Financial regulation and energy regulation – not so different now

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In Europe, one of the big trends in energy trading markets has been for market participants to increasingly face rules akin to those that apply in the financial markets. This is for two reasons: Financial regulators are extending the reach of their rules to impact more directly energy markets and their participants; and energy regulators are developing rules that take their inspiration from those governing the financial markets. This Client Alert highlights these trends in three key areas and considers what they mean for energy trading businesses, be they part of banks, utilities or trading companies.

Insider trading and disclosure

It has been long-accepted in securities markets that equal access to information protects market integrity and confidence. Non-public price-sensitive information should be disclosed to the market, and people who trade using that information before it is disclosed should be punished. This is the underlying reason for having insider trading laws.

Energy and commodity markets have taken a different approach. These markets do not have wide-ranging disclosure regimes. Energy companies facing physical disruptions (such as unscheduled maintenance) have largely been free to use that information in their trading before the market becomes aware of it.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

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