Market abuse technology is being deployed in the electronic trading platforms that govern the activity on the energy market. These are solutions that are meant to protect the integrity and transparency of traders and the energy market as a whole. This technology is making it possible for the market regulators to protect the interests of the masses who are heavily dependent on these markets. It is essential to note that the deployment of this technology was occasioned by the enactment of the REMIT energy regulations on leading energy trading markets.
What are REMIT energy regulations?
REMIT is an acronym that stands for Regulation on Energy Markets Integrity and Transparency. This is a piece of regulation that was recently passed by the European Union. It is designed to be a better legal framework to govern the activity on the European energy markets. It is meant to ensure that these markets, which are crucial to the world, are run efficiently, transparently, and in complete probity. It should be noted that this regulation comes on the back of the discovery of a price fixing scandal in the European energy markets. It was discovered that some companies were manipulating the prices of wholesale energy to increase their own profits.
What kind of activity will REMIT prevent?
Collusion among traders
The most prevalent form of market abuse in the energy market is collusion by cartels to inflate the prices declared onto the market, thus, increasing the profit margins for the members of the cartels. Companies have been colluding to ensure that they issue prices that are much higher to the market. This earns them a greater profit while fleecing the consumers. The technology will be able to monitor trading patterns to highlight possible cases of collusion between the traders and energy producing companies.
Companies that produce and trade in energy have long been able to manipulate the market to ensure that the prices offered are always favorable to them. Market manipulation is especially common as the companies that produce energy are the same ones that set the prices. The market abuse technology that is being deployed to monitor for illegal activity, will be able to monitor for such cases and alert the regulators.
Wholesale price fixing
REMIT empowers the regulators to seize documentation from companies that they suspect of engaging in fixing the prices of wholesale energy and electricity. This will enable them to act on the information that they get from the technology that they are deploying to monitor these markets.