The Exchange Council of the European Energy Exchange (EEX) has welcomed plans for the exchange to introduce additional trading platforms for power and natural gas, in addition to the existing exchange markets.
The Markets in Financial Instruments Directive classifies energy derivatives as financial instruments. This creates additional requirements and has increased entry barriers for the market participants who wish to trade. However, transactions traded on a new platform to be introduced – the “Organised Trading Facility” (OTF) – are exempt from this provision.
The Markets in Financial Instruments Directive (MiFID) classifies energy derivatives as financial instruments. This creates additional requirements and has increased entry barriers for the market participants who wish to trade. However, transactions traded on a new platform to be introduced – the “Organised Trading Facility” (OTF) – are exempt from this provision.
EEX and Powernext plan to apply for an Organised Trading Facility (OTF) license for these platforms, which are initially referred to as “non-MTF”, prior to MiFID II taking effect.
The Exchange Council understands the need for the new products in view of the regulatory background, whilst simultaneously emphasising the importance of liquidity on the regulated power and natural gas markets, which will be preserved.
Council chairman Peter Heydecker says: “Since the new and existing markets will be linked via spread products, the liquidity of both markets are bundled. Therefore, physical and financial players will be brought together through this connection”.
As a further measure to protect and develop the on-exchange liquidity, the Exchange Council has adopted new rules for market makers and liquidity providers. In future, trading participants for whom trading at corporate group level forms an ancillary function to their main activity will not require additional permission under MiFID II. When calculating whether trading activity is ancillary, trading volumes from market making or liquidity providing will not be considered if it serves to provide a trading platform with liquidity and is mandatory according to the rules of the exchange. Therefore, the Exchange Council decided on rules to introduce a mandatory supply of liquidity.
"In the future, EEX will provide its participants with legal certainty when calculating the ancillary activity exemption. This will also enable them to provide quotes as market makers and liquidity providers on EEX,” explains Heydecker.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. It consists of a total of 24 members who expertly represent the various relevant interest groups and business circles. In addition to the trading participants who are represented by 19 elected members from five different voting groups, four representatives from associations and one representative of energy science belong to the Exchange Council. The tasks of the Exchange Council include the formulation of the rules and regulations of the exchange and their amendments. The Exchange Council is also tasked with the supervision of the Management Board of the Exchange and the appointment of the Head of the Market Surveillance.
