Hungarian Energy Regulator MEKH fines Hungaro Energy for spoofing under REMIT

Theme 1: The Spoofing Conduct on the Hungarian Gas Spot Market

Hungaro Energy's market position. During the period under investigation, Hungaro Energy was the dominant seller on the Hungarian organised gas spot market. On seven of the eight days reviewed, it held the largest sales volume by MWh across the entire venue, and on the eighth day it ranked second by sales volume (page 18, paragraph 48). Its business model was built on procuring gas outside the organised market and selling it through the exchange. MEKH found, on the basis of EIA and ARIS trading data, that the sell side consistently represented its genuine economic interest.

The pattern across all six trading days. MEKH noted that Hungaro Energy trading activity was the same pattern across all six trading instances. Hungaro Energy placed buy-side orders at competitive prices, typically at or near the best bid in the order book, without genuine execution intent. These orders moved the market's visible picture of demand upward. Other market participants, interpreting these orders as genuine buying interest, adjusted their own offers accordingly. Following the execution of a sell-side transaction, Hungaro Energy cancelled the buy-side orders, often within seconds (pages 21–25, paragraphs 51–55).

MEKH summarised the conduct directly at paragraph 56 of the decision on page 25:

The Client planned to sell a significant volume of natural gas on each of the days examined; consequently, [MEKH] identified the sell side as the genuine side based on the evaluation of the data. In order to sell at the best possible price, the Client also placed bids on the buy side to create the impression that demand was higher, thereby encouraging other buyers to pay more for the natural gas offered by the Client on the sell side. The analyses led [MEKH] to conclude that the buy-side bids were not genuine, and it therefore regarded the buy-side transactions as fictitious. The reason for this is that the Client's completed transactions took place on the sell-side, and immediately after each successful sale, the Client deleted the non-genuine buy offers, presumably with the aim of preventing their execution.

The six trading days in question. Table 1 of the decision sets out the specific dates, products, and key time windows at page 2 as follows

Source: MEKH

For each trading incident, the manipulation was concentrated in a window of between 10 and 30 minutes. The day-by-day analysis in Section VII of the enforcement traces the specific order placements, price amendments, and cancellation timing for each incident (pages 18–25).

The 19 April trading incident - manipulation without a completed trade. The 19 April activity is particularly notable because it contained two separate events within minutes of each other. On the first occasion, the spoofing succeeded with a transaction resulting in Hungaro Energy likely making a profit. On the second occasion, the order was cancelled before any execution occurred, meaning no financial benefit resulted. MEKH found manipulation in both instances and was explicit in noting that the completion of a trade is not required for the conduct to constitute market manipulation under REMIT (page 21, paragraph 51).

We provide a summary of each of the six spoofing incidents in Theme 5 below.

Theme 2: MEKH's Assessment Methodology - ACER Guidance in Practice

MEKH’s detection framework is set out in Section VI of the decision in operational detail that is rarely published in NRA enforcement decisions. The NRA applied ACER REMIT Guidance Version 6 and ACER’s January 2019 Guidance Note on Layering and Spoofing, while also developing its own supplementary investigative methodology on those foundations and applied the combined framework to EIA and ARIS data (page 11, paragraph 27 and page 7, paragraph 16).

The primary criteria. The primary layer of MEKH’s methodology draws on paragraphs 30–33 of the ACER Layering and Spoofing Guidance, and assesses three core features of the conduct: pattern, market effect and repetition (pages 13-15, paragraphs 39-43).

• The first is pattern: whether one or more non-genuine orders were placed on one side of the order book, followed by one or more transactions on the opposite side. MEKH’s reasoning is that the two-sided conduct is functionally connected: the first-side order does not express an independent, genuine trading intention, but improves or prepares the market conditions for the transaction to be executed on the other side (page 13, paragraph 39).
• The second is market effect: whether the non-genuine orders were placed at prices or volumes that were at least likely to elicit a reaction from other market participants. Orders close to the best price levels, orders that influence the spread, display a noticeable quantity, visibly alter order-book depth, or shape perceptions of short-term demand or supply are more likely to be interpreted by the market as genuine trading interest and therefore capable of giving a false or misleading signal (page 14, paragraph 40).
• The third is repetition: whether the same structure recurs, with a non-genuine order on one side of the book, followed by activity or execution on the other side, and then the cycle beginning again. MEKH recognised that repetition is not a necessary element of a false or misleading signal but considered that repeated conduct makes it more likely that the activity was not accidental, poorly timed or the result of ordinary risk management, but instead reflected a consciously applied strategy (page 14, paragraph 41).

MEKH then assessed non-genuineness through three sub-criteria: (a) whether the non-genuine order on the opposite side was placed before the transaction; (b) whether the order was cancelled shortly after execution of the transaction on the other side; and (c) whether the cumulative volume of orders on the non-genuine side were disproportionate to the volume of executed transactions on the genuine side (pages 14–15, paragraph 42).

MEKH supplementary criteria. Where the three primary criteria were not all fully satisfied, MEKH applied five supplementary indicators drawn from Section 4 of the ACER Layering/Spoofing guidance:

1. Imbalance in trading activity between the two sides of the order book;
2. Abnormally short order duration relative to the market average for the same product;
3. Order execution ratio compared to the market-wide average;
4. Temporal correlation between order cancellations and opposite-side transactions; and
5. Use of specific order types, including iceberg orders (page 15-17, paragraph 44).

MEKH used this structured assessment analysis in several of the six trading days activity. In particular, it provides an in-depth analysis of its assessment using the supplementary criteria for the trading day of 16 August 2024 (page 19, paragraph 51). Specifically, the trading activity on that day met most of the ACER spoofing criteria with the exception of only partially meeting the criteria for a fictitious or misleading order. As not all primary criteria were met, MEKH also carried out an assessment of the supplementary criteria for that day as follows:

• Imbalance in trading activity between the two sides of the order book: The enforcement decision stated that the trader dominated the market in terms of value on the sell side while there was no trading on the buy side despite an order being placed (page 20, paragraph 51). This alludes to the fact that the trader placed buy side orders to mislead the market and subsequently cancelled the orders. MEKH found this imbalance between buy side and sell side activity to establish the likelihood of a discrepancy in intent.
• Duration of orders: The trader’s withdrawn order spent a lower amount of time in the order book than the daily average of withdrawn orders on 16 August 2024 across the entire market. MEKH’s interpretation of this differential in time spent in the order book added more weight to the argument that there was no genuine intention behind the trader’s orders.
• Execution rate: MEKH assessed the execution rate by comparing the trader’s activity with execution rates across the market as a whole. A lower execution rate may indicate a lack of genuine trading intent, particularly where orders are repeatedly cancelled rather than executed. In this case, the trader cancelled its only non-genuine buy order, and no trade resulted from it.
• Correlation between order cancellations and transactions: A striking feature of this trading day was that the opposing bid was cancelled several seconds after the transactions had been executed. MEKH clarified by stating that a lower number signals a higher likelihood of no genuine intention between the market participant’s quotes.
• Use of specific order types: Iceberg orders were used for the genuine bids, whilst the non-genuine bids constituted the hidden quantity on the invisible side of the iceberg. The existence of a hidden trading quantity is another example of the trader attempting to signal that the trading intention is genuine.

MEKH’s assessment shows that a spoofing finding does not depend on every primary indicator being present at the same time. Where the disparity between order volumes on the alleged non-genuine side and executed volumes on the genuine side is not decisive, an NRA may still rely on other indicators, including very short order duration and low or zero execution on the alleged non-genuine side, particularly where this contrasts with executed trading on the genuine side.

Firms should not assume that a spoofing allegation can be answered simply by showing that the volume of buy-side orders was not materially disproportionate to sell-side executions. MEKH’s methodology indicates that order duration and execution behaviour may carry independent evidential weight. In particular, orders that remain in the order book for a much shorter period than the market average, and orders on the alleged non-genuine side that rarely or never execute, may support a finding even where the volume-based indicator is equivocal.

Compliance functions operating in Hungary should map their firm's surveillance approach against both tiers of MEKH's framework. Order duration benchmarking (comparing how long orders remain in the book against market average dwell times for the same product) is particularly convincing based on the reasoning applied across multiple trading days in this decision. That metric is within reach of standard surveillance platforms applied to exchange data feeds and should be considered a baseline calibration requirement for firms active on exchange-traded wholesale energy markets, including gas spot markets.

Theme 3: Strict Liability Under REMIT Article 5 - No Intent Required

MEKH confirmed an established position that market manipulation under Article 2(2)(a)(i) of REMIT requires no proof of intent. The infringement is established when conduct actually gives, or is likely to give, false or misleading signals as to the supply, demand or price of wholesale energy products regardless of whether the market participant intended to produce that effect (pages 10-11, paragraphs 22, 28).

The decision states this in direct terms on page 11:

Whether the conduct is intentional or not is irrelevant for the purposes of determining whether it constitutes an infringement in the form of 'market manipulation' under Article 5 of REMIT. Consequently, even a mere erroneous trading activity may be deemed manipulative.

The distinction with attempted manipulation. MEKH drew a careful distinction between Article 2(2) (market manipulation, no intent required) and Article 2(3) (attempted market manipulation, which does require intent). Having reviewed the facts, it concluded that the conduct met the Article 2(2) standard on all six charged days and therefore it had no need to rely on the attempted manipulation angle at all (page10, paragraph 23).

Probability of a signal - not certainty. MEKH also confirmed that actual false or misleading signals need not be proven. Conduct is in breach of Article 5 where it was capable of giving such signals on a proper assessment of the overall circumstances. Establishing probability of a false signal is sufficient but certainty is not required (page 12, paragraph 32). The authority framed its analytical task throughout Section VII as a probability assessment conducted day by day, not a binary proof exercise.

MEKH also confirmed that according to REMIT and the ACER REMIT Guidelines, it is not necessary to prove that a false or misleading signal was actually received by the market. Conduct may breach Article 5 of REMIT where, upon detailed analysis of the case circumstances, it was capable of giving such a false signal. Consequently, MEKH treated the relevant question as whether the trading behaviour made the existence of a false or misleading signal likely, rather than whether actual market reliance could be proven with certainty (page 12, paragraph 32).

This approach shaped MEKH’s analysis in Section VII. It assessed each trading day by weighing the relevant indicators together, including order placement, price and volume, cancellation timing, execution ratios and repetition, to determine whether the overall pattern supported a probable false or misleading signal.

No profit requirement. MEKH confirmed that derivation of profit or advantage is not a precondition for a manipulation finding. ACER's REMIT Guidance states expressly that deriving an advantage is not a necessary element of market manipulation (page 12, paragraph 32). On 26 April, the second event on 19 April, and 30 April 2024, no transactions resulted from the buy-side activity (hence no immediate profit was realised) yet MEKH found manipulation on each of those days regardless.

The strict liability standard is important especially for firms with automated or algorithmic gas trading strategies. An algorithm designed to manage execution costs through order book interaction could, in a thin or low-liquidity market, generate order patterns that are objectively indistinguishable from spoofing even where no manipulation was intended. Firms relying on algorithm-generated order flow should ensure that pre-trade controls and post-trade surveillance are calibrated to detect patterns capable of being assessed as spoofing under the ACER methodology, independent of the algorithm's design intent.

Algorithm governance frameworks should include a specific review addressing order cancellation patterns in illiquid markets. Trading strategy documentation covering the commercial rationale for any strategy involving rapid order placement and cancellation should be maintained and accessible to compliance functions. The eleven questions posed in MEKH's information request (page 6, paragraph 13) cover the documentation categories an NRA expects to find in place: algorithm design and approval, internal controls for key time windows, trader training records on manipulation awareness, and relevant communications. Firms should treat those questions as a compliance documentation checklist.

Theme 4: NRAs are becoming more sophisticated

MEKH’s decision shows how NRA surveillance analysis is moving beyond simple red flags and isolated trading anomalies. It did not rely only on obvious indicators. For example, in the 16 August 2024 trading day, there was no intraday repetition, and the disproportionality between order volumes and executed trades was not conclusive on its own. MEKH nevertheless concluded that the conduct was manipulative by assessing the full sequence of order placement, visibility, cancellation timing, execution behaviour and repetition across trading days.

Rather than relying on a small number of outliers, MEKH applied a structured indicator framework based on ACER’s REMIT guidance. It distinguished between core spoofing indicators, such as pattern, market effect, repetition and non-genuineness, and supplementary indicators, including order duration, execution ratio, imbalance between the two sides of the order book, timing between transactions and cancellations, and the use of specific order types. This allowed the authority to assess the trading behaviour in context, rather than treating any single metric as conclusive.

A particularly important feature of the investigation was MEKH’s focus on micro-timing. It examined how quickly orders were cancelled after opposite-side executions, how long alleged non-genuine orders remained in the book compared with the market average, and whether those orders were executed at all. This type of analysis requires high-quality order-level data and the ability to reconstruct the sequence of events with precision. It also requires supervisory expertise that may not yet be evenly developed across all NRAs.

MEKH’s approach was also notable because it did not focus only on outcomes. It examined whether the order behaviour was capable of sending a false or misleading signal, including by assessing whether the trading pattern suggested a discrepancy between the orders displayed to the market and the trader’s apparent genuine execution intention. In practical terms, this meant looking closely at cancellation behaviour, order duration, execution probability and the relationship between submitted orders and completed transactions.

The decision is therefore a useful example of evidence-led REMIT supervision. MEKH aligned its analysis closely with ACER’s spoofing and layering guidance but supplemented that framework with a detailed empirical assessment of the underlying order and transaction data. Surveillance controls need to detect not only large or obvious spoofing patterns, but also shorter, more subtle sequences where timing, execution ratios and order-book behaviour collectively point to a false or misleading signal.

Theme 5: Reconstructing the spoofing pattern across trading days

MEKH’s enforcement decision is valuable because it shows in detail how an NRA reconstructed alleged spoofing patterns across multiple trading days. The core pattern was broadly consistent: the trader maintained genuine sell-side interest, placed visible buy-side orders that MEKH considered non-genuine, and then cancelled those buy-side orders shortly after sell-side execution or after the market failed to react.

MEKH’s analysis did not depend on every trading day showing the same strength of evidence. On some days, the alleged non-genuine buy order was followed by a sell-side transaction; on others, the orders were cancelled before any transaction occurred. MEKH nevertheless considered the broader pattern relevant because REMIT Article 5 does not require a transaction or proven market reaction where the conduct is capable of giving a false or misleading signal.

The practical significance is that MEKH looked at sequencing, not just outcomes. It assessed when orders were placed, whether they improved the visible bid, whether they were cancelled shortly after execution or non-reaction, how long they remained in the order book, and whether they were consistent with the trader’s genuine economic interest. For compliance teams, this illustrates why spoofing surveillance should reconstruct the full order lifecycle across related products and trading days, rather than reviewing individual alerts in isolation.

We review the details of the trading periods under investigation to understand the spoofing patterns identified by MEKH.

Trading day of 16 August 2024, Bank Holidays (17-20 August) Weekend traded product (page 21, paragraph 51):

On 16 August 2024, the trader had sell-side interest in the market, with part of the displayed sell-side liquidity structured through hidden quantities. The trader then placed a buy-side order on the opposite side of the order book, which MEKH treated as the alleged non-genuine side. The buy order was visible to the market and, at the relevant times, was placed at the best bid and at a quantity that MEKH considered capable of eliciting a reaction from other market participants.

MEKH’s assessment was that the buy-side order was not independent genuine trading interest but formed part of a wider sequence supporting execution on the sell side. Following the subsequent sell-side transaction, the buy-side order was cancelled. MEKH treated this sequence as consistent with spoofing-type conduct under REMIT Article 5: a visible order on one side of the book created or reinforced the appearance of demand, while the trader’s genuine economic interest was reflected on the opposite side.

Trading day of 19 April 2024, Day Ahead traded product (page 21, paragraph 51):

On 19 April 2024, no trading had taken place for a period before the relevant event, and the trader was present with the best sell-side order. The trader then placed a buy-side order that became the highest bid in the order book. Shortly afterwards, another market participant executed against the trader’s sell-side order, including hidden quantity behind the visible sell-side volume. MEKH considered the timing significant: the transaction occurred shortly after the alleged non-genuine buy-side order was entered, and the trader cancelled the buy-side order shortly after the sell-side transaction.

In the same trading session, the trader submitted two further buy-side orders in the same product within minutes of the first event. These later orders were cancelled before any sell-side transaction occurred. MEKH recognised that the absence of an executed transaction reduced the strength of one indicator, but did not treat it as excluding market manipulation. MEKH's reasoning was that REMIT Article 5 may apply where conduct is capable of giving a false or misleading signal, even if no market participant ultimately reacts by trading.

MEKH concluded that the buy-side orders did not reflect genuine execution intention. It relied on the broader order pattern, the short duration of the buy-side orders, their lack of execution, the contrast with sell-side trading activity, and the trader’s wider conduct during the session.

Trading day 16 April 2024, Day Ahead traded product (page 22, paragraph 52):

The 16 April trading day appears to follow the same broad pattern identified in the other trading days. MEKH treated the sell side as the genuine side and the buy-side order as the alleged non-genuine side. The authority considered that the buy-side order was capable of influencing another market participant’s behaviour and was followed by execution on the opposite side.

MEKH also noted that not every primary indicator was equally strong. In particular, one of the conditions for identifying a non-genuine order was not fully met because the ratio between cumulative order volume on the alleged non-genuine side and executed volume on the genuine side was low. The authority therefore relied on supplementary indicators to support its conclusion, including order duration, execution behaviour and the broader pattern of trading.

Trading day 26 April 2024, Day Ahead traded product (page 23, paragraph 53):

On 26 April 2024, the trader submitted buy-side orders that MEKH considered capable of eliciting a response from other market participants. When the market did not react, the trader cancelled and resubmitted the buy-side orders with amended characteristics, including larger displayed quantity and, in one instance, hidden quantity.

No market participant responded in a way that resulted in execution. However, MEKH did not treat the absence of execution as determinative. Instead, it assessed the duration of the buy-side orders, their lack of execution, and their relationship to the trader’s sell-side interest. MEKH concluded that the trader’s genuine economic interest was on the sell side, while the buy-side activity was capable of influencing market price, demand or liquidity.

Trading day 27 August 2024, Day Ahead traded product (page 24, paragraph 54):

On 27 August 2024, MEKH identified a similar pattern, although the evidence of market impact was less direct than in some of the earlier examples. The trader placed buy-side orders that were later cancelled before the relevant transaction occurred. MEKH considered that it could not be ruled out that these orders influenced other market participants’ perception of the market.

Following the trader’s buy-side activity, another market participant submitted a bid, which the trader then improved. A sell-side transaction was concluded shortly afterwards, and the buy-side order was later cancelled. MEKH recognised that the longer interval between the alleged non-genuine buy-side orders and the transaction made the evidence of effect weaker than in other cases, but nevertheless considered the sequence consistent with the broader pattern of spoofing-type behaviour.

Trading day 30 April 2024, Within Day traded product (page 25, paragraph 55)

On 30 April 2024, the trader was active on the sell side throughout the day, which MEKH treated as the genuine side. On the alleged non-genuine side, the trader placed a buy-side order for the 17-hour product. The trader amended the buy order shortly after submission and later cancelled it. No transaction occurred in that sequence, and the related sell-side order was also cancelled after the market did not react.

Shortly afterwards, the trader executed a transaction in the 18-hour product. MEKH treated the 30 April sequence as similar to the 25 April example: the order sequence did not result in a transaction, but the authority considered the conduct capable of giving a false or misleading signal. The case therefore illustrates MEKH’s focus on the full order lifecycle and observable indicators of genuine execution intention, rather than only on whether a transaction occurred.