NERA’s Role in REMIT Market Manipulation Investigation

The Situation

In 2017, the Spanish Markets and Competition Authority (CNMC) opened a market manipulation investigation in relation to certain trades on the Iberian Organised Gas Market (MIBGAS). The CNMC argued that the trades could potentially be considered attempts to “mark the close,” meaning they may have been made with the aim of fixing reference market prices (i.e., the Last Daily Price) for one of the traded products.  

The CNMC believed this behavior may constitute market manipulation under REMIT (the EU Regulation 1227/2011 on wholesale energy market integrity and transparency). 

NERA's Role

Counsel for the energy trader retained a team based in NERA’s London office led by Managing Director Dr. Richard Hern, Director George Anstey, and former Associate Director Clara Segurola. NERA was asked to assess the compliance of the trades with EU regulations and to measure their impact on reference market prices. 

NERA’s team undertook an econometric analysis to assess whether the trades were made with the intention of influencing reference market prices. NERA’s analysis assessed whether the contested trades were made at artificial levels or had affected the reference market prices. In addition, NERA’s report compared the key features of trades aimed at “marking the close.” NERA’s report was submitted to the CNMC as evidence that the trades could not be considered market manipulation under REMIT.

The Result

The CNMC considered the trades as constituting an attempt to manipulate the market by “marking the close.” However, it also concluded that the trades’ economic impact on market prices had been minimal, as NERA’s analysis showed. Based on this finding, the fine paid by the trader was less than 2% of the maximum penalty stipulated by law for this type of infraction.