REMIT: prohibiting market manipulation and insider trading

CRE monitors the wholesale energy markets. Its mission falls within the framework of the European Regulation n°1227/2011 of the European Parliament and of the Council of 25 October 2011 on the integrity and transparency of the wholesale energy market (REMIT), the application modalities of which are specified in the Energy Code.

REMIT lays down rules prohibiting abusive practices on wholesale energy markets and aims at ensuring market integrity.

The prohibitions on market manipulation and insider dealing provided for in Articles 3 and 5 of the REMIT Regulation do not apply to wholesale energy products which are also financial instruments: they are subject to the provisions of Articles 14 and 15 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (MAR). However, wholesale energy products qualified as financial instruments remain concerned by the obligation to disclose inside information pursuant to Article 4 of the REMIT Regulation.

Prohibition of insider trading

Section 3 of the REMIT Regulation prohibits insider trading. Certain exemptions are provided for in its Article 3(4), under certain conditions, in particular in the case of transactions concluded for the sole purpose of covering “immediate physical losses resulting from unforeseen unavailability” (Article 3(4)(b)).

CRE recalls that, in this case, Article 3(4)b requires market players to notify it and ACER of the transactions concluded.

It recommends that the players concerned, in particular groups with both electricity or gas production or infrastructure activities and trading activities, institute relevant control procedures relating to the circulation and use of inside information (lists of insiders, appropriate mechanisms, such as a “Chinese wall” for example, with regard to processes or even installations, etc.). These procedures can help prevent insider trading.

CRE verifies a posteriori that market transactions comply with the REMIT regulation, in particular Article 3.

Prohibition of market manipulation

Article 5 of the REMIT Regulation prohibits market manipulation and attempted market manipulation, as defined in Articles 2(2) and 2(3) respectively.

In its non-binding guidelines, ACER specifies that the qualification of a practice as an “accepted market practice”, mentioned in Article 2(2)(a)(ii) of the REMIT Regulation, falls within the jurisdiction of each national energy regulator. To date, CRE has not wished to draw up a list of accepted market practices.

In its recitals 13 and 14, REMIT reporting gives illustrations of different forms of market manipulation :

  • the placement and withdrawal of false orders;
  • the dissemination of false or misleading information, or rumours, in the media, including on the internet, or by any other means;
  • the deliberate provision of false information to companies that provide price assessments or market reports with the effect of misleading market participants who rely on those assessments or reports;
  • deliberately creating the impression that available electricity or natural gas generation capacity, or available transmission capacity, is other than actually available technical capacity, thereby affecting or potentially affecting the price of wholesale energy products;
  • the action of one or more persons to secure a decisive position on the supply or demand of a wholesale energy product, which has, or is likely to have, the effect of directly or indirectly fixing prices or creating other unfair trading conditions ;
  • the offer, purchase or sale of wholesale energy products with the aim, intention or effect of misleading market participants by acting on the basis of reference prices.

The ACER guidelines include other examples of practices that may constitute market manipulation.

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