Wholesale energy market under REMIT Regulation

 


 

 

"Wholesale energy market" under REMIT Regulation represents legal concept strictly interlinked with the notions of  "wholesale energy products" and "market participant".

 

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.

 

 

Definition

 

 

 Definition of "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.

 

 

Examples

 

 

ACER in its Guidance on the application 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 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 Union;


- Intraday or within-day markets for the trading of electricity or natural gas with delivery in the Union;


- Day-ahead or two-day-ahead markets for the trading of electricity or natural gas with delivery in the Union, including week-end products;


- Physical markets for the trading of electricity or natural gas with delivery in the 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 Union;- Derivatives markets relating to electricity or natural gas produced, traded or delivered in the Union, including financial OTC markets;


- Derivatives markets relating to the transportation of electricity or natural gas in the Union.

 

Pursuant to ACER, in future, also generation capacity markets (CRM) "may have to be considered".

 

 

Interpretation

 

 

In the Agency's view (presented in the Annex III to the 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)."

 

 


 

 

 

Links

 

 

Wholesale electricity market

 

 

 

Last Updated on Saturday, 15 October 2016 12:48
 

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