On 2 December 2021, the Exchange Council of the European Energy Exchange (EEX) held its last meeting of the year, chaired by Dr. Bernhard Walter, Head of Market Design and Regulatory Affairs at EnBW AG.
The Exchange Council discussed the recent market price development, its regulatory implications and the effects on clearing. Against the backdrop of a highly volatile market environment in the power and gas markets, Dr. Clemens Völkert, Chief Risk Officer of ECC, reported that the clearing house operations were stable and designed to cope in such instances. The daily exchange of profits and losses (variation margin) in such market circumstances led to a higher number and amount of intraday margin calls, which were completed according to standard procedures. The ECC initial margin model worked as designed and ensured that the financial resources were sufficient to cover potential exposures at all times. The employed margining models are subject to high standards and strict model governance. In particular, he highlighted ECC’s daily update of the initial margin parameters. Due to this, the initial margin for the trading participants did not increase suddenly, but rather continuously, giving participants the opportunity to handle the required liquidity appropriately and in line with individual trading and hedging strategies. Given the current price development in the energy markets, the Exchange Council underlined the importance of robust and efficient clearing mechanisms for the market. At the same time the Exchange Council also suggested to further evaluate how specific needs of market participants, especially in volatile market conditions, can be addressed within the scope of the regulatory framework.
The Exchange Council also discussed changes of the Trade Registration Rules on the EEX Power Derivatives market with a view on hedging of Power Purchase Agreements (PPAs). PPA hedges concluded off-exchange with terms of up to 10 years are usually carried out via the registration of interrelated transactions in EEX Power Futures products. By enabling registration of the full curve of contracts with one price EEX intends to further reduce the efforts for registration of PPA deals on the clients side. Following the introduction of the new 10-Year-Futures for the German, Italian and Spanish Power Market, EEX already registered transactions for up to eight years ahead in Spain. The Exchange Council agreed on the respective amendment of the Trade Registration rules as this will further facilitate long-term hegdes on the exchange.
Additionally, two further members were elected to the Exchange Council. The Council welcomed Mr. Sven Otten, representing E.ON Energy Markets GmbH and Mr. Feridoun Kademi for EWE Trading GmbH as new members.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. This committee consists of a total of 24 members who are elected from among the trading participants in four voting groups in order to represent the various interests and businesses appropriately. 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.
