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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).

RSS_Icon Last update: 20/12/2011  

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.

RSS_Icon Last update: 20/12/2011  

Q&As on REMIT – Question II.3.3.

Who is considered an insider?


Answer:

According to Article 3(2) of REMIT, the prohibition of insider trading applies to the following persons who possess inside information in relation to a wholesale energy products (insider):

• members of the administrative, management or supervisory bodies of an undertaking;

• persons with holdings in the capital of an undertaking;

• persons with access to the information through the exercise of their employment, profession or duties;

• persons who have acquired such information through criminal activity; and

• persons who know, or ought to know, that it is inside information.

RSS_Icon Last update: 20/12/2011  

Q&As on REMIT – Question II.3.4.

What are possible examples of market manipulation?


Answer:

The Agency’s non-binding guidance provides examples of the various types of practices which could constitute market manipulation and which are inspired by European energy regulators’ own experiences and the experiences in financial markets. These can therefore be taken as indicating possible signals of market manipulation in wholesale energy markets according to REMIT. These considerations apply until more experience is gained about market manipulation in wholesale energy markets.

More generally, the Agency considers that market participants’ behaviour must be coherent with their technical and economic constraints in a way to comply with competition law, especially concerning market power exercise. The cooperation of the Agency and NRAs with the competition authorities, as foreseen by REMIT, must be understood in this respect. The Agency will review its Guidance on market manipulation and publish a revised Guidance if considered appropriate.

RSS_Icon Last update: 20/12/2011  

Q&As on REMIT – Question II.3.5.

Who is considered a market participant?


Answer:

Article 2(7) of REMIT states that a ‘”market participant” means any person, including transmission system operators, who enters into transactions, including the placing of orders to trade, in one or more wholesale energy markets.’

In its Guidance to NRAs, the Agency considers at least the following persons to be market participants under REMIT if entering into transactions, including orders to trade, in one or more wholesale energy markets:

• energy trading companies in the meaning of ‘electricity undertaking’ pursuant to Article 2(35) of Directive 2009/72/EC[1] carrying out at least one of the following functions: transportation, supply, or purchase of electricity, and in the meaning of ‘natural gas undertaking’ pursuant to Article 2(1) of Directive 2009/73/EC[2] carrying out at least one of the following functions: transportation, supply or purchase of natural gas, including LNG;

• producers of electricity or natural gas in the meaning of Article 2(2) of Directive 2009/72/EC and Article 2(1) of Directive 2009/73/EC, including producers supplying their production to their in-house trading unit or energy trading company;

• shippers of natural gas;

• balance responsible entities;

• wholesale customers in the meaning of Article 2(8) of Directive 2009/72/EC and Article 2(29) of Directive 2009/73/EC;

• final customers in the meaning of Article 2(9) of Directive 2009/72/EC and Article 2(27) of Directive 2009/73/EC, acting as a single economic entity, that have a consumption capacity of 600 GWh or more per year for gas or electricity. If the consumption of a final customer takes place in markets with interrelated prices, his total consumption capacity is the sum of his consumption capacity in all those markets;

• transmission system operators (TSOs) in the meaning of Article 2(4) of Directive 2009/72/EC and Directive 2009/73/EC;

• storage system operators (SSOs) in the meaning of Article 2(10) of Directive2009/73/EC;

• LNG system operators (LSOs) in the meaning of Article 2(12) of Directive 2009/73/EC; and

• investment firms in the meaning of Article 4(1) No 1 of Directive 2004/39/EC[3].

The crucial criterion for the assessment of whether a company is a market participant is the entering into transactions, including the placing of orders to trade, in wholesale energy markets.


[1] Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC.

[2] Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC.

[3] Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC.

RSS_Icon Last update: 17/12/2014  

Q&As on REMIT – Question II.3.6.

What wholesale energy markets and products are covered by REMIT?


Answer:

Wholesale energy markets include both commodity markets and derivative markets. The wholesale energy markets include, inter alia, regulated markets, multilateral trading facilities and over-the-counter (OTC) transactions and bilateral contracts, direct or through brokers.

REMIT applies to wholesale energy markets, which means any market within the Union on which wholesale energy products are traded.

According to Article 2(4) of REMIT, wholesale energy products means the following contracts and derivatives, irrespective of where and how they are traded:

a) contracts for the supply of electricity or natural gas where delivery is in the Union;

b) derivatives relating to electricity or natural gas produced, traded or delivered in the Union;

c) contracts relating to the transportation of electricity or natural gas in the Union; and

d) derivatives relating to the transportation of electricity or natural gas in the Union.

Contracts for the supply and distribution of electricity or natural gas for the use of final customers are not wholesale energy products. However, contracts for the supply and distribution of electricity or natural gas to final customers with a consumption capacity greater than 600 GWh per year shall be treated as wholesale energy products. Further guidance on the application of the definition of wholesale energy products is provided in the Agency’s Guidance to NRAs.

The prohibitions of insider trading and market manipulation under REMIT do not apply to wholesale energy products which are financial instruments and to which Article 9 of MAD[1] applies, i.e. wholesale energy products which are financial instruments admitted to trading on a regulated market in at least one Member State, or for which a request for admission to trading on such a market has been made, irrespective of whether or not the transaction itself actually takes place on that market. This exemption only applies to the prohibitions of insider trading and market manipulation. The REMIT obligations, data collection and monitoring apply to all kinds of wholesale energy products.


[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).

RSS_Icon Last update: 17/12/2014  

Q&As on REMIT – Question II.3.7.

[** Question number changed to Q III.5.3. **]

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