Authority comment on permitted circumstances for market makers

The Electricity Authority provides its expectations of any market maker intending to issue a Permitted Circumstance notification based on a potential breach of an applicable law as provided for under clause 13.236N(1)(a)(ii) of the Electricity Industry Participation Code.

This provision is a very limited exclusion from the obligation to market make. We appreciate this issue may arise in the context of a developing transaction that may reasonably constitute insider information and that different participants will manage these arrangements in different ways. However, we expect participants to take all reasonably practicable steps to ensure they can meet their market making obligations. In particular, we expect that:

• participants will put in place insider trading policies that ensure (as far as reasonably practicable) that the inside information does not impact their firm’s ability to provide market making services - the Authority will see it as challenging for participants to issue a Permitted Circumstance if they have not reasonably managed information flows in this way
• as far as reasonably practicable, participants will speak to the Authority on a confidential basis early, and before the stage where they may not be able to market make (noting that these types of transaction evolve over time).

The Authority will consider whether further guidance may be required. However, participants should be clear on our expectations in relation to a notification of a Permitted Circumstance.