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(Trading Places - Herbie Skeete): Welcome to your first Q&A with Trading Places as EEX’s COO. The first obvious area we would like to explore with you is EEX’s recent cooperation with Powernext in setting up PEGAS (the Pan-European Gas Cooperation). Could you explain what it’s all about?
Steffen Koehler, Chief Operating Officer, EEX
(Steffen Koehler): Thank you Mr Skeete. I am delighted to be here and take part in my first Q&A with Trading Places. The cooperation is all about delivering a Pan-European gas market for European natural gas traders, which is the best and most effective way to harmonise existing markets on one single trading platform.
What’s special about PEGAS when compared to other existing exchange markets is its ability to offer spreads, commonly used by traders in the OTC market for use on a single exchange trading platform. The synergies between EEX and Powernext make it so much easier to become a member at both exchanges and the cost savings for those trading at both marketplaces become quite substantial. Of course, the added security of integrated clearing for traders is offered by our clearing house, ECC.
(TP): What benefits will this new concept deliver to EEX customers and the market as a whole? And how competitive is it likely to be in the current environment?
(SK): PEGAS is very well positioned to provide a new competitor to existing gas exchanges, as opposed to some others, who may have more liquidity but only in individual markets.
We believe that PEGAS is a unique market for European gas traders due to some key points of differentiation. By combining spot and derivatives trading for the Dutch TTF hub, the German NCG and GASPOOL market areas as well as the French PEG Nord, PEG Sud and PEG TIGF, we will present our participants a truly comprehensive pan-European gas offering. A further key benefit is that implicit prices created via spread products will improve the liquidity for outright products. At the same time, both EEX and Powernext plan to extend the product portfolio, tradable within the cooperation, step-by-step, to other European gas hubs.Finally, and most importantly, by offering trading at the major continental gas hubs and all spreads between them via one single technical connection, market participants will benefit from increased trading opportunities and synergy effects.
(TP): You mention the importance of the ease of technical connectivity. Can you explain this in more detail?
(SK): PEGAS will operate using the Trayport ETS system which is the gas market standard and already well received by the traders. Instead of introducing a less familiar connectivity platform, we have been mindful that traders require an easy system which they are already accustomed to. Since the Trayport system is an exchange standard, it was the obvious choice for PEGAS. I know that traders will welcome this step.
(TP): You recently announced that EEX plans to offer Dutch and Belgian power futures into the market for its clients. How does this fit into the cooperation strategy that EEX has followed in recent years?
(SK): EEX is always sensitive to the demands of its clients. For example, with price convergence between European power markets currently decreasing, hedging price risks in neighbouring markets has become more important. This is one reason why EEX is offering these new power futures. Also, as the European Energy Exchange, we aim to grow in further regions in the future.
(TP): Since taking up office, a major focus of yours has been to ease the facilitation of trading for EEX’s customers, especially in London. What makes this city so important to EEX?
(SK): London is a very important hub for EEX because of its large client base. We set up the London office in August 2011 from which to meet and engage with clients, as a centre for cooperation with them in real time. EEX’s strong customer-centric ethos is totally embraced by the London hub and we hold various on-going committees to create new products and discuss market design with them. The way in which we use our customer insight in order to define their preferences to provide an even sharper service, is at the heart of our commitment to the market.
Senior leaders in the multi asset classes together with their expert teams are now ever-closer to the important London trading community. The office already services around 120 members, ensuring that their every need is met and exceeded, with the stage set for even further growth.
(TP): You mentioned the various commodity based asset classes. As this element comes under your remit, can you tell us what notable progress EEX is making in this area?
(SK):
In addition to gas as I have mentioned before, in the power market, EEX is making good progress and gaining market share, as was seen in our latest financial results. This has been achieved despite a difficult environment in the German power market due to regulatory uncertainty, especially with regard to future power market design, discussions about capacity markets are a prime example of this.
EEX continues to maintain and improve its market share by adapting its product portfolio to the changing needs of the market. For example, EEX extended its product portfolio with Phelix Day and Weekend Futures in response to the increase in demand for short term products and more flexible trading instruments. We recently launched trading in “Guarantees of Origin” (GoO), certificates for electricity from renewables. Our exchange offering of GoO will contribute to more transparency in this sector since such guarantees for green power have previously only ever been traded over-the-counter. This development sees EEX taking a pioneering role in a new European market.
(TP): And finally, are there any further interesting developments which the trading community can expect from EEX in 2013?
(SK): New products and extension to other market areas, integration of new partners and the EEX-Powernext cooperation (PEGAS), will of course extend our offering as we become more successful in existing markets.
This year, our focus is on the ease of trading capability on EEX. For example, the refinement of IT technical connectivity with Trayport in parallel with prominent independent software vendors, adjustment of fee structure and incentive programs to stimulate trade in product portfolio and the new ‘Member Readiness’ team’s driving force to facilitate customer satisfaction are all firmly on track.
EEX will further invest in the growth of the important asset classes, promote the expansion of the new business fields and continue to utilise strong cooperations in 2013. Given the broad value chain within the EEX Group, characterised by trading markets with high liquidity and cost-effective clearing solutions, we have established a very solid position for the future. Our latest financial figures and positive development in the first half of 2013 shows that EEX is well on track and fully prepared in our marketplace.
