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Q&As on REMIT – Question II.1.1.

What is REMIT?


Answer:

Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (REMIT), was published in the Official Journal of the European Union on 8 December 2011 and entered into force 20 days following its publication, i.e. on 28 December 2011. REMIT introduced, for the first time, a consistent EU-wide framework:

• defining market abuse, in the form of market manipulation, attempted market manipulation and insider trading, in wholesale energy markets;

• introducing the explicit prohibition of market manipulation, attempted market manipulation and insider trading in wholesale energy markets;

• establishing a new framework for the monitoring of wholesale energy markets to detect and deter market manipulation and insider trading; and

• providing the enforcement of the above prohibitions and the sanctioning of breaches of market abuse rules at national level.

REMIT prohibits market manipulation and trading on inside information in wholesale energy markets. The definitions of market manipulation and insider trading in REMIT are in line with those applying under Directive 2003/6/EC (Market Abuse Directive or MAD), though adapted for wholesale energy markets. The prohibitions of market manipulation and insider trading in REMIT does not apply to wholesale energy products which are financial instruments and to which Article 9 of MAD applies.

REMIT regulation is available here: https://www.acer-remit.eu/portal/custom-category/remit_doc.

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Q&As on REMIT – Question II.1.2.

Who has obligations under REMIT?


Answer:

All entities and persons who participate in, or whose conduct affects, wholesale energy markets within the Union should be compliant with REMIT. It makes no difference whether or not the person is resident within the EU or whether or not they are professional investors. Also non-EU and non-EEA market participants are covered by REMIT if entering into transactions, including the placing of orders to trade, in one or more wholesale energy markets in the Union. Accordingly, the obligations to register under REMIT with the competent NRA and to report data to the Agency according to Article 8(1) and (5) of REMIT also applies to such non-EU and non-EEA market participants. The same holds for the prohibitions of market abuse pursuant to Articles 3 and 5 of REMIT.

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Q&As on REMIT – Question II.1.3.

What are the benefits of greater transparency in wholesale energy trading?


Answer:

Wholesale energy markets provide key price signals which affect the choices of producers and consumers, as well as investment decisions in production facilities and transmission and distribution infrastructure. It is therefore essential that these signals reflect a fair and competitive interplay between supply and demand, and that no profits can be drawn from market abuse.

Greater transparency in wholesale energy markets reduces the risk that markets are manipulated and the price signals distorted. Transparency in wholesale energy markets is thus crucial in ensuring that consumers pay the fair price for their gas and electricity. It also helps creating a level-playing field for all market participants.

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Q&As on REMIT – Question II.1.4.

Why is the EU framework for wholesale energy transparency and integrity necessary?


Answer:

Wholesale energy markets in Europe are increasingly interlinked across the Union in that market abuse in one Member State can affect the price of energy in other Member States.

When REMIT came into force, only a few Member States had organised the monitoring of the wholesale energy markets within their own borders, trading venues often had no clear prohibition of market abuse. Most of the transactions were not reported and fundamental data was not accessible to NRAs. Therefore, the European Union judged it essential to set up a dedicated market integrity and transparency framework at Union level for the gas and electricity wholesale markets.

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Q&As on REMIT – Question II.2.1.

What is the role of the Agency under REMIT?


Answer:

The Agency for the Cooperation of Energy Regulators plays a central role in the monitoring framework under REMIT.

As recognised in REMIT, the Agency is best placed to carry out efficient market monitoring at Union level as it has both a Union-wide view of electricity and gas markets, and the necessary expertise in the operation of electricity and gas markets and systems in the Union. Therefore the Agency has been tasked with collecting and screening wholesale market transaction data across the EU and performing an initial assessment of anomalous events, before notifying suspicious cases to NRAs for investigation.

 

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Q&As on REMIT – Question II.2.2.

Why centralise the monitoring at the Agency?


Answer:

Wholesale energy markets are becoming increasingly interlinked across the Union. NRAs typically see only a part of these markets. A centralised approach to market monitoring with a holistic view of the markets is therefore essential to ensure effective detection and deterrence of abusive market practices. In addition, a centralised data collection will help to avoid double reporting of market participants active in several Member States will instead provide the Agency with a complete set of data on the EU wholesale energy market.

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Q&As on REMIT – Question II.2.3.

Will the Agency prosecute cases of market abuse?


Answer:

Investigations of market abuse cases and prosecution of market participants are left to NRAs.

Member States had until 29 June 2013 (eighteen months from the date on which REMIT entered into force) to adapt their legislation in order to give their national authorities the necessary powers to enforce REMIT.

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Q&As on REMIT – Question II.2.4.

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Q&As on REMIT – Question II.3.1.

What is market abuse?


Answer:

The definitions in REMIT are based on the definitions in MAD[1], but tailored to the gas and electricity markets. Market abuse means insider dealing and market manipulation, which have become explicitly prohibited with the entry into force of REMIT.

The following seven types of behaviour may amount to market abuse, the first three of which relate to insider trading, the last four to market manipulation, including attempted market manipulation:

1. insider trading – when an insider trades, or tries to trade, on the basis of inside information;

2. improper disclosure of inside information – where an insider improperly discloses inside information to another person, unless such disclosure is made in the normal course of the exercise of their employment, profession or duties;

3. recommending on the basis of inside information – where an insider is recommending or inducing another person, on the basis of inside information, to acquire or dispose of wholesale energy products to which that information relates;

4. false/misleading transactions – trading, or placing orders to trade, which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of wholesale energy products;

5. price positioning – trading, or placing orders to trade, which secures or attempts to secure, by a person, or persons acting in collaboration, the price of one or several wholesale energy products at an artificial level, unless the person who entered into the transaction or issued the order to trade establishes that his reasons for doing so are legitimate and that that transaction or order to trade conforms to accepted market practices on the wholesale energy market concerned;

6. transactions involving fictitious devices/deception – trading, or placing orders to trade, which employs fictitious devices or any other form of deception or contrivance; and

7. dissemination of false and misleading information – giving out information that conveys a false or misleading impression about a wholesale energy product where the person doing this knows the information to be false or misleading.


[1] Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive, MAD).

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Q&As on REMIT – Question II.3.2.

What is inside information?


Answer:

Article 2 of REMIT defines “inside information” by means of the following four criteria information of a (1) precise nature, (2) which has not been made public, (3) which relates, directly or indirectly, to one or more wholesale energy products (4) and which, if it were made public, would be likely to significantly affect the prices of those wholesale energy products.

In its non-binding Guidance on the application of the definition of inside information, the Agency considers that, in view of the current limited experiences with the application of the definition of inside information in the wholesale energy market, the notion of “inside information” should currently be primarily understood in relation to:

• information which is required to be made public in accordance with Regulations (EC) No 714/No 714/2009[1] and (EC) No 715/2009[2], including guidelines and network codes adopted pursuant to those Regulations. This includes information referred to in Commission Regulation (EU) No 543/2013[3], which amends the guidelines annexed to Regulation (EC) No 714/2009;

• information relating to the capacity and use of facilities for production, storage, consumption or transmission of electricity or natural gas or related to the capacity and use of LNG facilities, including planned or unplanned unavailability of these facilities; and

• information which is required to be disclosed in accordance with other legal or regulatory provisions at Union or national level, insofar as this information is likely to have a significant effect on the prices of wholesale energy products.

Experience will show which kind of other information is likely to have a significant effect on the prices of one or more wholesale electricity products if made public.

These considerations apply until more experience is gained about the notion of inside information in wholesale energy markets. The Agency believes that respect of the aforementioned transparency requirements is currently essential to avoid breaches of inside information rules.

Further guidance on this subject will be provided by the Agency as soon as more experience on the application of REMIT is gained, as the definition of inside information will evolve over time.


[1] Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity.

[2] Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005.

[3] Commission Regulation (EU) No 543/2013 of 14 June 2013 on submission and publication of data in electricity markets and amending Annex I to Regulation (EC) No 714/2009 of the European Parliament and of the Council.

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