The company internal documentation and procedures on definitions of roles and responsibilities in the organisation (e.g. responsibilities for the REMIT requirements (centralised vs. decentralised), internal vs. external reporting lines, internal vs. external interfaces, provision of resources: human/technical IT Systems) resources), as well as the identification/assessment of concrete compliance risks will inevitable be in the first place the subject of the detailed scrutiny and examination of the relevant authorities in case of any suspected REMIT non-compliance.



On 28 September 2012 has been released the 2nd Edition of the Agency for the Cooperation of Energy Regulators (ACER) Guidance on the application of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency. Compared to 1st Edition, the 2nd version contains a series of additional important clarifications regarding REMIT compliance. Particularly noteworthy in that regard are:


1. In ACER’s opinion contracts for emission allowances (as well as green certificates) are not  wholesale energy products since they do not fulfil the requirements set out in Article 2(4) of REMIT.


ACER admits, however, that these contracts can have a significant price effect on wholesale energy markets. According to Article 10 of REMIT, information on transactions in emission allowances or derivatives relating to emission allowances collected by trade repositories or competent authorities overseeing trading in emission allowances or derivatives thereof must be provided to ACER together with access to records of transactions in such allowances and derivatives.

2. It does not rise doubts that the term “wholesale energy markets’ encompass both commodity markets and derivative markets. It follows directly from REMIT recitals. Apart from that, ACER’s understanding is that the definition of wholesale energy markets also includes, among others, financial OTC markets as well as balancing markets. The generation capacity markets (CRM) may also have to be considered in future in that regard.


3. It is underlined that Article 4(1) of REMIT (which addresses the obligation to publish inside information) applies regardless of whether the wholesale energy product is a financial instrument are not.


4. In the 2nd Edition of Guidelines ACER confirms that the system operator is typically best placed to publish relevant REMIT related information and by doing so can avoid duplicate, and potentially misleading publications by individual market participants involved. Market participants should, however, ensure they have back-up arrangements for publication to cover situations where the system operator is not able to publish, for instance due to technical reasons, or where the system operator's publication of information is not deemed to have met the requirements for publication of information under Article 4(1) of REMIT.


However, publishing inside information within an energy exchange information service or news board available only to selected participants does not satisfy the requirement of informing the broad trading public.


5. Pursuant to REMIT market participant is any person who enters into transactions in one or more wholesale energy markets. This applies irrespective of the location of the person. Accordingly, also persons from non-EU and non-EEA countries are covered by REMIT provided that they enter into transactions in wholesale energy markets. Article 9(1) of REMIT confirms this understanding that REMIT also applies to market participants from non-EU and non-EEA countries as it requires market participants not established or resident in the Union entering into transactions which are required to be reported to the Agency in accordance with Article 8(1) of REMIT, to register in a Member State in which they are active.


In the light of the above, the ACER considers that also non-EU and non-EEA market participants are covered by the notion of market participant according to Article 2(7) of REMIT if entering into transactions, including the placing of orders to trade, in one or more wholesale energy markets.

Accordingly, the obligations to register pursuant to Article 9(1) of REMIT with the competent National Regulatory Authority and to report data to the ACER 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.


6. If the inside information does not have to be made public in accordance with Regulations (EC) No 714/2009 and (EC) No 715/2009, including guidelines and network codes adopted pursuant to those Regulations, the Agency currently considers that there is no reason for applying a different reasonable timeframe for the disclosure of information. Such information must therefore normally be published within one hour if not otherwise specified in applicable rules and regulations. But in any case the inside information has to be published before the prohibition of insider trading ceases to apply.


ACER considers that market participants should develop a clear compliance plan towards real time or close to real time disclosure of inside information, beyond compliance with existing Third Package transparency obligations.


7. Pursuant to Article 3(4)(a) of REMIT, prohibition of insider trading does not apply to “transactions conducted in the discharge of an obligation that has become due to acquire or dispose of wholesale energy products where that obligation results from an agreement concluded, or an order to trade placed, before the person concerned came into possession of inside information.”


Concerning the said exemption ACER considers that the market participant is obliged to refrain from any amendment or selective withdrawal of the order placed ("hands-off approach") in order to comply with the prohibition of insider trading.


8. ACER also specified the interpretation of the second important exemption from prohibition of insider trading provided for in Article 3(4)(b) of REMIT (according to which the prohibition of insider trading does not apply to where the sole purpose of the transactions entered into is to cover the immediate physical loss resulting from unplanned outages, where not to do so would result in the market participant not being able to meet existing contractual obligations or where such action is undertaken in agreement with the Transmission System Operator concerned in order to ensure safe and secure operation of the system).


Regarding the first alternative, the ACER considers that the contractual obligations referred to must exist ex-ante of the immediate physical loss resulting from unplanned outages. Additionally, the existing contractual obligations must relate to the relevant period of the unplanned event.


The Agency considers a market participant "not being able" to meet such existing contractual obligations, in particular if a the market participant has no other own assets available to cover the loss.


9. In the 2nd Ediotion of Guidelines ACER confirmed that the Accepted Market Practices (AMP) accepted by competent authorities according to the Market Abuse Directive (2003/6/EC) may also apply under REMIT, but AMPs under REMIT are not limited to these accepted market practices. On that occasion ACER specified also its understanding of the difference between terms “market activities” and “market practices” under REMIT. In the ACER opinion "activities" would cover different types of operations or strategies that may be undertaken such as arbitrage, hedging and short selling. "Market practices" would cover the way these activities are handled and executed in the market.


ACER decided to attach to its Guidelines an example of best practice on form of Urgent Market Messages (UMM), which is enclosed below.


10. The Agency is of the opinion that market participants should develop a clear compliance regime towards real time or close to real time disclosure of inside information and the further REMIT requirements, beyond compliance with existing Third Package transparency obligations. ACER recommends that National Regulatory Authorities should consider the following best practice example of such compliance regime for market participants, but taking into account the market participant's size and trading capacity:


Compliance culture: the creation of a corporate culture to comply with REMIT requirements,


Compliance objectives: the compliance with REMIT requirements, namely the registration, disclosure and reporting obligations and the market abuse prohibitions,


Compliance organisation: the definition of roles and responsibilities in the internal organisation (e.g. responsibilities for the REMIT requirements (centralised vs decentralised), internal vs external reporting lines, internal vs external interfaces, provision of resources: human/technical IT systems/resources),


Compliance risks: the identification/assessment of concrete compliance risks,


Compliance programme: the identification of concrete actions to define compliant/noncompliant behaviour,


Communication: the communication of the rules and regulations to be observed:


- internal communication and training concept (raising the awareness of employees);


- external communication and reporting to the ACER/National Regulatory Authorities;


- reporting processes: internal reports on compliance, reporting of infringements, status of current processes, etc.


Monitoring improvements: internal controls, audits, etc.; reporting lines for monitoring results; documentation of processes and actions.


It appears that particularly the two of them mustn’t be neglected by market participants: compliance organisation and compliance risks.