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One year after the launch of exchange trading in natural gas on European Energy Exchange AG (EEX) the results achieved are positive. In a relatively short period of time and under difficult market conditions (split liquidity on account of a large number of market areas, existing long-term bilateral agreements), EEX has already managed to achieve a share of 10 percent in the total gas volume which can be traded freely in the two market areas (BEB and E.ON Gastransport).
On 2 July 2007, trading on the Spot Market was initially launched in the BEB market area. On 1 October 2007, spot trading was also launched in the E.ON Gastransport market area. Since the launch of trading one year ago, the trading volume on the Spot Market has reached a total of 800,120 MWh. On the Derivatives Market, the volume traded amounted to 10,048,331 MWh during the same period of time. The open interest, i.e. the total of all open derivatives contracts, increased to 2,591,931 MWh by 30 June 2008. Even today, the prices of other European gas trading hubs already display a high correlation to the gas prices on EEX. The number of trading participants in-creased from 26 at the beginning to a total of 48 companies today.
“We are very satisfied with the development of this young market – we have seen a continuous increase in volumes, in particular, on the Derivatives Market over the last months. Moreover, the high demand for training courses for traders from gas companies also clearly testifies to the interest in gas trading on EEX,“ Oliver Maibaum, Managing Director Exchange of European Energy Exchange comments. “At this point, it is important to expand gas trading further and strengthen the significance of the price index this way.”
And EEX has paved the way for that. In addition to a reduction of the fees in March 2008, the daily trading times on the Spot and Derivatives Market were extended. The introduction of cross-margining on the Derivatives Market leads to a reduction of the margins to be furnished by those trading participants which are active on several trading hubs. Upon a request to that end by the trading participants, EEX has allowed for the OTC registration of smaller transactions on a 1 MW basis since March 2008, so that further companies can now benefit from the security provided by the EEX clearing house, European Commodity Clearing AG (ECC).
EEX will continue to develop its market design for the gas market further in the future. EEX is currently examining the introduction of season contracts (half-year contracts) in order to get a product on the exchange which is common on the gas market. In addition to this, a reduction of the minimum contract volume from 10 to 1 MW in spot trading is planned for the fourth quarter of 2008 in order to provide more flexibility to trading participants wishing to trade smaller quantities. EEX also hopes that the switching from the hourly to the daily balancing system as of the beginning of the new gas busi-ness year 2008/2009 will generate positive impulses for trading.
EEX operates Spot and Derivatives Markets for energy and related products. With more than 200 trading participants from 20 countries it is the energy exchange in continental Europe which boasts the biggest number of trading participants and the highest turnover. While coal is only quoted on the Derivatives Market, power, natural gas and CO2 emission rights are traded both short-term on the Spot Market and long-term on the Derivatives Market with a time horizon of up to six years into the future. Clearing of exchange and over-the-counter transactions (OTC clearing) is provided by European Commodity Clearing AG (ECC). ECC is the clearing house of EEX and its partner exchanges.
