S.2. Internal Energy Market

D.2.5. Regulation on Energy Market Integrity and Transparency

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ACER clarifies application of REMIT

Friday, March 22, 2019

ACER published a guidance note to clarify the application of REMIT (EU Regulation on Wholesale Market Integrity and Transparency) within the context of the trading behaviours associated with layering and spoofing (Article 5). Layering and spoofing refers to the “issuing by a market participant of one large or multiple non-genuine orders to trade on one side of the order book, in order to enter into one or multiple transactions on the other side of the order book”.

The consequence of such practice is that on electronic gas and electricity exchanges, the order book for continuous trading displays anonymised bids. By issuing one or more non-genuine orders, a single market player can alter the order book and send misleading demand or price signals for wholesale energy products. These bids may also secure the price formation process of the wholesale energy product at an artificial level, undermining market integrity and confidence in market signals.

Recent NRA Decisions on market abuse have highlighted the importance of detecting order-based manipulations. To this end, ACER has also issued guidance for the detection of non-genuine orders on wholesale markets. This is the third guidance note published by ACER on the issue of market abuse, following notes covering behaviours including transmission capacity hoarding and wash trades respectively.