EU begins monitoring gas trading to stop manipulation

By RACHEL MORISON
Bloomberg

Traders buying or selling power and natural gas in Europe will have to report details about their transactions to regulators from Wednesday under rules to enhance transparency and prevent market abuse.

Trading companies within or outside the European Union must register with a national regulator and provide records of wholesale energy market transactions, including orders executed by brokers or completed on exchanges.

The Agency for the Cooperation of Energy Regulators, or ACER, in Ljubljana, Slovenia, will monitor the information to prevent insider trading.

Trade reporting is a requirement of the EU’s regulation on energy market integrity and transparency, known as Remit, and aims to shine a light on transactions done through brokers that are settled outside a clearing house.

Trayport, a trading services provider, estimates these made up 60% of power deals and 86% of those for gas in Europe last year. ACER’s resources are “inadequate” to monitor and assess the amount of information which will be available, it said in a report on its website.

“The monitoring activity of regulators has increased over the past few years and most likely the number of inquiries will increase further,” said Riccardo Rossi, regulatory affairs manager at Gazprom Marketing & Trading. “It is a massive project and the role of ACER hasn’t been made easier by the limited amount of resources available.”

Bilateral Trading

The regulator’s surveillance system will be complete on April 7, 2016, when reporting is extended to include bilateral trades, which are private transactions done outside exchanges or brokerages. Data from grid regulators on power and gas flows will also be collected from April and used to aid analysis by ACER.

National regulators have the powers to enforce the rules and will be informed of detected suspicious behavior. Market participants can be reassured that they all trade on the basis of the same information, Alberto Pototschnig, director of ACER, said in a statement.

“Clear transparent rules on the prohibition and detection of market abuse will increase trust in wholesale markets, which may attract extra liquidity,” said Thorsten Ziegler, a spokesman for Vattenfall’s trading unit in Hamburg.

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