The main body of the REMIT Regulation applies from 28 December 2011. So, practically, it is useful to precisely define what arrangements energy firms should have in place as of that date.
The newly published ACER guidelines on REMIT coincide with the release of the ‘CEER final advice on the regulatory oversight of energy exchanges, A CEER Conclusions Paper’. Perceived jointly, the considerations of the Union and the national energy regulators, lean towards the reflection what we find at the end of the regulatory direction started by REMIT. The problem particularly concerns vertically integrated undertakings.
In its ‘Questions & Answers on REMIT’ (last updated: 20 December 2011) and accompanying non-binding ‘Guidance on the application of the definitions set out in Article 2 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’ 1st Edition of 20 December 2011 (http://www.acer.europa.eu/portal/page/portal/ACER_HOME/Activities/REMIT) the Agency for the Cooperation of Energy Regulators (ACER) sets out a few interpretations as regards certain issues related to the implementation of this Regulation. These guidance may be helpful, however, still remains an entire set of ambiguities necessitating urgent reaction (opinion) of ACER.
It should be underlined that whilst the obligations for wholesale energy market participants to register with the competent National Regulatory Authority (NRA) and to provide the ACER with records of transactions and information related to the capacity and use of energy facilities will only come into force after the adoption of the implementing acts to be developed by the European Commission, the main body of the Regulation will apply as of 28 December 2011. Among obligations applying from 28 December 2011 are:
1) the prohibitions of insider trading and market manipulation,
2) the obligation to publish inside information,
3) the obligations for persons professionally arranging transactions to establish and maintain effective arrangements and procedures to identify suspected breaches of the prohibitions of insider trading and market manipulation and to notify them to the competent NRA without further delay.
In the said guidelines the Agency confirms 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:
1) information which is required 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,
2) 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 and
3) any other information that is likely to have a significant effect on the prices of one or more wholesale electricity product if made public.
It is noteworthy that according to Recital 12 of REMIT, information regarding the market participant’s own plans and strategies for trading should not be considered as inside information. The scope of this exception will probably be in the future a contentious issue in particular in vertically integrated undertakings.
In order to extend the area of potential ambiguities it would be useful to refer to considerations contained in the ‘CEER final advice on the regulatory oversight of energy exchanges, A CEER Conclusions Paper’, Ref: C10-WMS-13-03a, of 11 October 2011 (published on the CEER website).
In the context of REMIT CEER expressed in this document a general opinion that it would be useful to distinguish reasons for market intervention, rather than distinguishing spot or future markets. The reasons for market intervention include:
1) trading on own account to optimise physical assets or a sourcing portfolio;
2) trading on own account to capture arbitration revenues;
3) trading for third parties.
As the CEER observed, market makers might be trading in parallel for all of these different reasons. In CEER’s view information collected for the first reason (e.g. physical state of the assets) and for the third reason (e.g. client needs) must be properly treated, otherwise it can lead to conflict of interests.
Generally, information collected under different trading reasons may be inside information in the sense of REMIT, and persons who possess inside information can neither buy nor sell a wholesale energy product to which this information relates, or distribute this information outside of their normal professional exercise or recommend or induce someone to buy or sell a wholesale energy product to which this information relates, on the basis of this information. Market participants will have to publish effectively and in a timely manner any inside information which they hold in respect of their business.
A market participant may delay, in exceptional circumstances, the publication of inside information to protect its legitimate interests if it can ensure its confidentiality that no decision to trade wholesale energy products is taken on the basis of this information and this is not likely to mislead the public. This information and the reasons for the delay shall be communicated immediately to ACER and the relevant NRA.
CEER considers appropriate that NRAs regularly control whether voluntary and appointed market players have put in place internal procedures (Chinese walls) in order to prevent insider dealing and in particular:
1) how inside information is detected;
2) how the process for publication of inside information is organised;
3) how the confidentiality of inside information is ensured, when its publication has been delayed;
4) how it is ensured that no decision to trade is made on the basis of inside information.