Speaking notes van directeur Energie ACM voor het EMart congres over REMIT

Volledige speech van Bos over "Regulatory compliance – getting prepared for new regulation"

REMIT, what to expect from the energy regulator?

Introduction

First of all, I would like to thank the EMart organization for inviting me. Thereby providing me with this opportunity to speak on REMIT.

In my speech I will

• Shortly introduce my organization to you.
• Subsequently I will try to create some clarity on what to expect from us, with regard to REMIT.
• Finally I will go into what we expect from you!

Before I will tell you what you can expect from us, I would like to ask you to think about the role the regulator has nowadays.

From the recent crises we’ve learned that regulators need to be able to cope more effectively with complex and ever evolving markets.

We therefore constantly have to design and reshape Takour regulatory role. This role can change over time and depends on concrete situations.

• market oversight has to be able to adapt to the dynamics of the markets.
• It has to be able to cope with an ever changing landscape.
• New products, new drivers and fundamentals, new players enter,
• while traditional players exit or reinvent themselves.

We therefore constantly have to design and reshape Takour regulatory
role. This role can change over time and depends on concrete situations.

Introduction ACM

First of all, I would like to give you an impression of ACM as organization and how we perceive our regulatory role.

The Netherlands Authority for Consumers and Markets (ACM) is a new multidisciplinary authority. It was created through the consolidation of

• the Netherlands Consumer Authority (CA),
• the Netherlands Independent Post and Telecommunication Authority(OPTA) and the
• Netherlands Competition Authority (NMa).

ACM enforces compliance with the rules on consumer protection,
antitrust, and sector-specific regulation. ACM therefore regulates the Energy
markets not only from the perspective of a sector-specific regulator, but also
from the perspective of promoting competition and protecting the consumer.

In our strategy we have three pillars:

• The first one is related to our overall goal in which the consumer’s
  perspective is central to ACM’s way of dealing with problems. Our central
  mission is to create OPPORTUNITIES for businesses and consumers.
  This principle applies to all of ACM’s departments, from the execution of
  specific consumer-protection tasks to the application of competition rules.
• The second one also relates to our overall goal and aims to keep an eye
  out for public interests. One of the important questions is how to deal with
  the different public interests that play a role in our market oversight, such
  as sustainability and security of supply.
• The third and final pillar is our regulatory style with which we maintain
  market oversight and intervene: First we try to detect PROBLEMS
  instead of certain breaches. We only try to intervene in those cases in
  which we see a true problem underlying the specific behavior of a market
  participant. After we find a problem, WE TRY TO FIX THE PROBLEM
  and we TALK ABOUT it, so we can be held accountable for what we do.
  Central element in our oversight: what is the most effective instrument to
  solve the problem. Those instruments may differ and depend on the
  concrete problem and situation.

These main building blocks also apply to the way we look at the REMIT provisions. As some of you might recall, REMIT was established after the publication of the 2007 EU Sector Inquiry Final Report by DG Competition of the EC.

• The inquiry signaled several price peaks that could not easily be
  explained by market fundamentals.
• The inquiry also concluded that “customers have little trust in the
  functioning of wholesale energy markets”.
• Market participants also suspect market manipulation on the spot and
  forward markets by large generators to be the main reasons for recent
  price increases”.

As you are all aware, markets can only function when there is confidence in its functioning. New entry of parties is only possible with confidence in the market. If market confidence therefore is at stake, we feel we have legitimate reasons to intervene.

This does not always mean we will only levy high fines in big cases.

• Given our pragmatic view it might very well mean that we do nothing, if we do not recognize an actual problem.
• However, in case there is a problem, it might also mean that we will have a serious talk with the parties involved, or that
• we give further guidance. However, if necessary,
• we will not hesitate to impose substantial fines either.

What to expect from us?

The main objective of REMIT is to enhance confidence in the wellfunctioning of the energy markets. As I already mentioned, this confidence is of paramount importance to market parties.

REMIT not only

enhances confidence by creating more transparency.

REMIT also

enables NRAs to detect and terminate the use of inside information and other forms of market abuse

The mere ability to do so already establishes a first layer of confidence.

What about the core values of ACM?

• First of all, we have the ambition to act independently, but in dialogue with the market
• Secondly, we try to do so in a professional manner and
• Thirdly we try to work in an open and transparent manner as much as possible.

One of the key features of REMIT is the chance to set up a pan-European oversight network in which all relevant authorities will cooperate.

We work in close cooperation with other regulatory bodies, such as the competent financial regulator (the AFM) and other NRAs, among whom our neighbouring NRAs (BNetzA, OFGEM and the CREG). Last but not least important, there is also the public prosecutor for breaches of article 3 and 5 of REMIT.

One of REMIT’s unique features is that we can work together as NRAs coordinated by ACER in so called Investigatory Groups. I’ve been told this is without precedent.

In this sense, the ACM is merely one of the shackles in the entire regulatory web.

Of course, there are the bodies for cooperation that sustain the individual NRAs, such as CEER, ACER, but also ESMA and the financial authorities. Closely followed by the energy exchanges and other organized marketplaces, who also have their role to play.

The exchanges and brokers not only have the obligation to survey the conduct on their platforms, but also to report suspicious transactions to ACER and the NRAs as well.

So what does this all mean?

First of all, we are working on several topics regarding the publication of inside information.

• We are currently at the forefront in Europe to promote good market conduct regarding the publication of inside information. 
• We have already been in contact with a large number of market participants.
• You can expect from us that we will continue to strive for compliance with the ACER-guidelines when it comes to the obligation to publish inside information in an effective and timely manner.
• When something is unclear in these guidelines or when the viewpoints between NRAs seem to differ, we will seek to give more guidance via ACER, if necessary.

Until now we did not see the need to use a formal measure to steer the market parties towards further compliance. E.g. by penalties this could change in the future.

REMIT has been in place now though for more than 3 years already. Transparency through publication of inside information is the stepping stone towards better functioning markets. Guidance on how market participants are to publish their inside information has been provided a year ago. We have been in contact with a large number of market participant to warn them that they might not be fully compliant.

Given the fact that we’re no longer dealing with an entirely new piece of legislation, we feel that imposing penalties may be the right instrument at the moment, depending on the specific situation.

Our second main focus is registration by the market participants.

• As soon as registration becomes mandatory, 6 months after the adoption of the implementing acts, you can expect from us that we’ll closely follow the registration process. We will assist in those cases where market participants experience any difficulties in filling out the extensive form.
• Market participants have to make sure they register on time, and keep the registers up to date and correct.
• We have informed the public of the obligation market participants about registering. We feel there is also a task here for representative bodies to make their members aware of their obligation to register.
• Where parties show non-compliant behavior, ACM has different instruments to intervene (e.g. penalties but also guidance).

Thirdly, another key topic for us, is the obligation for market parties to
report their transaction data.

• Nine months after the adoption of the implementing acts, the reporting of standard transactions will start. This is the bulk of all transactions. 
• You will agree with me that it is the exactness of the data that enables ACER to delve into the data and to find suspicious transactions.
• It will then be up to ACM to investigate whether a breach has taken place
  and to penalize it, if necessary.
• This means that you can expect us to investigate situations where:
  • a transaction is reported incorrectly
  • a transaction is reported incompletely
  • a transaction isn’t reported at all.

Finally, with regard to what you can expect from us, I would like to add
the potential manipulation and insider trading cases we’re currently developing.
We’re often handed over signals about potential breaches:

• Perhaps our most important source of the potential breaches that we
  investigate are the signals provided by market parties themselves.B
• Besides this we have close connections to most brokers and exchanges
  who are obliged to survey the behavior on their platforms.
• Together with our own market insight and contacts with a great number of
  parties involved in the market, such as the
  • TSOs,
  • governmental agencies,
  • lobbyists and
  • trade associations

we are able to detect potential cases ourselves.

We have already received signals of potential cases in the field of
publication of inside information, and on potential market manipulation. BUT: The fact that we regularly receive those indications in itself does not or not yet mean there is a problem of breach at this moment. It is too early to draw conclusions. We are in the stage of carefully scrutinizing those indications to take our role in the field of REMIT.

Our focus is therefore also on concrete cases, since these

• will give us a good experience with this particular type of matter.
• It will also serve as a first demonstration on how NRAs will cooperate with each other and with ACER.
• An actual decision in a case also typically serves as a means to create further clarity on the prohibitions.
• And last but not least we will try to find a good case and to make it stake to prevent other market participants from attempts to manipulate the market.

I hope , having highlighted what to expect from us, you don’t mind if I use the time this morning to also clarify what we expect from you.

Change, as you are all well aware, doesn’t come easily. Change can only come through a process of internalization of the problem. Therefore, I hope you will be more aware of the need for REMIT and of its impact on your firm.

I believe for some companies the impact will be limited. I have also sensed that many firms are already well underway. For some however, REMIT might have a big impact. Asking yourself the right questions is essential, such as have you done enough to prevent market manipulation and insider trading.

To highlight a couple of relevant questions:

• Do traders e.g. have access to maintenance planning of the production plant?
• Who decides to go into maintenance?
• Do you have a designated counsellor to whom employees can report malpractices?
• Does the company structure and culture support transparency and compliance?
• Does your organization have the right tone-at-the-top?

You can answer most of these questions yourself. In case you need further guidance, I would like to advise you to first have a look at ACER’s website. You will find a lot of guidance on our expectations in the different documents already produced by ACER. Some of them are currently in consultation, one or two are being still drafted. A good part of the work however does come down to self-assessment.

Today, I hope, I have been able to make a contribution to your understanding on what to expect from REMIT and what to expect from the Dutch Energy Regulator ACM.

• Firstly, ACM aims to enhance market confidence.
• Secondly, REMIT will impact your operations. This impact varies depending on the concrete situation.
• And thirdly: ACM expects compliance, is willing to give compliance assistance, but also expectseffective self-assessment by companies.

You may have noticed that I have given away some “inside information” on how we will approach our market oversight duties with regards to REMIT.

I’ve told you how we currently plan to go about this. I’ve also told you that this might change, if market circumstances so dictate.

I believe that now is the time to increase awareness and to become fully compliant with the REMIT-provisions.

Thank you for your time. On the slide behind me you will find our contact details. Please do not hesitate to contact us in case you see suspicious trading behavior in the market. We’ll gladly take it into consideration.

In case you have any questions, please ask me and I will try to answer them. For the more difficult questions I would kindly like to ask you to give my colleague, Daniël Leliefeld, a try at it.