Brussels, 8 December 2010
Wholesale energy markets: Commission proposes rules to prevent market abuse
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:
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.
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.
For more information please see also MEMO/10/655 and