At the meeting of the Exchange Council chaired by Peter Heydecker, Alpiq AG, in representation of Dr. Günther Rabensteiner, Verbund AG, in Rome on 14 September 2011, the Exchange Council was informed of the exchange’s plans regarding the expansion of the OTC clearing services. EEX andits clearing house, European Commodity Clearing AG (ECC), will offer OTC clearing services for trading at the UK National Balancing Point (NBP), the trading point for natural gas in Europe with the highest liquidity.
In the future, EEX trading participants can also register Derivatives Market transactions in natural gas, which are concluded bilaterally at the NBP virtual trading point, on the exchange. Clearing and settlement of the trading transactions is provided by ECC, which also nominates the natural gas quantities for physical delivery to the transmission system operator. With week, month, quarter, season and year futures EEX and ECC provide gas products which are in line with the market and which have also been established in Continental European trading to the trading participants. Derivatives Market transactions can be registered on EEX from 8:00 to 18:00 (CET). With regard to the financial assessment of open positions in NBP futures contracts, settlement prices are to be established in accordance with the standards common on the NBP gasmarket.
The Exchange Council approves the expansion of OTC clearing to the UK gas market. As a result, EEX Group will introduce OTC clearing for products which are not traded on EEX or the partner exchanges for the first time. This step will help to expand ECC’s position as the leading clearing house for energy. Even today, the services provided by ECC cover the most important gas market areas in Continental Europe. And the more products and markets are connected to ECC clearing, the higher the potential nettinge ffects will be.
These netting effects will be reinforced even more through the expanded cross margining, which ECC will introduce in the fourth quarter of 2011. Dr. Thomas Siegl, Chief Risk Officer of ECC AG, who took part in the meeting as a guest, presented the expanded cross-margining as well as the savings potential connected with it for the trading participants to the members of the Exchange Council. As a new feature, cross margining effects can be used across all products in the future – power, natural gas, emission allowances and coal. Moreover, ECC will also offer complete cross-margining across all market areas, maturities and periods within a given product class (e.g. natural gas) with the amount of the savings depending on the extent to which the prices of the products concerned are correlated. With regard to closed positions which result from combinations of fully opposite positions (e.g. year contract versus the corresponding four quarter contracts, month base versus month peak and off-peak), only a minimum amount of collateral has to be furnished in this case.
The Exchange Council very much welcomes this development in the field of the cross margining.This will result in a further reduction in liquidity costs for trading participants with diversified portfolios – across partner exchanges, delivery areas and asset classes. Moreover, this expansion creates an incentive to transfer transactions which are settled over the counter at the moment to clearing and to increase the settlement volume of ECC.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. It consists of in total 24 members who adequately represent the various interest groups and business circles: In addition to the trading participants with 19 elected members from various sectors (transmission system operators and power trading companies, municipal utilities and regional suppliers, brokers and financial service providers as well as commercial consumers), four representatives from associations and one investors’ representative are members of the Exchange Council. The tasks ofthe Exchange Council include, in particular, the adoption of the rules and regulations of the exchange and their amendments. In addition, its tasks comprise the appointment and supervision of the Management Board of the Exchange and the appointment of the head of the Market Surveillance.