Archive for the ‘European Commission’ Category

Preventing Insider Trading and Market Manipulation in Wholesale Energy Markets

Late last week, international law firm WilmerHale published a very thorough review of the European Commission’s (EC) recently proposed rules aimed at preventing abuse in wholesale energy markets.

Image by William Maver. Some rights reserved.

The proposal hopes to close gaps in the “existing regime” that were found upon inspection by the Committee of European Securities Regulators and the European Regulators Group for Electricity and Gas (at the request of the EC). While the EC’s  Market Abuse Directive and the Markets in Financial Instruments Directive prohibit manipulation in financial markets, these Directives fail to cover the 75% of energy transactions that occur outside of energy exchanges.

According to the EC’s press release, the new rules specifically prohibit:

  • use of inside information when selling or buying at wholesale energy markets.
  • transactions that give false or misleading signals about the supply, demand or on prices of wholesale energy market products
  • distributing false news or rumours that give misleading signals on these products.

While the EC claims to be unaware of any particular cases of price manipulation in the EU, they are quick to make an example of the US. Amaranth Advisors LLC, an American hedge fund, “accumulated massive natural gas holdings in the form of derivatives […], pushing up prices and making huge profits. It is assumed that an Amaranth-style market manipulation would inflate gas and electricity bills of European businesses and industrial users by some Euro 1 billion.”

At least we had the rules to deal with it (eventually) – 18 CFR § 1c became effective in January 2006 after the passage of the Energy Policy Act, and was made famous (well, in certain circles) by the case against Amaranth and subsequent enormous settlement in 2009. Let’s hope for the EU’s sake that their new rules have a more preventative effect.

Strengthening European Rules on Chemical Accident Prevention

A recent memo from Squire Sanders discusses the proposed changes to the European Commission’s Seveso II Directive (96/82/EC), an updated version of legislation originally adopted in 1982 that aimed to prevent and control major accidents in the chemical industry.

Photo courtesy of US Air Force.

The Directive is named after a 1976 industrial accident near Seveso, Italy, in which kilograms of dioxin (lethal in doses measured in micrograms) were released and immediately contaminated more than ten square miles of land and vegetation. This accident and others like it prompted the Directive’s rules on safety management systems, emergency planning, storage procedures, and accident reporting.

Based on a recently concluded review of the Directive, the December 2010 EC proposal would update the existing rules to “align the legislation to changes in EU chemicals,” introduce “stricter inspection standards,” and improve “the level and quality of information available to the public in the event of an accident.”

Squire Sanders points out that “although the changes will have most impact within the EU, the Seveso approach has historically been followed worldwide.” You can read more about the review of the Directive and find supporting documents here.

%d bloggers like this: