Exchange Council release: Madrid, 28 March 2023
The Exchange Council of the European Energy Exchange (EEX) held its first meeting of this year on March 23, 2023, chaired by Dr. Bernhard Walter, Head of Market Design and Regulation of EnBW AG. Key topics of the meeting included measures taken by EEX regarding the gas price cap, the expansion of product offering in the freight segment, access of the clearing house to EUA auctions, as well as implications of high-frequency trading on the exchange.
The Exchange Council had an overall discussion on the recent proposals on the reform of the EU electricity market design. In addition, a specific focus was put on the so-called Market Correction Mechanism (MCM) which, as a result of the energy price crisis, the EU energy ministers reached a political agreement on at the end of 2022. The mechanism, that could trigger a temporary gas price cap, is applied on wholesale prices for exchange-traded natural gas futures in the Dutch TTF market as soon as front-month contract prices for TTF exceed LNG prices by 35 euros and in total 180 euros per MWh on three consecutive working days.
The Exchange Council expressly welcomed the commitment and the intensity with which the exchange complied with the decision of the European Commission, also supporting that market participants in applying the respective provisions.
It also welcomed that EEX, through its OTF ("Organised Trading Facility") and its Trade Registration on the regulated exchange, provides reinsurance, in particular for risk management, enabling the mitigation of major unintended consequences of the MCM.
While trading in power and gas transactions on EEX’s OTF market has been available for market participants for years, legal and organizational prerequisites have now been created to enable all participants of EEX gas markets to also have access to the OTF, which is operated in addition to the regulated market. The Exchange Council supported the commitment of EEX and the parallel listing of TTF products on the OTF. The OTF solution ensures that market participants are able to close their TTF positions at any time in the future and that clearing participants in particular will continue to have the possibility to manage positions without being exposed to increased risks.
The Exchange Council also discussed the expansion of product offering for the freight market. Since the beginning of this year, EEX has recorded increasing volumes in this sector, especially in Freight Options. To ensure wider trading opportunities for participants, EEX will extend maturities from 36 to 72 consecutive months for options most in demand. The new maturities will apply to the following products: EEX Baltic Capesize 5TC Freight Options, EEX Baltic Panamax 4TC Freight Options, EEX Baltic Panamax 5TC Freight Options and EEX Baltic Supramax 10TC Freight Options.
Furthermore, the Exchange Council amended the exchange's rules and regulations to allow European Commodity Clearing (ECC) access to the secondary market auction of emission rights. As part of its default management process, the clearing house is also admitted as a trading participant on EEX in order to conclude close-out transactions or transactions for the liquidation of collateral, if necessary. In addition to cash and securities, ECC also accepts the deposit of EU emission allowances (EUA) as collateral. Access to the secondary market auctions gives ECC the opportunity to liquidate larger quantities of deposited EUAs in a market-friendly manner, if required.
The Management Board of the Exchange also informed members of the Exchange Council about updates in technical connections, affecting automated high-frequency trading. In March 2023, EEX introduced a so-called "Co-Location Service" which considerably increases the processing speed of orders by reducing transmission distances between servers of trading participants and the exchange system. The expansion enables high frequency trading on EEX and so-called "Enhanced Trading Interface" high-frequency sessions (ETI HF sessions) have also been introduced. These are designed for market participants who require very fast transmission of data with the lowest possible time delay. The Exchange Council discussed the development intensively and welcomed the proposal of the Management Board of the Exchange to set up a dedicated technical working committee to address current and further technical developments in exchange trading, and to advise both the Exchange and the Exchange Council.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. This committee consists of up to 24 members who are elected from among the trading participants in four voting groups in order to represent the various interests and businesses appropriately. The tasks of the Exchange Council include the decision on the rules and regulations of the exchange and their amendments. The Exchange Council is also responsible for the supervision of the Management Board of the Exchange and the appointment of the Head of the Market Surveillance.
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