Precise nature of the inside information definition under REMIT

Article 2(1) of REMIT defines "inside information" as:

- information of a precise nature,

- which has not been made public,

- which relates, directly or indirectly, to one or more wholesale energy products and

- which, if it were made public, would be likely to significantly affect the prices of those wholesale energy products.

Article 2(1) third subparagraph of REMIT provides indications as to what is meant by the term "information of precise nature" as follows: information shall be deemed to be of a precise nature if it indicates a set of circumstances which exists or may reasonably be expected to come into existence, or an event which has occurred or may reasonably be expected to do so, and if it is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or event on the prices of wholesale energy products.

The precise nature of the information is to be assessed by the holder of the information on a case-by-case basis and depends on what the information is and on the surrounding context.

According to the ACER’s 5th Edition of its Guidance on the application of REMIT of 8 April 2020 in that assessment, the holder of the information may, among other things, take into consideration:

(i) that there is a realistic prospect that a fact will occur;

(ii) that the estimation of the potential price effect of information disclosure is irrelevant for the assessment of the precise nature; and

(iii) that intermediate steps in a lengthy process may be precise information. Each of these considerations will be further explained below along with non-exhaustive examples.

These elements are further analysed by the ACER in greater detail.

Realistic prospect

According to the ACER, it is enough that there is a realistic prospect that the fact will occur to make the information related to that event precise Information is precise as long as there is a realistic prospect that the circumstances or events it refers to will come into existence/occur, considering all the factors existing at the time of the assessment (this is consistent with the Court of Justice of the European Union understanding in the financial sector judgment in Geltl, CJEU, Case C 19/11 (2012), as regards the criterion of ‘precise information’).

The ACER refers also to the following examples of the application of the concept of realistic prospect:

1. Information on strikes provided to the market participant impacting workers relevant for the normal operation of a generation unit:

• Such information on strikes can be seen as having a realistic prospect of happening due to, for example, the existence of historical records of this information resulting in effective strikes impacting the production of this unit. Therefore, it can be considered that there is a realistic prospect of a strike happening, considering all the factors existing at the time of the assessment.
• This information on strikes would then qualify as precise information. This is despite the fact that the strike can still be cancelled and/or that there may be some uncertainty about the overall duration of the strike or other elements.
• Any further developments of the situation (cancellation of the strike, update on the dates of the strike, scope of workers affected etc.) may make the prospect of the strike less realistic. However, as long as they occur after the market participant assessed whether the information was precise, they should not be taken into consideration by the NRA when assessing whether the information was precise at the time the market participant received the information. In any case, the market participant should provide updates to the public on the evolution of the information.

2. Information/request by the nuclear safety authority to the market participant of possible security tests to be run at an electricity generation unit during the first half of the year:

• Such information can be seen as having a realistic prospect of happening due to, for example, the existence of previous information of the same type that resulted in effective security tests impacting the production and/or availability of the unit, episodes reflecting the planning of the nuclear safety authority, or previous expressions of concerns with the operation of the unit.
• Therefore, it can be considered that there is a realistic prospect of the security tests impacting the production and/or availability to happen considering all factors existing at the time of the assessment.

It is to be noted that in some Member States there is an obligation deriving from the national legislation for the nuclear safety authority to publish this information on possible security tests. 

The estimation of the potential price effect of information disclosure is irrelevant for the assessment of the precise nature

The calculation of the potential effect of the information on the prices of wholesale energy products is not an element to be taken into consideration in the assessment of the precise nature of the information (this is consistent with the Court of Justice of the European Union understanding in the financial sector judgment in Lafonta, CJEU, Case C-628/13 (2015)). However, the likelihood of a significant price effect should be assessed to determine if the information is inside information under REMIT. More specifically, in order for the information to have a precise nature, it is not necessary to be able to infer from that information, with a sufficient degree of probability, that, once it is made public, its potential effect on the prices of the relevant wholesale energy products in a particular direction.

Intermediate steps

ACER underlines that intermediate steps in a lengthy process that are connected to bringing about future circumstances or events may be regarded as precise information. The knowledge of such steps could constitute an advantage that could undermine the spirit and objective protected by REMIT, which is to place market participants on an equal footing and enhance market integrity in terms of information symmetry. Intermediate steps connected to bringing about future circumstances or events shall be specific enough to enable conclusions to be drawn as to the likely effect of that set of circumstances or events on the prices of wholesale energy products. 

The ACER refers to the following examples of the application of the concept of intermediate steps:

1. Commissioning of new plants/Re-commissioning of mothballed power plants

The process leading to the commissioning of new plants or re-commissioning of mothballed power plants is a lengthy and complex process. Its major milestones (for example: management board approvals, regulatory approvals, licence granting, etc.) constitute intermediate steps in this process.

Some facts generated by the intermediate steps leading to the commissioning or re-commissioning of a power plant would qualify as precise information under REMIT, as they constitute a set of circumstances which exist or may reasonably be expected to come into existence and impact the realistic prospect of energy being produced from a certain point in time onwards.
In order to decide whether these facts qualify as inside information, the three other criteria also need to be met.

2. Planned unavailability on existing electricity interconnector due to expansion works in the existing interconnector’s infrastructurw. 

The process leading to the expansion of capacity in an electricity interconnector is a lengthy and complex process. Its major milestones (for example: market participant’s management board decisions, regulatory approvals, licence granting, decisions from the interconnector’s operational centre to proceed with the unavailability,…) constitute intermediate steps.

In this context, a management board decision (for example, on the unavailability on the existing interconnectors to allow the expansion of the existing infrastructure during a specific period), despite being an intermediate step (that can still be subject to other approvals - for example by regulatory or operational centre), fulfils the criteria of precise nature under REMIT. Indeed, the management board decision to approve or disapprove a planned maintenance during a specific period is specific enough to enable a conclusion to be drawn as to the possible effect of that set of circumstances or events on the prices of wholesale energy products. In order to decide whether the management board decision can qualify as inside information, the three other criteria also need to be met.

It is noteworthy that according to the European Commission Proposal of 14 March 2023for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1227/2011 and (EU) 2019/942 to improve the Union’s protection against market manipulation in the wholesale energy market) the definition of inside information under REMIT should be adjusted to mirror Regulation (EU) 596/2014 (MAR). The European Commission proposes, in particular, that where inside information concerns a process which occurs in stages, each stage of the process as well as the overall process could constitute inside information. An intermediate step in a protracted process may in itself constitute a set of circumstances or an event which exists or where there is a realistic prospect that they will come into existence or occur, on the basis of an overall assessment of the factors existing at the relevant time. However, that notion should not be interpreted as meaning that the magnitude of the effect of that set of circumstances or that event on the prices of the financial instruments concerned must be taken into consideration. An intermediate step should be deemed to be inside information if it, by itself, meets the criteria for inside information.

   Regulatory chronicle

14 March 2023

Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 1227/2011 and (EU) 2019/942 to improve the Union’s protection against market manipulation in the wholesale energy market) - the definition of inside information under REMIT should be adjusted to mirror Regulation (EU) 596/2014 (MAR), in particular, where inside information concerns a process which occurs in stages.

    Documentation

REMIT, Article 2(1)