Market Correction Mechanism

Market Correction Mechanism

Gas Pipes

The Council Regulation (EU) 2022/2578 of 22 December 2022 and the European Commission’s Implementing Regulation (EU) 2023/736 of 31 March 2023, established a gas “market correction mechanism to protect Union citizens and the economy against excessively high prices” (MCM Regulation). It entered into force on 1 February 2023 for a period of one year. In December 2023, the MCM was extended until 31 January 2025.

What is the MCM?

The market correction mechanism (MCM) is an instrument designed to limit prices in EU gas markets. It is activated when prices at EU virtual trading points move above certain levels and when these prices are also significantly above the LNG import price.

The MCM applied originally to the Dutch Title Transfer Facility (TTF) gas price only, and is activated only if certain conditions are met. Regulation (EU) 2023/736 (of 31 March 2023) extended the MCM also to other EU virtual trading points, besides TTF.

The MCM is not applied to over-the-counter transactions (OTC). The Commission can propose to amend the MCM to extend it to OTC.

ACER and ESMA effects assessment reports

The Regulation tasked ACER and the European Securities and Markets Authority (ESMA) with assessing the market effects from the introduction of the MCM and submitting their MCM effect assessment reports to the European Commission by 1 March 2023.

The aim of the two reports was to assist the Commission in its decision of extending the Market Correction Mechanism (MCM) to the derivatives traded at other Virtual Trading Points (‘VTPs’) in the EU and in assessing whether the key design elements of the MCM need to be reviewed. ACER and ESMA already published preliminary reports on 23 January 2023.

In their final assessment reports (1 March 2023) on the effects of the MCM (see below), neither ACER nor ESMA have identified significant impacts (positive or negative) that could be unequivocally and directly attributed to the adoption of the MCM. However, one should not infer from this that the MCM might not have any impacts on markets or on security of supply in the future.

See ACER news (1 March 2023) on its assessment report on the effects of the gas Market Correction Mechanism.

MCM activation

The MCM Regulation tasks ACER with calculating and monitoring the following elements with a view to activating and deactivating the MCM bidding limit:

  • Reference price defined as a basket of indexes aiming at reflecting the liquefied natural gas (LNG) import price to the EU;

  • Front-month TTF derivative settlement price.

As of 15 February 2023, ACER will activate the MCM bidding limit if the following two conditions are met:

  • The front-month TTF derivative settlement price exceeds 180 EUR/MWh for three consecutive working days; and

  • The front-month TTF derivative settlement price is 35 EUR/MWh above the MCM reference price during the same period.

Upon activation, ACER shall publish a notice stating that a market correction event has occurred on its website no later than 23:59 CET on the day of event.

Upon the activation of the MCM, orders on TTF derivatives (front-month to front-year) 35 EUR/MWh above the MCM reference price (which is a basket of LNG import indexes) cannot be accepted. Should the reference price be lower than 145 EUR/MWh, the MCM bidding limit is set at 180 EUR/MWh.

This MCM bidding limit applies until:

  • ACER publishes a deactivation notice twenty working days from the occurrence of the market correction event if the reference price is below 145 EUR/MWh for three consecutive working days; or

  • The European Commission suspends the MCM in case of significant deterioration of the gas supply situation in the EU.

The MCM reference price is an approximation of the price to continue importing LNG to the EU. The ACER LNG price assessment and other LNG price indexes are included in the reference price. ACER is required to publish the MCM reference price starting from 1 February 2023.

MCM monitoring and suspension

The MCM Regulation tasks ACER, ESMA, ENTSOG and the Gas Coordination Group to monitor the effects of the MCM when activated and inform the European Commission about unintended market disturbances related to security of supply.

The monitoring of the MCM assesses its impact on gas supplies to the EU, demand reduction targets, intra-EU flows, gas supply contracts and financial markets.  

The Commission shall suspend the MCM should it lead to detrimental effects in EU gas markets.


Market Correction Mechanism

Contact ACER

In case of queries on the computation and the publication of the MCM reference price, the activation and deactivation notices and reports related to the effects assessment, please send your questions to ACER's functional mailbox