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European Energy Exchange AG (EEX) is progressing as planned with its preparations for the launch of gas trading on the exchange. The start of trading is scheduled for the beginning of the new gas business year on 1 October 2007 in the BEB and E.ON Gastransport market areas.
According to a statement by the CEO of the European Energy Exchange AG, Dr. Hans- Bernd Menzel, the selection of the two market areas of BEB and E.ON Gastransport – with the latter being established by means of a merger of the three E.ON H-gas market areas north, centre and south as of 1 October 2007 – is based on an in-depth analysis and on a survey among potential trading participants.
The study, which EEX commissioned PricewaterhouseCoopers (PwC) to carry out, specifies essential selection criteria for exchange gas trading. In addition to the focus on at maximum two trading points and the availability of storage capacity in the market areas, this also comprises the integration of important entry and exit points. Moreover, the study showed that the areas should be h-gas market areas in which a certain basic liquidity is already available. On this basis, the market areas of E.ON Gastransport and of BEB turned out to be just the right thing. “These two market areas comprise approx. 60 per cent of the transport volume of the German h-gas market with E.ON Gastransport accounting for 45 per cent and BEB accounting for 15 per cent“, Mr. Menzel explains.
Parallel establishment of Spot and Derivatives Market
In accordance with the market participants’ wishes EEX will launch the Spot and Derivatives Market in parallel. In the framework of market exploration it became clear that a spot market is considered necessary in particular for the short-term optimization of physical portfolios.
According to the study prepared by PwC, a growing potential for the Derivatives Market is perceived in the successive expiry of the city gate contracts. On account of the trendsetting decision by the Federal Network Agency for the 2-contract model a required minimum precondition for liquidity has already been fulfilled. Ultimately, de-coupling of gas transmission and gas as a trading product will lead to increased price transparency.
On the Spot Market trading will be launched with day contracts and weekend contracts, whereas physical futures with terms of up to six years (month, quarter and year futures) will be traded on the Derivatives Market. Seven companies have already stated their willingness to become market makers and to ensure the liquidity which is required initially for all the products launched.
“Our aim is to establish gas as a second foothold on the exchange in addition to power. Coal and CO2 complement this strategy”, states Mr. Menzel.
The EEX operates a Spot and a Derivatives Market for power and CO2 emission allowances. Moreover, trading in coal futures and clearing of coal contracts is offered. Integrated clearing is effected via European Commodity Clearing AG (ECC), a wholly owned subsidiary of EEX AG, which also co-operates with the Dutch ENDEX European Energy Derivatives Exchange N.V. With currently 158 trading participants from 19 countries, EEX is the energy exchange in continental Europe which boasts the biggest number of trading participants and the highest turnover.
