The European Commission has today proposed rules on wholesale
energy markets to prevent market manipulation and insider trading. The
Regulation seeks to ensure market transparency by obliging energy traders to
respect clear market rules. Wholesale markets, where gas and electricity is
traded between companies producing energy and traders, are key to the prices
consumers finally pay.
EU Energy Commissioner Günther Oettinger
said: "Our energy markets are interdependent. Market abuse that takes place in
one
Member State often affects the prices in another Member State. It
is crucial to ensure EU level comprehensive rules which guarantee that citizens
can be confident that prices are formed fairly and they can fully benefit from
the internal energy market." The new rules aim at ensuring that traders cannot
use inside information to benefit from their transactions or manipulate the
market by artificially causing prices to be higher than would be justified by
the availability, production cost or capacity to store or transport energy. In
particular, the rules prohibit the following:
use of inside
information when selling or buying at wholesale energy markets. Exclusive and
price sensitive information should be disclosed before trades can take
place
transactions that
give false or misleading signals about the supply, demand or on prices of
wholesale energy market products
distributing false
news or rumours that give misleading signals on these
products.
Market monitoring to
uncover possible cases of abuse will be the responsibility of the European
Agency for the Cooperation of Energy Regulators (ACER). The Agency must have
timely access to the complete information on the transactions taking place at
wholesale energy markets. This includes information on the price, the quantity
sold and the counterparties involved. The data will also be shared with national
regulators who will also be responsible for detailed investigation of suspected
abuse. In complex cross-border cases the ACER will coordinate
investigations.
Penalties will be
enforced by national regulatory authorities in Member States.
The specific
legislation is necessary to ensure that one body can monitor the entire
wholesale market for energy, whether it concerns the deritivative market or the
spot market. The Directive on Insider Dealing and Market Manipulation (MAD) and
the Directive on Markets in Financial Instruments (MiFID) which relate to
financial instruments cover only derivative markets and
transactions.
Background:
Prices at wholesale
markets are key for retail prices for household consumers and industrial users.
More than in other sectors, market prices are highly sensitive to the
availability of production and transmission capacities. This is due to the fact
that electricity cannot be stored on an industrial scale. It is for this reasons
that prices can be influenced easily by creating a false impression about the
availability of capacities or indeed by reducing actual
production.
Europe's wholesale energy markets are also increasingly
cross-border in nature. Price setting is not tied to single countries. It occurs
through the interaction of supply and demand across national boundaries.
Electricity prices in The Netherlands, for example will strongly be influenced
by the availability and cost of generation in Germany or the change in demand in
France. Wholesale markets are also cross-platform. Transactions are frequently
concluded outside the country to which the trades relate. While all this is
beneficial for market integration, it opens ways for market abuses transcending
national borders. In order to effectively detect and deter such behaviour
different national markets have to be looked at together.