REMIT-2
In 2024 the European Union Regulation on wholesale Energy Market Integrity and Transparency (REMIT) has been updated leading to the REMIT-2 package. This update was needed, amongst others, due to new trading practices, such as algorithmic trading, as well as due to practical developments, including changed market conditions or structures.
In the course of 2021 and 2022, energy prices in Europe surged upward due to various factors, including reduced gas supply and the war between Russia and Ukraine. Additionally, the post-COVID-19 global economic recovery led to increased energy demand, which contributed to prices spiking.
Against this background, in March 2023 the European Commission (EC) launched two legislative proposals, namely:
- A REMIT revision; and
- A revision of electricity market design rules.
The proposed REMIT revision aims to align the scope of the regulation with evolving market dynamics. Key amendments include:
- Expanded scope of data reporting, encompassing new electricity balancing markets, coupled markets, and algorithmic trading.
- Enlarging the scope of REMIT’s market abuse provisions to wholesale energy products that are also Financial Instruments.
- Supervision of reporting parties like Registered Reporting Mechanisms (RRMs) and Persons Professionally Arranging or Executing Transactions (PPAETs).
- Harmonisation of fines across National Regulatory Authorities (NRAs).
- Reinforced cooperation between energy and financial regulators (namely, the Agency for the Cooperation of Energy market Regulators(ACER) and the European Securities and Markets Authority (ESMA)), ensuring a robust regulatory framework for derivative wholesale energy products.
- Strengthened ACER’s oversight over RRMs and Inside Information Platforms (IIPs) to improve the collection of inside information and market transparency.
- Enhanced role for ACER in complex cross-border cases with a European dimension, reinforcing market integrity.
- Permanent extension of ACER’s power related to the implementation of the Liquefied Natural Gas (LNG) price assessment and benchmark.
Basically, there was need for an updated regulation to assure:
- New measures to better protect EU’s wholesale energy market and minimise consequences for retail markets, including the reduction of (potential) impact of short-term market price volatility on energy bills of households and businesses.
- Closer alignment to EU rules on financial markets’ transparency. In other words, compared to REMIT-1, the REMIT-2 package shows more alignment with the Market Abuse Regulation (MAR) (EU regulation no. 596/2014).
- Strengthening provisions on reporting and monitoring to protect consumers from market abuses.
- Coverage of new trading practices, such as algorithmic trading.
- Reinforcement of the EU dimension of theAgency for the Cooperation of Energy market Regulators (ACER) and its supervisory role.
As a consequence, new rules have been introduced while, besides, some definitions have been adjusted or extended, leading to obligations for parties or activities that were initially out-of-scope.