and insider trading in the wholesale energy market.

The guidance considers, inter alia,:

  • The scope of REMIT;
  • The application of the definitions of wholesale energy products, wholesale energy market and market participants; inside information;and market manipulation; and
  • The application of the obligation to publish inside information; the prohibitions of market abuse and on possible signals of suspected insider dealing and market manipulation; and the implementation of prohibitions of market abuse.

Considering the scope of REMIT, it should be noted that the guidance stipulates that intra-group transactions, i.e. over-the-counter contracts entered into by counterparties which are part of the same group of companies, would come within the scope of REMIT, given that the definition of wholesale energy products specifies that REMIT will apply to contracts irrespective of how and where they are traded. 

Regarding penalties that will be imposed in the event that a market participant is found to be in breach of REMIT, the guidance states that the national regulatory authorities (NRAs), i.e. the bodies from each member state working with ACER to monitor market participants, should penalize not only breaches of the market abuse prohibition, but also:

  • Any breaches of the obligation to notify ACER of any delayed disclosure of inside information;
  • Any breach of the obligation to provide ACER with a record of wholesale energy market transactions; and
  • A breach of the obligation to register with the competent NRA. 

The first piece of guidance on REMIT was published by ACER in December 2011, a few days before REMIT entered into force.  The guidance focused particularly on the definition of inside information, and what activities ACER would consider to be market manipulation, or attempted market manipulation.  The guidance also gave examples of the types of activities that may indicate insider dealing and suspicious transactions.

It is expected that REMIT will be fully implemented by summer 2013.  In the interim, member states will be required to enable NRAs with the means and powers necessary to investigate suspicious cases, and the prosecute confirmed cases of insider trading and market manipulation.  By summer 2013, it is expected that both ACER and the NRAs (Ofgem in the UK) will start collecting data, and monitoring market participants that come within the scope of REMIT. 




ACER and ESMA Publish Respective Consultations on REMIT and EMIR

by Prajakt Samant and Simone Goligorsky

In the last two weeks, both the Agency for the Cooperation of Energy Regulations (ACER) and the European Securities and Markets Authority (ESMA) have published consultations for market participants on the Regulation on wholesale energy market integrity and transparency (REMIT) and the European Market Infrastructure Regulation (EMIR), respectively.  This article considers some of the issues that have been raised by both consultation papers and outlines the areas where the input of markets participants has been sought.

To read the full article, click here.




EC to Regulate Market Abuse in Wholesale Power and Natural Gas Transactions

by Thomas Morgan

European Union (EU) Regulation 1227/2011 on wholesale energy market integrity and transparency (REMIT), which came into force on December 28, regulates at an EU-level, the wholesale energy markets.  REMIT seeks to detect and prevent market abuse (or more specifically, market manipulation and insider trading) in the wholesale energy sector.  This is in contrast to the existing European market abuse legislation which applied, almost exclusively, to financial instruments admitted to trade on regulated markets.

REMIT applies to wholesale energy products (WEPs):

  • contracts for the supply of electricity or natural gas delivered in the EU;
  • contracts relating to the transport of electricity or natural gas within the EU; and
  • derivatives of those contracts;

irrespective of where or how they are traded, but does not apply if the consumption capacity of the gas or electricity is less than 600 GWh per year.

REMIT prohibits the manipulation of WEP transactions, and requires energy market participants to publish inside information relating to WEPs and submit details of energy transactions to the European energy regulatory authority, the Agency for the Cooperation of Energy Regulators (ACER).  REMIT also requires ACER, working with National Regulatory Authorities (NRA), to monitor wholesale energy markets and requires energy market participants to register with the NRAs.  Member States, in turn, are charged with ensuring that NRAs have the necessary investigatory powers, which shall be exercised in a proportionate manner.

REMIT extends securities market concepts to the energy sector by prohibiting manipulative transactions and the dissemination of misleading information, and preventing insiders from benefiting from access to information relating to power, natural gas and commodity derivatives markets.  Compliance with REMIT will require market participants to introduce or review information barriers between operational and trading activities and ensure timely public disclosure of relevant information.

Rules are to be promulgated requiring energy traders to report transactions to ACER.  ACER, in turn, will be responsible for monitoring and analysing all trades to verify that the rules are followed, and will instruct NRAs to investigate any incidents of market abuse.

Each NRA must establish a register of market participants.  This,is central to the goal of increased market transparency.  Participants will be required to register with one authority only: in the Member State in which it was established or is resident (if neither applies to the participant, then it must register in a Member State where it is active).  The European Commission will adopt implementing acts defining the scope of trade reporting and registration obligations.  Member States must establish registries of electricity and natural gas traders three months after the adoption of the implementing acts, with transaction reporting requirements coming into force three months later.




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