Significant potential for gas trading in Europe
Interview with Peter Reitz, CEO, EEX – How do you evaluate the energy exchange’s growth opportunities in the gas sector?
EEX is traditionally strong in the power trading but also on the gas side we are seeing growing interest from market participants. Within five years, EEX has become the gas exchange with the highest number of trading participants in Europe. Gas companies are facing major challenges both on account of the energy turnaround and the evolution of the gas market into a free trading market. We offer participants the opportunity to operate on this market on a non-discriminatory and transparent basis and continue to support the market with services, such as our indices, which can be used as a reference in gas supply agreements.
How high is the share of gas trading on EEX and how does exchange trading influence gas procurement and pricing?
On the Spot Market our trading participants can already optimize their portfolios with within-day, day and weekend products around the clock. The liquid spot market forms the basis for the development of the derivatives market. Currently, the share of exchange trading at EEX in the entire short-term trading of the virtual trading hubs NCG, GASPOOL and TTF ranges between 10% and 20% while the share of EEX trading on the NCG or GASPOOL derivatives markets is about 5% to 10%.
For the future development of exchange gas trading the acceptance and use of EEX prices is decisive. In short-term trading EEX has established a daily reference price which is used by the German market area operators to settle control energy. The significance of EEX prices in long-term natural gas trading is to be further supported by our price index EGIX.
What measures are EEX using to increase exchange liquidity in gas trading and are these measures bearing fruit?
We work together with market makers since the launch of exchange gas trading in July 2007. Market makers enter bids on the buy- and sell-side to safeguard basic liquidity. In return, the exchange relieves market makers of transaction fees provided they comply with the market maker agreement.
Additionally, EEX has established volume-based incentive schemes for the Spot and Derivatives Market, which financially reward participants if they shift their existing trading activities from OTC trading onto exchange.
Which aims has EEX set for itself in the field of gas trading over the next 5 years?
Compared with the established OTC market exchange trading in natural gas is still in its infancy in Germany. EEX wants to strengthen trading on the Spot and Derivatives Market. Trading structures in the field of gas are now beginning to evolve in many companies. We will support this development because we see a lot of potential in this market – both for Germany and for other markets.
What developments do you expect for exchange gas trading in Europe?
For several years, the most important European gas markets in Great Britain, Germany, the Netherlands, France and Italy have been undergoing intense transformation. Monopoly or oligopoly structures in gas supply are opening up on the basis of European directives and for the first time are creating the precondition for free trading in gas and, hence, for exchange trading. This market is still young in Continental Europe but it is growing rapidly. At present, gas trading on the TTF in the Netherlands is Europe’s leading market. On account of the two German market areas’ enormous growth on the spot market and excellent infrastructure preconditions (gas storage facilities, gas distribution systems etc), we see significant growth potential in this segment.
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