Dutch regulator fires energy market manipulation warning shot

• Dutch regulator ‘reprimanded’ company over possible market manipulation on TTF gas hub
• Price manipulation on major benchmark hub can cost other participants, consumers
• Company in question to be ‘closely watched’, trader committed to ‘no longer engage’ in such behaviour

Additional reporting by Jamie Stewart

LONDON (ICIS)–The Dutch energy regulator has “reprimanded” an international company for “possible market manipulation” at the TTF gas hub, according to a statement released 6 February.

The statement was clearly intended to deter market participants from attempting to “mark the close”, as it termed the behaviour, adding such behaviour was “an illegal trading practice”. It did not reveal the company in question and did not cite any specific penalty.

The Dutch Authority for Consumers and Market (ACM) added it would “continue to keep a close watch on the company” and that the trader had pledged to no longer “engage in this conduct”.

MARKET INFLUENCE

According to ACM, the practice of “marking the close” can occur if a market participant influences the reference price on a wholesale energy market by buying or selling close to the moment that a settlement price is determined.

This can involve bidding for orders with a much higher asking price or buying excessively large volumes on offer right before the market close, as a result of which the price spikes up.

The reverse can also be true, with the price range pushed down by repeatedly offering volumes at a lower price or selling excessively large volumes.

As a result of a closing value that does not otherwise reflect market fundamentals or the prevailing price range, other traders, as well as Dutch and other European energy consumers, foot the bill for forward contracts that later settle at this closing price.

IMPLICATIONS

The cases cited by ACM concerned the short-term Day-ahead contract at the Dutch TTF gas hub. The ICIS TTF Day-ahead is a benchmark price commonly used across the energy industry.

The TTF is by far the most traded hub in Europe, and market moves would affect other hubs not only locally but across the continent.

Rules across Europe governing energy market trade are laid out in the EU’s Regulation on Wholesale Energy Market Integrity and Transparency which covers market abuse including market manipulation and insider trading.

ICIS POSITION

Richard Street, international regulatory affairs head at ICIS’ parent company LexisNexis Risk Solutions, said: “We were aware of the issues referred to by ACM. We have strict data standards that allow us to remove any off-market trades.

“Market participants who make trades they know are off-market can pre-empt any issues by marking these deals as ‘P&C’ or contact us confidentially to make us aware of the circumstances surrounding unusual activity.”

Street added it was “clearly disappointing that ACM has had to publicly reprimand certain traders for their behaviour” but he was hopeful that this “sends a clear message that regulators are watching and will take action where necessary”.

The Dutch regulator added: it was “calling on market participants and other relevant stakeholders on the wholesale energy markets to share information about possible illegal trading activities. They can do so using ACER’s Notification Platform. See also ACM’s website: Reporting suspicious energy trading.” Eduardo Escajadillo

EDITOR’S VIEW

How price reporting is done is of vital importance to maintain trust in the integrity of commodities markets, and in the price formation process itself. This is important because these markets, in some way, touch all of our lives.

Price reporting agencies (PRAs) such as ICIS welcome the support of regulators in ensuring a robust price discovery environment.

In this case the Dutch regulator ACM has flexed its muscles, reminding all market participants of their obligations, as well as its own as a watchdog with a duty to consumers.

Best practice in the discipline of price reporting is defined by the EU Benchmarks regulation, which as a benchmark administrator ICIS aligns its practices to, as well as the long-standing IOSCO principles of best price for price reporting in commodities markets. ICIS has long been a voluntary signatory to the IOSCO principles and is audited against these principles every year.

PRAs best-practice models also lay out how to deal with unusual trading patterns. Central to the approach is transparency if transactions are deleted from a price assessment process, which does happen from time to time.

For example, this British NBP gas market comment published by ICIS as recently as 30 January, said: “February ’25 trades recorded at the time of the close at the value of 130.500p/th were deemed to be outside of the prevailing range of verified market information reflecting the value of the contract at that time and were therefore excluded from the assessment and ICIS indices.”

Our publicly available pricing methodologies, for example our gas methodology, give more details regarding ICIS price reporting practices. Jamie Stewart