Speedy EU Energy-Rule Change Will Protect Trading, Trayport Says

Speedy decisions by European Union regulators to clarify changes in energy rules will help protect trading volumes, Trayport Ltd said.

Producers, utilities, traders and brokers will probably need to change how they report transactions under reforms to antitrust rules and the Regulation on Energy Market Integrity and Transparency, or REMIT, said Dan Smith, head of corporate development at the London provider of trading systems owned by GFI Group Inc. (GFIG)

Rules to limit market abuse are being expanded to cover power, natural gas, coal and carbon trading, with firms in those markets required to register with national regulators and report trades to the European Agency for the Cooperation of Energy Regulators in Ljubljana, Slovenia, known as ACER. Regulators including ACER need to finalize rules to remove risks during a period when the sovereign-debt crisis is hurting energy prices, Trayport said in an e-mailed report.

“This type of regulatory limbo can drag on investment in trading and, while unresolved, could slow development of the market,” Smith said by phone on Jan. 13. “That said, we believe the increased transparency that comes with REMIT when fully implemented will be good for the market.”

Red Tape Burden

Trayport will probably offer new software to make it easier for traders and brokers to meet reporting requirements, it said. “Overlapping licensing programs on the EU and national level add to the burden of red tape on traders. But now that we have an EU-level license, it’s important to quickly evolve this to a state where it can replace national schemes,” Smith said.

Brokers won’t feel the full impact of the regime until the transaction reporting and market monitoring by ACER is in full swing, which may be at least 18 months away, Smith said.

“While this process is going on, it makes it difficult for participants to plan,” he said. “They need clarity.”

Regulators need the transactions to be reported in order for them to better investigate any allegations of insider trading in energy markets, Smith said. The report was co- authored by Sapient Global Markets.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net