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ACER: The Dispute Settlement And Sanctions Committee Of French Energy Regulatory Commission Fines VITOL S.A. € 5 Million For Engaging In Market Manipulation

Date 10/10/2018

In its decision, dated 5 October 2018, the Dispute Settlement and Sanctions Committee (CoRDiS) of the French Energy Regulatory Commission (CRE) held that the energy and commodities company VITOL S.A. had engaged in market manipulations on the French Southern virtual Gas Trading Point between 1 June 2013 and 31 March 2014, in breach of the EU Regulation on wholesale energy market integrity and transparency (REMIT).

CoRDiS found that VITOL S.A. carried out, over the course of 65 cases spread over 54 trading days a modus operandi consisting of the following steps:

1) VITOL S.A. would issue multiple sell orders, generally at the beginning of the trading day (especially before 3 p.m.), when liquidity was low. As the day moves along, VITOL S.A. would issue sell orders at gradually decreasing prices. These sell orders would then decrease after 4 a.m. during the more liquid period of the day;

2) once prices had decreased, VITOL S.A. would engage in important purchases; and

3) after having proceeded with those purchases, VITOL S.A. would cancel its sell orders to finish the day as a net buyer.

The European Union Agency for the Cooperation of Energy Regulators (ACER) welcomes effective oversight of wholesale energy trading and stresses that this decision is the first to impose a penalty within the framework of the REMIT Regulation in the gas sector.

The ACER Guidance provides examples of the various types of trading practices, which could constitute market manipulation, for example by placing of orders with no intention of executing them. For detecting these types of behaviour effective market monitoring of EU wholesale energy markets plays a key role and ensures confidence in market outcomes for the benefit of EU energy consumers.

Market monitoring is carried out at European as well as at national level thanks to close cooperation between National Regulators, ACER and Persons Professionally Arranging Transactions (PPATs).

This decision coincides with the third anniversary of the entry into application, on 7 October 2015, of the trade reporting obligations and the successful establishment of a data collection framework by ACER under REMIT. ACER has also established mechanisms to give access to the information which it receives on EU wholesale energy products to National Regulatory Authorities to facilitate their potential market monitoring at national level and their investigation and enforcement of market abuse cases under REMIT.

However, as also highlighted in the EMIT Forum organised by ACER in Ljubljana last month, most of this framework, which is starting to deliver its benefits in terms of detection of market abusive behaviour, might need to be abandoned, in case ACER’s budget for 2019 were significantly reduced, as proposed by the Council of the European Union.

For further information see:

https://www.cre.fr/en/News/The-Dispute-Settlement-and-Sanctions-Committee-CoRDiS-imposes-a-penalty-for-market-manipulations-on-the-wholesale-energy-market

https://documents.acer-remit.eu/wp-content/uploads/4th-Edition-ACER-Guidance_updated.pdf