Regulation (EU) 2024/1106 of the European Parliament and of the Council of 11 April 2024 amending Regulations (EU) No 1227/2011 and (EU) 2019/942 as regards improving the Union’s protection against market manipulation on the wholesale energy market (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

After consulting the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) Open and fair competition in the internal markets for electricity and for gas and ensuring a level playing field for market participants requires integrity and transparency of wholesale energy markets. Regulation (EU) No 1227/2011 of the European Parliament and of the Council (3) establishes a comprehensive framework to achieve that objective. To enhance the public’s trust in functioning wholesale energy markets and to protect the Union effectively against market abuse, Regulation (EU) No 1227/2011 should be amended to ensure further transparency and increase monitoring capacities, thereby contributing to the stabilisation of energy prices and consumer protection, as well as to ensure more effective investigation and enforcement of cases of potential cross-border market abuse addressing the shortcomings identified in the current framework.

(2) Financial instruments, including energy derivatives, traded on wholesale energy markets are of increasing importance. Due to the increasingly close interrelation between financial markets and wholesale energy markets, Regulation (EU) No 1227/2011 should be better aligned with the financial market legislation of the Union, such as Regulation (EU) No 596/2014 of the European Parliament and of the Council (4), including with respect to the definitions of market manipulation and inside information. The definition of market manipulation in Regulation (EU) No 1227/2011 should therefore be amended to align it with Article 12 of Regulation (EU) No 596/2014. To that end, the definition of market manipulation under Regulation (EU) No 1227/2011 should be amended to capture the entering into any transaction, or issuing, modifying or withdrawing any order to trade, but also any other behaviour relating to wholesale energy products which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of wholesale energy products; secures, or is likely to secure, by a person, or persons acting in collaboration, the price of one or more wholesale energy products at an artificial level; or employs a fictitious device or any other form of deception or contrivance which gives, or is likely to give, false or misleading signals regarding the supply of, demand for, or price of wholesale energy products. In that regard, with a view to the alignment with Regulation (EU) No 596/2014, the notion of any other behaviour relating to wholesale energy products should include, but should not be limited to, actions such as quote stuffing, painting the tape or momentum ignition.

(3) The definition of inside information should also be amended to align it with Regulation (EU) No 596/2014. In particular, where inside information concerns a process which occurs in stages, each stage of the process as well as the overall process could constitute inside information. An intermediate step in a protracted process could in itself constitute a set of particular circumstances or a particular event which exists or where there is a realistic prospect that they will come into existence or occur, on the basis of an overall assessment of the factors existing at the relevant time. However, that should not be interpreted as meaning that the magnitude of the effect of that set of circumstances or that event on the prices of the wholesale energy products concerned is to be taken into consideration. An intermediate step in a protracted process should be considered to be inside information if it, by itself, meets the criteria laid down in this Regulation for inside information.

(4) This Regulation is without prejudice to Regulations (EU) No 648/2012 of the European Parliament and of the Council (5), (EU) No 596/2014 and (EU) No 600/2014 of the European Parliament and of the Council (6) and to Directive 2014/65/EU of the European Parliament and of the Council (7), as well as to the application of Union competition law to the practices covered by this Regulation.

(5) The sharing of information between national regulatory authorities and the competent financial authorities of the Member States is a central aspect of the cooperation with regard to, and detection of, potential breaches of this Regulation concerning both the wholesale energy markets and the financial markets. In light of the exchange of information between competent authorities pursuant to Regulation (EU) No 596/2014 at national level, national regulatory authorities should share relevant information that they receive with the competent financial authorities of the Member States and the national competition authorities.

(6) Where information shared with the European Agency for the Cooperation of Energy Regulators (the ‘Agency’) is not, or is no longer, sensitive from a commercial or security point of view, the Agency should be able to make that information available to market participants and to the wider public in an accessible manner with a view to contributing to enhanced knowledge about the wholesale energy markets. This should include the possibility for the Agency to publish aggregated information on organised marketplaces (OMPs), inside information platforms (IIPs) and registered reporting mechanisms (RRMs) in accordance with applicable data protection law with the aim of improving transparency of wholesale energy markets and provided that it does not distort competition on those energy markets.

(7) Where information shared with the Agency is not, or is no longer, sensitive from a commercial point of view, the Agency should be able to make its commercially non-sensitive trade database available for scientific purposes, subject to confidentiality requirements, with a view to contributing to enhanced knowledge about the wholesale energy markets. This is intended to help to build confidence in, and to foster the development of knowledge about, the functioning of wholesale energy markets. The Agency should establish and make publicly available rules on how it intends to make the information available for scientific and transparency purposes in a fair and transparent manner.

(8) In order to further enhance market transparency in the Union wholesale energy markets and to contribute to a common Union energy data strategy, the Agency should develop and maintain a digital reference centre containing information on Union wholesale energy market data (the ‘Reference Centre’). The Agency should make public, in a user-friendly manner, parts of the information which it collects pursuant to this Regulation, including information regarding the trading of over-the-counter wholesale energy contracts, power purchase agreements and contracts for difference. Any data made public by means of the Reference Centre should be subject to this Regulation and to the applicable data protection law.

(9) OMPs which carry out activities relating to the trading of wholesale energy products that are financial instruments as defined in Article 4(1), point (15) of Directive 2014/65/EU should be duly authorised pursuant to the requirements of that Directive.

(10) The use of trading technology has evolved significantly in the past decade and is increasingly used on the wholesale energy markets. Many market participants use algorithmic trading and high-frequency algorithmic techniques with minimal or no human intervention. The risks arising from those practices should be addressed in Regulation (EU) No 1227/2011.

(11) Compliance with the reporting obligations under Regulation (EU) No 1227/2011 and the quality of the data that the Agency receives is of the utmost importance in order to ensure the effective monitoring and detection of potential breaches with a view to achieving the objective of that Regulation. Inconsistencies in the quality, formatting, reliability and cost of trading data have a negative effect on transparency, consumer protection and market efficiency. It is essential that the information received by the Agency is accurate and complete for the purpose of enabling it to carry out its tasks and functions effectively.

(12) In order to improve the Agency’s wholesale energy market monitoring and make data collection more complete, the current reporting regime needs improvement. The data collected should be expanded to overcome gaps in the data collection and should include coupled markets, new balancing markets, contracts for balancing markets, allocated transmission capacities and products that have potential delivery in the Union. OMPs should be required to make available to the Agency data relating to the order book or, upon request, provide the Agency with access, without delay, to the order book. Order book providers should also be designated as persons professionally arranging transactions subject to the obligation to monitor and report suspected breaches of this Regulation.

(13) The reporting obligations on market participants should be minimised by collecting the required information or parts thereof, where possible from existing sources. Market participants are unable easily to record or report OMP data. OMP data should therefore be made available to the Agency by the relevant OMPs or by third parties acting on their behalf.

(14) Any processing of personal data carried out within the framework of this Regulation, such as the exchange or transmission of personal data between relevant national authorities and reporting by national regulatory authorities, should be carried out in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council (8), and any exchange or transmission of information by the Agency should be carried out in accordance with Regulation (EU) 2018/1725 of the European Parliament and of the Council (9).

(15) IIPs should play an important role for the effective disclosure of inside information. It should be mandatory to disclose inside information on dedicated IIPs to make the information easily accessible and to enhance transparency. Market participants may, only in addition, continue to use other channels, including market participants’ websites, to disclose inside information. To ensure trust in the IIPs, they should be authorised pursuant to this Regulation. IIPs, including those registered by the Agency pursuant to Article 11 of Commission Implementing Regulation (EU) No 1348/2014 (10), should comply with the requirements for authorisation and with data protection law. The Agency should have the power to withdraw such authorisation in certain cases, while respecting the procedural safeguards referred to in Article 14(6), (7) and (8) of Regulation (EU) 2019/942 of the European Parliament and of the Council (11). The withdrawal of an authorisation should not prevent an entity from applying for a new authorisation as IIP with the Agency. IIPs registered by the Agency pursuant to Implementing Regulation (EU) No 1348/2014 and included in the Agency’s list of IIPs should be allowed to continue operating until the Agency has taken a decision on authorisation pursuant to this Regulation. IIPs should have mechanisms in place allowing inside information reports to be quickly and effectively checked. In the development of such mechanisms, IIPs may involve market participants.

(16) To streamline and make the reporting of data to the Agency more effective, the information should be provided through RRMs and the operation of RRMs should be authorised by the Agency pursuant to this Regulation. RRMs, including those registered by the Agency pursuant to Article 11 of Implementing Regulation (EU) No 1348/2014, should comply with the requirements for authorisation and with data protection law. The Agency should maintain a register of RRMs that it has authorised. The Agency should have the power to withdraw such authorisation in certain cases, while respecting the procedural safeguards referred to in Article 14(6), (7) and (8) of Regulation (EU) 2019/942. The withdrawal of an authorisation should not prevent an entity from applying for a new authorisation as RRM with the Agency. RRMs registered by the Agency pursuant to Implementing Regulation (EU) No 1348/2014 and included in the Agency’s list of RRMs should be allowed to continue operating until the Agency has taken a decision on authorisation pursuant to this Regulation. RRMs should have mechanisms in place allowing transaction reports to be effectively checked. In the development of such mechanisms, RRMs may involve market participants.

(17) In order to facilitate monitoring to detect potential trading on the basis of inside information, the collection of inside information needs to be aligned with the current processes for trade data reporting.

(18) Persons professionally arranging or executing transactions should have the obligation to report suspicious transactions in breach of Regulation (EU) No 1227/2011 with regard to insider trading and market manipulation and, in order to enhance the possibility of enforcement of such breaches, should also have the obligation to report suspicious orders and potential breaches of the obligation to publish inside information. Direct electronic access providers and order book providers are considered to be persons professionally arranging transactions.

(19) Commission Regulation (EU) 2015/1222 (12) provides for the possibility for third-country participation in the Union single day-ahead and intraday coupling in the electricity sector. Since market-coupling operators use a specific algorithm to match bids and offers in an optimal manner, this may result in orders to trade being placed in a third country participating in the Union single day-ahead and intraday coupling but resulting in a contract for the supply of electricity with delivery in the Union. The placing of such orders to trade in third countries participating in the Union single day-ahead and intraday coupling that may result in delivery in the Union should be covered by the definition of wholesale energy products pursuant to this Regulation.

(20) In order to obtain an accurate, objective and reliable assessment of the price for liquefied natural gas (LNG) deliveries to the Union, the Agency should collect all the LNG market data that are necessary to establish a daily LNG price assessment and an LNG benchmark. The LNG price assessment and the LNG benchmark should be established on the basis of all transactions pertaining to LNG deliveries to the Union. The Agency should be empowered to collect the relevant market data from all participants active in LNG deliveries to the Union, which should report the LNG market data to the Agency as close to real time as technologically possible, either after the conclusion of a transaction or after the posting of a bid or offer to enter into a transaction. The Agency’s LNG price assessment should comprise the most complete dataset including transaction prices, bids and offer prices for LNG deliveries to the Union. The daily publication of that objective LNG price assessment, and of the spread established in comparison to other reference prices on the market in the form of an LNG benchmark, paves the way for its voluntary uptake by market participants as the reference price in their contracts and transactions. Once established, the LNG price assessment and the LNG benchmark could also become a reference rate for derivative contracts used for hedging the price of LNG or the difference in price between the LNG price and other gas prices.

(21) The delegation of tasks and responsibilities can be an effective instrument to reduce duplication of tasks, foster cooperation and aims to reduce the burden imposed on market participants. Therefore, a clear legal basis should be provided for such delegation. National regulatory authorities should be able to delegate tasks and responsibilities to another national regulatory authority or to the Agency, with the delegates’ prior consent. The national regulatory authorities should be able to introduce specific conditions and to limit the scope of the delegation to what is necessary for the effective supervision of cross-border market participants or groups. Delegations should be governed by the principle of allocating competence to the authority which is best placed to take action on the subject matter.

(22) The rules on the performance of the duties of national regulatory authorities and of the Agency should ensure that conflicts of interest are avoided as far as possible.

(23) A uniform and stronger framework to prevent market manipulation and other breaches of Regulation (EU) No 1227/2011 in the Member States is necessary. In order to ensure the consistent application of administrative fines across the Member States for breaches of Regulation (EU) No 1227/2011, that Regulation should be amended to provide for a list of administrative fines and other administrative measures which should be available to the national regulatory authorities as well as for a list of criteria to determine the level of those administrative fines. In particular, the amount of administrative fines which can be imposed in a specific case should be able to reach the maximum level provided for in this Regulation. However, this Regulation does not limit Member States’ ability to provide for lower administrative fines on a case-by-case basis. Penalties for breaches of Regulation (EU) No 1227/2011 should be proportionate, effective and dissuasive and should reflect the type of the breaches, taking into account the ne bis in idem principle. The adoption and publication of administrative fines should respect fundamental rights as laid down in the Charter of Fundamental Rights of the European Union (the ‘Charter’). Administrative fines and other administrative measures are complementary parts of an effective enforcement regime. A harmonised supervision of the wholesale energy markets requires a consistent approach among national regulatory authorities. In order to fulfil their tasks, it is necessary that the national regulatory authorities be provided with the appropriate resources.

(24) Where a market participant that is not resident or established in the Union is active within the Union, it should designate a representative in the Union. The representative should be explicitly designated by a written mandate of the market participant to be authorised to act on its behalf. It should be possible for the national regulatory authorities or the Agency to address the representative with regard to the obligations laid down in this Regulation.