Regulator Seeks to Stop Price Manipulation in European Power, Gas Markets

(Bloomberg) -- Europe’s energy regulator is examining so-called wash trades in European power and natural gas markets as it seeks to reduce market manipulation across borders.

Wash trades are transactions where there’s no change of ownership or market risk, and can be done to distort market prices or, if done through a broker, to trigger commission fees. The trades are attracting attention from the European Union’s Agency for the Cooperation of Energy Regulators as trading hub prices for electricity and gas converge across the region.

Traders that fix prices at an artificial level or send misleading signals near the end of a session “are prone to be further inspected,” Martin Godfried, ACER’s head of market surveillance, said in an interview at the Flame gas conference in Amsterdam. “Very often we can see in our own system that a wash trade is of grave concern.”

After gathering data and noting the alerts, ACER then passes information to national regulators, which enforce the rules.

The number of alerts of suspicious behavior manually assessed by ACER was highest in June, July and September last year, at about 1,400 in each of those months.

It’s “too early” to determine whether wash trades are a major concern in Europe, Godfried said. “We are not saying a wash trade is a breach event. It’s not.”

Godfried also said:

• About 20% of the alerts were related to the wholesale gas market
• Number of alerts of about 8,000 a month compares with reported orders and trades of 73m a month, a rate of 0.01%; about 1,000 of the alerts are assessed on average
• More than half of market integrity breaches reported to or by the agency related to market manipulation
• Suspicious behavior in Europe’s energy markets isn’t always related to price
• ACER has put together guidance on wash trades

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Andrew Reierson, Rob Verdonck

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