On 7 September 2023 members of the European Parliament’s Industry, Research and Energy Committee (ITRE) adopted a final report on the European Commission’s proposal to amend the Wholesale Energy Market Integrity and Transparency (REMIT) Regulation. By way of background, the package of legislative measures published by the European Commission (Commission) in March 2023 was designed to reform European electricity markets and strengthen European wholesale energy markets’ protection against market manipulation (see our blog note).
Key elements of the European Parliament’s position include:
- Registration of market participants and EU location requirement: One of the most controversial elements of the proposed REMIT review concerned registration of third-country market participants. The Commission proposal includes an amendment to REMIT that would require third-country market participants to “declare an office” in a Member State in which they are active and register with the national regulatory authority (NRA) of that Member State. The European Parliament went further than that and adopted an amendment that would require third-country market participants to register with an NRA in a Member State where they have “declared an office from which they carry out their principal activities”.
- Definitions: The European Parliament report expands the definition of “market participant” to clarify that this term also covers distribution system operators, storage system operators and LNG system operators that enter into transactions in one or more wholesale markets.
- Insider trading: The REMIT prohibition of insider trading was expanded to the use of inside information by the establishment of links or dependencies between orders, or any other action relating to entering into transactions or issuing orders concerning a wholesale energy product to which the information relates.
- Algorithmic trading:The European Parliament report retains the proposed provisions on algorithmic trading that require energy market participants engaging in algorithmic trading to have in place, among other things, effective systems and risk controls suitable to the business it operates to ensure that its trading systems are resilient and have sufficient capacity, are subject to appropriate trading thresholds and limits and prevent the sending of erroneous orders or the systems otherwise functioning in a way that may create or contribute to a disorderly market. In addition, such market participants should notify the NRA of the Member State in which it engages in algorithmic trading of this fact, and NRAs may require the market participant to provide, on a regular or ad-hoc basis, a description of the nature of its algorithmic trading strategies, details of the trading parameters or limits to which the trading system is subject, the key compliance and risk controls that it has in place. Another notification is required is a market participant provides direct electronic access to an organised marketplace.
- LNG: The European Parliament amended the Commission’s proposals concerning the LNG price assessments and benchmarks. The Agency for the Cooperation of Energy Regulators (ACER) will maintain a mandate to produce a daily LNG price benchmark, whereby it is required to use third-party services. The report provides the Commission with a mandate to adopt delegated acts establishing rules to define the production and publication of LNG price assessment and benchmarks, as well as rules for the LNG reference price assessment and benchmark methodology to be used by ACER. The Parliament decided to remove the strict deadlines for the European Commission and ACER to take these actions. The Parliament proposes provisions that list the LNG market data LNG market participants are required to supply to ACER in view of the benchmark production.
In terms of next steps, the ITRE committee’s vote paves the way to commencing trilogue negotiations with the Commission and the Council, which are expected to start later in September or early October. A final agreement is expected before the end of 2023, with a formal adoption and Official Journal publication expected in December 2023 or Q1 2024.
