The Exchange Council of the European Energy Exchange (EEX) held its first meeting of the year, chaired by Dr. Bernhard Walter, Head of Market Design and Regulatory Affairs at EnBW AG.
The Exchange Council of the European Energy Exchange (EEX) has discussed dot length the current market conditions set against the background of the Ukrainian conflict.
In light of the current events, energy markets are experiencing unprecedented price developments. In these turbulent times, it is the highest priority of the exchange and the clearing house to ensure the stability of trading and clearing for all listed energy and commodity contracts.
The exchange reports that trading and clearing operations continued to run smoothly also under the stressed market conditions in the last weeks. EEX has volatility interruption processes in place to be able to cope with very dynamic prices changes throughout a day.
The Exchange Council has emphasised the importance of keeping energy markets open even in turbulent periods. Especially during times of stress, it is essential to have access to an open, central and transparent market that enables participants to manage and transfer their risk through trading and central clearing. The Exchange Council discussed as well potential future scenarios with physical restriction of supply and emphasised that regulatory planning alone might not be sufficient; cooperation of all market stakeholders – being the regulator, EEX, the market participants and the infrastructure providers – will be essential to ensure efficient allocation of gas volumes and orderly price determination. The exchange management confirmed that such scenarios will be further detailed in close cooperation with the market and the authorities.
In light of the political discussion on how to deal with price peaks, the Exchange Council is warning against an intervention in the free formation of prices on the market. Proposals to interfere with the price formation process, as currently made by some EU Member States, should be treated with highest caution. Shutting down exchanges, limiting certain trading strategies or capping wholesale market prices would not change the market’s valuation of the underlying commodity. If market price formation at exchanges were restricted, market participants would move away from transparent trading venues to unsecured and non-transparent ways of trading. A transparent price determination would not take place, price changes would just be delayed and potentially even amplified because of the increased uncertainty. Additionally, the physical and financial fulfilment would not be that secure as safeguarded by a central counterparty.
The Exchange Council members have underlined the relevance of price signals which mirror the supply and demand situation in the market and are fundamental for an efficient wholesale market. At the same time, it is important to find adequate measures on how end-customers can be protected from extreme prices levels, without distorting the wholesale market.
