ACER publishes guidance on layering and spoofing in continuous wholesale energy markets

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ACER publishes today a guidance note to further clarify the application of REMIT (EU Regulation on Wholesale Market Integrity and Transparency) in the context of the trading behaviours associated with layering and spoofing.

With this publication, ACER aims at sharing its insights on the general framework of assessment that National Regulatory Authorities (NRAs) shall use to determine whether a specific behaviour could constitute a breach of REMIT.

Layering and spoofing refers to the issuing by a market participant of one large or multiple non-genuine orders to trade on one side of the order book, in order to enter into one or multiple transactions on the other side of the order book.

On gas and electricity exchanges and other electronic trading venues, the order book for continuous trading displays the unveiled interest of buyers and sellers in an anonymised manner. In this setting, by issuing one or multiple non-genuine orders, a single market participant can alter the order book that is visible to other players. By design, layering and spoofing behaviours create, through non-genuine orders, the likelihood of sending false or misleading signals regarding the supply, demand or price of a wholesale energy product. They are also likely to secure the price formation process of the wholesale energy product at an artificial level.

The perception of layering and spoofing undermines confidence in market signals. If market participants perceive that the order book does not reflect market fundamentals, they may lose confidence in the integrity and transparency of the market, and even withdraw from it. As a result, competition would be adversely affected, to the detriment of all Market Participants and the final consumers of energy.

Recent NRA Decisions on market abuse have highlighted the importance of detecting order-based manipulation. ACER has been investing in capabilities for the detection of potentially abusive behaviours based on the issuance of non-genuine orders in the wholesale energy markets. Anomalous instances detected by ACER are shared with the relevant NRA that takes the necessary investigatory and enforcement measures.

This is the third guidance note published by ACER in the area of market abuse. The previous guidance notes covered the behaviours of transmission capacity hoarding and wash trades.

The guidance note on layering and spoofing is available here.

The updated ACER Guidance (4th edition) on the application of REMIT can be found here​.