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Post on wash trades

See here for an informative post about wash trades, by Gordon Allott of Broadpeak Partners. A wash trade is defined in ACER’s REMIT guidance as:

The practice of entering into arrangements for the sale or purchase of a wholesale energy product where there is no change in beneficial interests or market risk, or where the transfer of beneficial interest or market risk is only between parties who are acting in concert or collusion.

It is one of the sample outlawed practices under the “False/misleading transactions” label. The post examines some common scenarios and how they may be investigated in order to establish if a set of trades were entered into for abusive purposes.

While the focus of REMIT is currently on reporting, it should not be forgotten that the main objective of REMIT is the outlawing of actual and attempted abuse, and that the purpose of data collection is to permit ACER and the other NRAs (National Regulatory Authorities) to use the data to monitor for abuse. While REMIT does not mandate internal surveillance for market participants unless they have “PPAT” status (Professional Person Arranging Transactions), some market participants have already started to tighten up training, monitoring processes and systems. However, there remain many who have not yet upgraded their technology to improve monitoring.  It is likely that this proportion will increase once the regulators’ data collection and surveillance takes effect.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.


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