The importance of keeping energy markets open in times of turmoil

    Executive Summary

    The role of exchanges in these uncertain times:

    • The current situation in the energy market – caused by the price spikes in the past months and exacerbated by Russia’s invasion into Ukraine - is characterized by an environment where uncertainty makes it unusually hard to price assets. 
    • Regulated exchanges operating the wholesale energy markets provide essential transparency on prices and the physical underlying of energy supply and demand.
    • Especially during times of stress, it is important to have access to central and transparent liquidity that enable participants to manage and transfer their risk through trading and central clearing. 

    Why caution before intervention is warranted:

    • Shutting down exchanges, limiting certain trading strategies or capping wholesale market prices does not change the market’s valuation of the underlying commodity. 
    • Market participants will move away from trading on exchange towards the over-the-counter space without any visibility on price movements. Transparent price determination would therefore not take place and price changes would just be delayed and potentially even amplified because of the increased uncertainty. 
    • The market reflects the physical reality of energy supply and demand. This situation (Europe’s dependence on import of Russian gas) does not go away if the market is closed or capped. 
    • It is impossible to halt spot markets without disrupting security of near to real time supply of power and gas to the physical grid. 
    • Prohibiting derivative trades can exacerbate negative implications on the ability of companies in the energy sector (both on demand and supply side) to do business and withstand times of crisis.

    Trading on EEX/EPEX SPOT:

    • At EEX and EPEX SPOT, power and gas can be traded in the last minutes before delivery until up to 10 years in advance. Both spot and derivative markets, and subsequent clearing, perform essential functions for the overall energy markets and its participants.

    What happens at the exchange in case of extreme volatility: 

    • Operational resilience is ensured by the market surveillance and operations teams on high alert.
    • Volatility interruption processes are in place with the purpose of containing excessive volatility.



    Daniel Wragge
    Director Political & Regulatory Affairs

    Ellen De Vocht
    Political & Regulatory Affairs Officer