Post on 15-Apr-2017
Trading processes and Exchange
platforms
Institutional and organizational designs of the gas hubs in
Europe: An introduction to the Iberian Gas Hub
24th June 2014, Bilbao
2
Exchange trading inside PEGAS
Interactions between gas market participants – role allocation
Preconditions for a positive hub development
Agenda
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The European wholesale market for gas
Development of European gas hubs in 2013 in comparison to 2012
Hubs Spot market Futures market
TWh Δ to 2012 TWh Δ to 2011
NBP 1,078 +4% 13,765 -15%
TTF 417 +16% 8,126 +6%
NCG 258 +15% 930 +20%
GPL 158 +52% 576 +52%
PEG 137 +30% 270 +35%
ZEE 150 +25% 611 -7%
CDG/AOC ca. 100 TWh
* both OTC and Exchange volumes
Source: Powernext
Continental European gas markets show the
biggest increase (TTF, GPL, NCG, PEG’s)
Reduction on NBP due to withdraw of banks
Strong competition between broker and exchanges
CDG
CDG
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PEGAS – Pan-European Gas Cooperation
Bundling of trading interest and volumes on one trading platform
More than 150 market participants in now 6 gas market areas
Trading of price differences between gas market (Location-Spreads)
Clearing and settlement by solely usage of ECC inside PEGAS – Netting
EEX and Powernext enables gas trading in Continental Europe
Powernext
Pan-European Gas cooperation
EEX
PEG’s TTF-Future TTF-Spot NCG GPL
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PEGAS Initiative on UK and Belgian hubs
Next steps in 2014:
9. July - Spot and Futures on Zeebrugge
Trading Point (ZTP) offered by PWX
9. July - Spot on Zeebrugge Trading
Point L-Gas (ZTPL) offered by PWX
Q4/14 - Spot and Futures on National
Balancing Point (NBP) offered by EEX
Q4/14 - Spot and Futures on Zeebrugge
Beach (ZEE) offered by Powernext
New location spreads become tradable:
ZEE/NBP, ZTP/NCG, ZTP/TTF, ZTP/GPL, ZTP/PEG-N
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All PEGAS markets inside one screen
Cross membership without additional costs for joining the other market
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Volume growth in PEGAS markets in 2014
1.636
3.306 1.020 1.430
4.714
3.258
6.644
9.444
8.865
17.133 28.982
5.350
-
5.000
10.000
15.000
20.000
25.000
30.000
35.000
GPL NCG TTF PEG's GPL NCG TTF PEG's GPL NCG TTF PEG's
Intraday market Spot market (Day Ahead, Weekend, Individual Days)
Future market
GW
h
Jan. 13 - Apr. 13 Increase in Jan. 14 - Apr 14
Strong increase in all spot markets in 2014, especially TTF
Sharpest increase in TTF futures, also GPL and PEG’s futures
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0
20
40
60
80
100
120
140
160
2007 2008 2009 2010 2011 2012 2013 2014
34
52
72
92
108117
138
34
18
20
20
16
9
21
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Increase of trading participants at the EEX gas market
Member development inside EEX gas markets
New member
Existing member
CEGH-EX (89)
ICE Endex Zee (24)
ICE Endex TTF (53)
ICE Endex NBP (77)
Powernext (45)
Nord Pool Gas (21)
EEX (148)
As of 07. February 2014
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Exchange trading inside PEGAS
Interactions between gas market participants – role allocation
Preconditions for a positive hub development
Agenda
10
Role allocation inside gas markets 1/3
Physical player
Importing companies – provide gas on own hub and supply end customer
Exporting companies – provide gas on adjacent hubs and supply end customer
Producing companies – provide gas on hubs and supply end customer
Storage operator – offers physical flexibility to market participants
Financial player – usually gas trading without direct end customer supply
Arbitrage smallest price differences in derivatives between markets/hubs
Increase significantly trading liquidity and connect wholesale markets
End customer
Industrial customer – needs competitive prices, otherwise move to adjacent hubs
Household customer – needs security of supply and also competitiveness
Several user roles have different claims on gas hubs
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Role allocation inside gas markets 2/3
Gas grid operator (LSO, DSO, TSO)
Operates gas grid system (regulated) – accept transport nomination
Facilitate VTP by enabling entry/exit regimes
Advice hub operator for balancing activities inside the gas grid
Hub operator (e.g. Huberator, GPL)
Pooling of liquidity inside one market area – one or more TSO as underlying
Manage extended trading and matching services at the VTP
Enables title transfer of gas for trading by offering of trade nominations
Support exchange trading by acceptance of single sided nomination
Offers back-up/back-down services – every hub trade is “super firm”
Balance the system on behalf of TSO’s by trading on exchange balancing
markets or own balancing markets
Act according national regulation rules – How to deal with overlapping hubs?
Grid operator and hub operator can fulfil different roles
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Role allocation inside gas markets 3/3
Act as Central Counterpart (CCP) between trading member
Enable anonymous and free of discriminatory trading between member
Ensure proper financial and physical clearing/settlement of trades
Provides Single side nominate services at VTP to member
Solely nomination of EEX/ECC is sufficient for deal execution – no counter nomination
at VTP by member is needed to confirm exchange trade
Regulated and licensed by financial authority
Sophisticated market surveillance and reporting tools
Publication of transparent references prices for gas hubs/delivery periods
Act as 24/7 balancing platform for all market participants in the market
Exchanges enable proper trade execution and transparency
Watch out: To give special authority/privileges only to one exchange inside
the gas market prevents level playing fields for competitor (EX, broker). !
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Exchange trading inside PEGAS
Interactions between gas market participants – role allocation
Preconditions for a positive hub development
Agenda
14
Preconditions for a liquid wholesale market
Availability of gas volumes
Availability of gas storage
Non discriminatory access to
transport and storage
Interconnection to adjacent
hubs/gas markets
Apply of entry/exit model
with direct access to VTP
Support for exchange trading
and simplified settlement
Market price transparency
Trigger for the development of a Virtual Trading Point
Regulatory pressure: EU Gas Target Model
Customer pressure: Competitive gas prices in own gas market
Hub development
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Stepwise development of hub trading
Trading on physical points (interconnection points, LNG hubs)
Bilateral trading with limited number of active counterparts
Pricing on benchmarks of substitute fuels or regulated price
Revenues shared between few companies
Traditional gas world
– without VTP
Transforming gas world
– with VTP
Trading on Virtual trading points and temporary limited also on
physical points (cross border, interconnection)
Bilateral trading with increasing number of counterparts
Dominant pricing on benchmarks of substitute fuels
Competition for revenues between more companies
Trading on Virtual trading points with sufficient liquidity
Standardised gas trading on an exchange
Full price transparency based on Exchange prices
Full competition for revenues between companies
Developed gas hub
– with Exchange
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5
10
15
20
25
30
35
Ga
s p
ric
es
in €
pe
r M
Wh
Delivery month
EGIX vs. published oil-indexed German gas import prices
Price transparency – benefit for customer
Import prices published by German Ministry
EGIX prices published by EEX
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Decision criteria for gas trader
Physical/financial demand for trading -
Short-term optimisation – usage of spot markets (WD, DA, WE)
Mid- and long-term optimisation – usage of future markets (M, Q, S, CY)
Trading venue
Number of possible counterparts - market participants
Tightness of Bid/Ask spread for market price based opening/closing of positions
Market Maker support
Sufficient liquidity in number of order, trades and volume per product
Risk affinity:
Bilateral or Broker trading – Not anonymous (incl. delivery), counterparty risks,
preferred for trading of non-standardized products or young gas markets
Exchange trading – Anonymous, no counterparty risk, balancing trading
Transaction cost per trade – incl. Bid/Ask spread, trading fees, clearing fees
Full price transparency for free – Increase trust of customer in Hub trading
Which criteria triggers order placement and trade execution?
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Conclusion
Market size – big enough?
Member support – strong enough?
Level playing field for all market player – fair enough?
Balancing trading at the exchange – transparent enough?
Price transparency by usage of hub pricing – Relying enough?
Hubs/VTP could be developed under consideration of
Any more questions?
More information available under www.pegas-trading.com