Dutch Regulator Examines Risk Controls Behind Automated Energy Trades

Key Takeaways

• ACM Launches Targeted Review: The Dutch Authority for Consumers and Markets is assessing whether algorithmic energy traders have effective risk controls and governance in place under the updated REMIT regulation.
• Focus on Pre-Trade Safeguards: Firms are being asked to share how they manage algorithmic risks, including the controls and limits they use before trades are executed.
• New REMIT Obligations Now in Force: As of May 2024, companies using algorithmic trading must comply with stricter EU requirements to prevent manipulation and ensure market integrity.
• Traders Asked for Candid Input: ACM is not only reviewing technical safeguards but also asking firms to share their views on current risks and remaining uncertainties in REMIT compliance.
• Findings Expected Later in 2025: The regulator plans to publish the results of its review later this year, using them to refine its approach to overseeing algorithmic activity in energy markets.

Deep Dive

In the high-speed world of energy trading, algorithms are calling more of the shots. But with greater automation comes a bigger question over potential risks and who's watching the watchers?

The Netherlands Authority for Consumers and Markets (ACM) is now stepping in to find out. The Dutch competition and markets watchdog has kicked off a detailed review of risk management practices among companies using algorithmic trading in the wholesale energy markets, including electricity and natural gas. It's not a crackdown, not yet, but a check-in. The regulator wants to know what traders are doing enough to keep their bots in line?

This isn’t just academic. With the revised REMIT regulation, the EU’s rulebook for transparency and integrity in wholesale energy markets, coming into force in May, algorithmic traders are now expected to meet new standards. That includes putting robust systems and controls in place to prevent manipulative behavior and manage the risks that come with automated decision-making. ACM is now testing how well those standards are being translated into real-life practice.

A Check with a Purpose

ACM has sent information requests to a group of energy market participants that rely on algorithmic trading. They’re asking about the nuts and bolts, like what kinds of pre-trade controls are in place? Who’s responsible for setting those limits? How often are those controls tested and refined?

But it’s not just a box-ticking exercise. The regulator also wants to hear from traders themselves: what are the biggest risks they see in algorithmic trading today? And what open questions remain under the new REMIT requirements?

The idea is to gather insight, both technical and strategic, and use it to shape future supervision. The ACM plans to publish its key findings later this year.

Algorithmic trading isn’t new, but it’s spreading and fast. It can streamline transactions and reduce friction, sure. But it can also bring volatility, systemic risk, and potential for abuse. Algorithms can unintentionally coordinate, magnify market swings, or be deployed deliberately to manipulate pricing. In energy markets, where prices ripple all the way down to consumer bills, that’s no small matter.

"Markets that function well and that have integrity lead to fair prices for consumers," ACM said, a reminder that the stakes go far beyond spreadsheets and server farms.

Teaming Up to Keep Watch

This latest initiative also reflects a growing regulatory trend of cross-agency collaboration. ACM is coordinating closely with the Dutch Authority for the Financial Markets (AFM), which oversees financial instruments and derivatives, including those tied to energy. With financial and energy markets increasingly interwoven, especially via algorithmic platforms, regulators are moving beyond their traditional silos.

Under the revamped REMIT regulation, which tightened enforcement powers and reporting obligations as of May 7, ACM can request algorithmic trading data from firms as part of its ongoing oversight. And this won’t be the last time.

As the ACM continues to deepen its understanding of algorithmic activity, companies operating in this space would do well to ensure their controls aren’t just on paper, but battle-tested, governed, and built for the complexity of today’s energy markets.

Because in an age where machines can move markets in microseconds, ensuring integrity isn't just about writing rules. It's about making sure someone, somewhere, still has a hand on the wheel.

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