On Thursday, 13th September, the Exchange Council of the European Energy Exchange (EEX) held its third meeting of 2018 in Paris, chaired by Dr Michael Redanz, Managing Director of EWE Trading GmbH. In the course of the meeting, the Exchange Council addressed a number of key topics including the continuing development of using EEX’s product offering to hedge long-term Power Purchase Agreements (PPAs), the applicability of pre-trade transparency requirements for trade registration services as well as the upcoming German/Austrian bidding zone split.

The Exchange Council was particularly encouraged by the continuous trend of hedging long-term positions such as PPAs via EEX and its clearing house ECC. EEX’s concept of long term hedging with standard futures products has been well received by the market, resulting in additional trading volumes and open interest. Long-term hedges are used to mitigate price and counterparty risks arising from PPAs or other long-term power positions. In the period May to September 2018, strips of yearly futures contracts up to calendar year 2024 have been registered in Spain and Germany, achieving a total volume of more than 10.7 TWh.

During the meeting, the Council also discussed the applicability of pre-trade transparency requirements as set out in MiFIR Art. 8 (1) for transactions bilaterally agreed outside the exchange and subsequently registered on the exchange for clearing purposes. Currently, there is growing confusion in the industry resulting from a debate amongst the national competent authorities. As the registration of OTC trades for clearing on exchanges is a cornerstone of the energy market and supports MiFID II/MiFIR in addition to the 2009 G-20 Pittsburgh Commitments policy objectives for more market transparency, the Exchange Council called for an appropriate interpretation of MiFIR Art. 8 (1), specifically for commodity derivatives. EEX is committed to being an active contributor in this discussion in order to provide maximum transparency for its customers.

Finally, the Exchange Council took the opportunity to recognise the efforts of EEX and in particular, its trading members for their comprehensive preparations and decisive actions ahead of the upcoming bidding zone split which comes into effect on 1st October 2018. Speaking at the meeting, Exchange Council Chairman, Dr Michael Redanz said; “As a result of the effective strategy and action plan that EEX undertook in conjunction with its trading participants, the market was able to prepare for the bidding zone split well in advance. This decisive approach enabled confidence to return once more.”

In April 2017 and in response to the impending bidding zone split, EEX introduced separate power futures for Germany (Phelix-DE Futures) and Austria (Phelix-AT Futures). Since launch, liquidity has continuously shifted to the Phelix-DE Future which has now firmly established itself as benchmark contract for European power. Furthermore, the Exchange Council welcomed EEX’s efforts to develop liquidity in the Austrian market, where EEX’s Phelix-AT Power Future product has seen a continuous increase in traded volumes over the past months.  

The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. It consists of a total of 24 members who expertly represent the various relevant interest groups and business circles. In addition to the trading participants who are represented by 19 elected members from five different voting groups, four representatives from associations and one representative of energy science belong to the Exchange Council. 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.