Aggregating demand side flexibility is essential to complementing the inflexible and variable renewable energy supply in achieving low carbon energy systems. Sources of demand side flexibility

e.g.

dispatchable generators

storage

and flexible loads

can be structured in a form of microgrids and collectively provided to utility grids through transactive energy in local energy markets. This paper proposes a framework of local energy markets to manage this transactive energy and facilitate the flexibility provision. The distribution system operator aims to achieve local energy balance by scheduling the operation of multi-microgrids and determining the imbalance prices. Multiple microgrid traders aim to maximize profits for their prosumers through dispatching flexibility sources and participating in localised energy trading. The decision making and interactions between a distribution system operator and multiple microgrid traders are formulated as the Stackelberg game-theoretic problem. Case studies using the IEEE 69-bus distribution system demonstrate the effectiveness of the developed model in terms of facilitating local energy balance and reducing dependency on the utility grids.