REMIT Regulation refers to "wholesale energy markets" in multiple places, the title of the Regulation notwithstanding, Article 1(1) thereof lays down that REMIT "establishes rules prohibiting abusive practices affecting wholesale energy markets", Article 5 (providing for the prohibition of market manipulation) also puts this into the context of "wholesale energy market", the definition of "inside information" in Article 2(1)(c) mentions, among others, "information which is required to be disclosed in accordance with legal or regulatory provisions at Union or national level, market rules, and contracts or customs on the relevant wholesale energy market", and so on.
Wholesale energy market
(Article 2(6) of REMIT)
any market within the Union
on which wholesale energy products are traded
According to Recital 5 of REMIT, wholesale energy markets encompass both commodity markets and derivative markets which are of vital importance to the energy and financial markets, and price formation in both sectors is interlinked.
Wholesale energy markets include, inter alia, regulated markets, multilateral trading facilities, over-the-counter (OTC) transactions and bilateral contracts, direct or through brokers.
ACER in its Guidance on the application of REMIT gave the following examples of wholesale energy markets (non-exhaustive list):
- balancing markets for the trading of electricity or natural gas with delivery in the European Union;
- intraday or within-day markets for the trading of electricity or natural gas with delivery in the European Union;
- day-ahead or two-day-ahead markets for the trading of electricity or natural gas with delivery in the European Union, including week-end products;
- physical markets for the trading of electricity or natural gas with delivery in the European Union, including markets for physical forward contracts and non-standardised long-term contracts;
- markets for the transportation capacities of electricity or natural gas in the European Union;
- derivatives markets relating to electricity or natural gas produced, traded or delivered in the European Union, including financial OTC markets;
- derivatives markets relating to the transportation of electricity or natural gas in the European Union.
In the Agency's view (presented in the Annex III to the Trade Reporting User Manual (TRUM, p. 1, 2), "a wholesale energy market is a market where the energy "commodity" or the "derivative" related to the commodity is physically traded (i.e. it physically changes hands/ownership) and not necessarily the venue where the transaction is agreed.
Therefore it is important to clarify that:
a. The energy exchanges, broker platforms and any other facilities where the commodity is negotiated (traded) are Organised Market Places in REMIT terms. These venues are used to arrange/negotiate the transactions (the contracts);
b. For contracts for the supply (and transportation) of gas or electricity in the EU (including futures for the physical delivery) the wholesale energy market is the place where the energy commodity changes ownership (it is traded) e.g. a defined gas hub/electricity network where the gas or electricity changes hands; and
c. For financial derivatives contracts related to EU wholesale gas and electricity products, the venue i.e. the organised market place that hosts that contract, with its clearing house and clearing members, is the wholesale energy market. In this case the wholesale energy market is the place where the derivative contract is traded, e.g. a specific venue with its own rules and arrangements (including clearing house and clearing members)."
An interesting evolution can be observed as regards the ACER’s stance with respect to generation capacity markets (CRM).
In the 1st Edition of the Guidance on the application of REMIT of 20 December 2011 ACER refrained from any remarks in this regard.
In the Second Edition of 22 September 2012 (p. 15) and in its update of 22 April 2013 (p. 15) ACER decided to use the following phrase in the context of the wholesale energy market definition:
„In future, also generation capacity markets (CRM) may have to be considered".
As from 3rd Edition of 29 October 2013, the said phrase has been replaced as follows:
“In addition, generation capacity markets and capacity remuneration mechanisms, where in place, shall be considered wholesale energy markets according to REMIT in so far as wholesale energy products are traded in such markets” (p. 16).
In the 6th Edition of the 22 July 2021 the respective phrase has been reworded into the following: "contracts for the supply of electricity and any derivative related to electricity resulting from generation capacity markets, capacity remuneration mechanisms, and flexibility markets where applicable, shall be considered wholesale energy markets according to REMIT".
In footnote 17 ACER explains, moreover, "In most EU Member States (not all), the contracts in the generation capacity markets include obligations to remain available during the delivery period but also to offer the supply of energy and, therefore, qualify as wholesale energy products".
Admittedly, “it is therefore the Agency’s understanding that the definition of wholesale energy markets includes […] generation capacity markets and capacity remuneration mechanisms, in so far as wholesale energy products are traded there” (p. 18, 19), nevertheless it seems that across the years the Agency’s stance matured and energy market participants should adjust their behaviour accordingly.
Wholesale energy market in numbers
According to the ACER’ presentation (2nd Energy Market Integrity and Transparency Forum, Ljubljana, 6 and 7 September 2018) the EU wholesale energy market exhibits the following activity per day:
- collected organised market place trade records: 250.000,
- collected bilateral trade records: 20.000,
- collected order records: 1.800.000.,
- number of registered organised market places (OMPs): 73,
- number of registered market participants: 13.507,
- number of listed standard contracts: 13.673,
- collected organised market place trade records: in total 220.000.000, per day 250.000,
- Collected order records: in total 1.200.000.000, per day 1.800.000,
- Collected bilateral trade records: in total 18.000.000, per day 20.000,
- Collected non-standard contract records: in total 662.000, per day 500.
REMIT Regulation, Article 2(6)