B. THE NATURE OF PHYSICAL AND FINANCIAL CAPACITY RETENTION
III. L EGAL CLASSIFICATION OF CAPACITY RETENTION : C APITAL MARKET LAW
1. European energy and capital market law
European capital market law is spread among a number of directives and regulations, the most important of which are MiFID II and MiFIR, EMIR and MAD respectively MAR.518 In the field of energy law discussed in this work as an example, REMIT contains the core provisions. EMIR regulates OTC trades and clearing requirements between energy trad-ers519. It may therefore not apply to manipulations of the EPEX spot and will not be dis-cussed further in this work. MiFID II520, even if focused on exchange trading of financial
516 See Chapter 1, section E.III.1. of this work.
517 See Chapter 1, section E.III.2. of this work.
518 For the recent changes refer to Alexander Kox, "REMIT, MiFID, EMIR und Co. verschärfen die
Anforderungen zur Teilnahme am Energiehandel," et Vol. 63, no. 8 (2013). With regard to the delineation be-tween the codes, refer to Chapter 1, section E.III.1. of this work.
519 Ibid. Also Jörg Spicker, "Der OTC-Handel (Over-The-Counter-Handel)," in Handbuch Energiehandel, ed.
Hans-Peter Schwintowski, 3nd ed. (Berlin: Schmidt, 2013), 140 Ref. 292.
520 The directive has been published in the EU Official Journal on June 12, 2014. It will enter into force in Janu-ary 2017. See the EC Press release from June 12, 2014 accessible at http://europa.eu/rapid/midday-express-12-06-2014.htm?locale=en (Last accessed October 17, 2014).
instruments and energy trading, does concentrate on transparency and liquidity of trad-ing521 and is therefore also not suited to legally capture and sanction EPEX spot manipu-lations.
MAD and MAR are applicable to financial instruments exclusively (Art. 1(2) MAD) and ex-clude spot commodity contracts that are wholesale energy products (Art. 1(4)(a) MAD, Art. 2(2)(a) MAR). The following section a) will therefore concentrate on the REMIT provi-sions in order to show that capacity retention strategies as introduced in section I. are covered by these norms. For comparably complex manipulation cases in the context of capital markets that are not wholesale energy products, MAD and MAR apply. They will be discussed later in section 2. on German capital market law and in the more general con-siderations on manipulation deterrence in the third chapter of this work, section B.II.1.b).
a) The Regulation on wholesale Energy Market Integrity and Transparency
REMIT has entered into force on December 28, 2011.522 It contains a ban of insider trading and market manipulation applicable also on EPEX spot.523 The European Agency for the Cooperation of Energy Regulators (ACER) supervises the compliance of traders with the REMIT provisions.524
Art. 5 REMIT contains the prohibition of market manipulation. The term is defined in Art. 2(2) lit. a REMIT (action based manipulations): Any transaction entered into or any order issued in wholesale energy products, which
▪ gives false or misleading signals with regard to supply, demand or price of whole-sale energy products (i),
▪ secures the price of a wholesale energy product on an artificial level (ii), or
521 Kox, "REMIT, MiFID, EMIR und Co. verschärfen die Anforderungen zur Teilnahme am Energiehandel," et Vol. 63, no. 8 (2013), 42-43.
522 Regulation on wholesale Energy Market Integrity and Transparency (REMIT) N° 1227/2011 of the European Parliament and of the Council. Version promulgated on October 25, 2011 (Official Journal L 326, p. 1-16).
523 Kox, "REMIT, MiFID, EMIR und Co. verschärfen die Anforderungen zur Teilnahme am Energiehandel," et Vol. 63, no. 8 (2013), 44. See also Spicker, "Der OTC-Handel (Over-The-Counter-Handel)," in Handbuch Energiehandel, ed. Schwintowski, 3nd ed. (Berlin: Schmidt, 2013), 135 Ref. 283.
524 Patric Bachert, "Befugnisse der Bundesnetzagentur zur Durchsetzung der REMIT-Verordnung," RdE Vol. 24, no. 9 (2014), 361; Spicker, "Der OTC-Handel (Over-The-Counter-Handel)," in Handbuch Energiehandel, ed.
Schwintowski, 3nd ed. (Berlin: Schmidt, 2013).. Refer also to Selma Konar, "Energieregulierung auf
Unionsebene - Die Rolle der Europäischen Kommission und der ACER nach der REMIT-VO," ZNER Vol. 19, no. 1 (2015), 9-10.
▪ employs a fictious device or any other form of deception to give false or misleading signals with regard to supply, demand or price of wholesale energy products (iii).
Also, information-based manipulations are banned according to Art. 2(2) lit. b REMIT:
Disseminating information through the media, which
▪ gives false or misleading signals with regard to supply, demand or price of whole-sale energy products, or
▪ rumors where the disseminating person knew or ought to have known that the information was false or misleading, or
▪ the information is disseminated for the purposes of journalism and the disseminator derives an advantage or profits from the dissemination (i) or intends to mislead the market (ii).
Both kinds of manipulative actions have been transposed into German national law and are now codified in Sec. 95 EnWG: Sec. 95 (1b) EnWG refers to action based manipula-tions and Sec. 95(1c) N° 6 EnWG to information based manipulamanipula-tions.525 The law makes a reference to the requirements of REMIT without defining the manipulative actions itself.
With regard to capacity retention at EPEX spot, ACER has specified the meaning of the REMIT rules in its 2013 guidance on the application of REMIT with examples of market manipulation involving price positioning:526
“Actions undertaken by persons that artificially cause prices to be at a level not justified by market forces of supply and demand, including actual availability of production, storage or transportation capacity, and demand (“physical with-holding”): This is for example the practice where a market participant decides not to offer on the market all available production […] without justification and with the intention to shift the market price to higher levels, e.g. not offering on the market, without justification, a power plant whose marginal cost is lower than the spot prices, […] that would result in abnormal high prices.”
Also, REMIT itself gives examples of market manipulations in its recitals N° 13 and 14 that include “making it appear that the availability of electricity generation capacity […] is other
525 Christian Theobald and Antje Werk, in Energierecht: Kommentar, ed. Wolfgang Danner and Christian Theobald, 86th ed. (München: C.H. Beck, 2015), Sec. 95 EnWG Ref 1 et sqq.
526 ACER, Guidance on the application of Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency, 2013, 37.
than the capacity which is actually technically available where such information affects or is likely to affect the price of wholesale energy products.”527
Hence, physical capacity retention strategies may be classified as an infringement of the REMIT ban of market manipulation.
b) Legal consequences
An infringement of the REMIT provisions on market manipulation may result in a punishment according to the rules of administrative offenses, Sec. 95(1b) EnWG. In case of intentional behavior and an actual influence on the price caused, even criminal sanctions may apply, Sec. 95a(1) EnWG. A detailed discussion of sanctions for manipulations ac-cording to energy capital market law will be undertaken in the third chapter of this work.
It deals with the current and optimal level of fines in order to establish an effective regime of public market surveillance to deter manipulations of the EEX.
c) Conclusion
The REMIT provisions cover capacity retention at EPEX spot. The following section will present an in-depth analysis of capital market rules applicable to EPEX spot market manipulations in German law. Thereafter, the work turns from the classification of the manipulations to the deterrent effect of the rules de lege lata in order to identify short-comings that weaken the system.