Monitoring of Market Manipulation in the Intraday Electricity Market
Karvinen, Lauri (2026)
2026
Sähkötekniikan DI-ohjelma - Master's Programme in Electrical Engineering
Informaatioteknologian ja viestinnän tiedekunta - Faculty of Information Technology and Communication Sciences
This publication is copyrighted. You may download, display and print it for Your own personal use. Commercial use is prohibited.
Hyväksymispäivämäärä
2026-05-18
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202605155696
https://urn.fi/URN:NBN:fi:tuni-202605155696
Tiivistelmä
The European Union’s (EU) ambitious objectives for an internal electricity market and climate targets have reshaped wholesale electricity markets in recent years. The increasing share of renewable energy, the growing number of marketplaces, and the rise in cross-border trade have made trading increasingly faster and more complex. Alongside significant benefits such as efficiency, competition, and innovation, this trend has also increased the susceptibility to market abuse, particularly market manipulation. To enhance market oversight and strengthen the integrity and reliability of energy markets, the EU amended the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) in 2024.
The new REMIT II amending regulation obligates Persons Professionally Executing Transactions (PPETs) in wholesale energy products and financial instruments, such as electricity derivatives, to establish arrangements, systems, and procedures to identify, detect, and notify about suspected market abuse. Additionally, the regulation imposes specific requirements for algorithmic trading, the use of which has increased, especially in the intraday (ID) market. In particular, the requirements to detect market manipulation create a need for a new type of internal control for PPETs, compelling them to assess their obligations from their own perspective.
This thesis develops effective and appropriate monitoring arrangements for a PPET under REMIT II. Utilizing various qualitative research methods, the study identifies the main risks of market manipulation in the electricity ID market, develops compliant monitoring arrangements and evaluates the most viable option for implementing an automated monitoring solution. The proposed arrangements are primarily based on an interpretation of the guidelines provided by the EU’s Agency for the Cooperation of Energy Regulators and the National Regulatory Authority of Finland, as well as a sector review of the best practices among Nordic market participants.
The most significant risks of breaching the prohibition of market manipulation in the ID market include engaging in prohibited trading practices such as layering, spoofing, transmission capacity hoarding, and wash trading. Furthermore, manipulation can occur unintentionally through erroneous orders. Individual PPETs must base their risk management on risks relevant to their specific business activities. To facilitate this, the thesis develops a framework for conducting a REMIT II risk assessment and a monitoring strategy based on it.
A PPET that engages in high-volume or sophisticated trading, such as algorithmic trading, is recommended to implement an automated monitoring system. The system can be either procured from a service provider or developed in-house. To support the decision-making process, the options are compared using the Analytic Hierarchy Process conducted in collaboration with specialists of the topic. The results of the comparison prioritised the in-house solution with a score of 0.559 out of the total priority weight (1.0) compared to 0.441 for the service provider solution. However, the evaluation of the results and sensitivity review demonstrate that the final result, and consequently the decision-making process, is significantly influenced by the PPET’s trading and monitoring strategy, as well as its risk appetite.
The new REMIT II amending regulation obligates Persons Professionally Executing Transactions (PPETs) in wholesale energy products and financial instruments, such as electricity derivatives, to establish arrangements, systems, and procedures to identify, detect, and notify about suspected market abuse. Additionally, the regulation imposes specific requirements for algorithmic trading, the use of which has increased, especially in the intraday (ID) market. In particular, the requirements to detect market manipulation create a need for a new type of internal control for PPETs, compelling them to assess their obligations from their own perspective.
This thesis develops effective and appropriate monitoring arrangements for a PPET under REMIT II. Utilizing various qualitative research methods, the study identifies the main risks of market manipulation in the electricity ID market, develops compliant monitoring arrangements and evaluates the most viable option for implementing an automated monitoring solution. The proposed arrangements are primarily based on an interpretation of the guidelines provided by the EU’s Agency for the Cooperation of Energy Regulators and the National Regulatory Authority of Finland, as well as a sector review of the best practices among Nordic market participants.
The most significant risks of breaching the prohibition of market manipulation in the ID market include engaging in prohibited trading practices such as layering, spoofing, transmission capacity hoarding, and wash trading. Furthermore, manipulation can occur unintentionally through erroneous orders. Individual PPETs must base their risk management on risks relevant to their specific business activities. To facilitate this, the thesis develops a framework for conducting a REMIT II risk assessment and a monitoring strategy based on it.
A PPET that engages in high-volume or sophisticated trading, such as algorithmic trading, is recommended to implement an automated monitoring system. The system can be either procured from a service provider or developed in-house. To support the decision-making process, the options are compared using the Analytic Hierarchy Process conducted in collaboration with specialists of the topic. The results of the comparison prioritised the in-house solution with a score of 0.559 out of the total priority weight (1.0) compared to 0.441 for the service provider solution. However, the evaluation of the results and sensitivity review demonstrate that the final result, and consequently the decision-making process, is significantly influenced by the PPET’s trading and monitoring strategy, as well as its risk appetite.