Transparency and integrity of the commodities markets is one of the goals of the ongoing regulatory reforms. Increased confidence in commodities markets will benefit the users of these markets and the economy at large. Wholesale markets in electricity and gas, but also EU Emission Allowances represent an important part of the commodity markets being targeted. Another aim of the reforms is precisely to enhance the EU single market for electricity and gas.
The rules applied to commodity markets stretch over several regulations. The key elements of the EU approach for traded energy markets include:
- The Regulation on wholesale energy market integrity and transparency (REMIT), which introduced a market abuse framework for wholesale energy markets and put these markets under surveillance and supervisory oversight. It also enhanced supervisory cooperation across borders and between the authorities responsible for energy and financial markets, under the coordination of the newly created Agency for the Cooperation of Energy Regulators (ACER). REMIT aims at increasing safety and efficiency in the wholesale markets as well as, as a consequence, the energy derivatives markets.
REMIT implementation started in 2013.
The website of the Agency for the Cooperation of Energy Regulators (ACER)
- Ensuring oversight of carbon markets by defining EU Emission Allowances as financial instruments, thus subjecting emission allowances to all relevant financial market legislation, such as rules on market abuse, information disclosure, business conduct, trading surveillance and licensing requirements. Emission allowances will become subject to these rules when the revised Markets in Financial Instruments Directive (MiFID).
- Supervisory oversight of commodity derivatives markets in general will be enhanced after the reviews of Market Abuse Directive and MiFID is implemented in 2017. The scope for supervisory oversight will be extended and improved definitions will lead to better coordination of oversight between spot and derivatives markets in the commodities space. Supervisors will also be empowered to take measures to limit commodity derivatives positions held by market participants, if necessary to safeguard orderly markets.
The European Commission’s website on a Single market for gas and electricity: http://ec.europa.eu/energy/gas_electricity/markets/wholesale_en.htm