Energy Market Surveillance in the EU and US: A Study of Market Designs, Regulations, and Detection  Algorithms

Abstract: The need for market surveillance in the context of wholesale energy trading is examined through a study of twenty years of energy market liberalisation, resulting modern market designs in EU and US power and gas markets, and through an exploration of high-profile case studies of energy market abuse. Additionally, an extensive regulatory analysis of core EU (REMIT, MAR, MiFID II) and US (CEA/Dodd-Frank Act, Energy Policy Act, EISA) market regulations is conducted, with the goal of clearly identifying current obligations and prohibitions in their application to wholesale energy market actors. Lastly, the identified prohibition of one specific manipulative behaviour – physical-asset-related insider trading – is translated into a functional high-level alert logic, suitable for future implementation in an automated surveillance system. This high-level alert logic is validated on a proof-of-concept level by testing a minimum working example of the logic against independently prepared sample trading data, which has been modified to include a suitable physical-asset-related insider trading case.