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Harmonisation within a merger of two spot power exchanges - Experiences by EEX and Powernext. APEX CONFERENCE 2008 IN SYDNEY | 13 October 2008 Dr. Wolfgang von Rintelen • Director Legal & Compliance European Energy Exchange AG. The Situation. - PowerPoint PPT Presentation
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Harmonisation within a merger of two spot power exchanges - Experiences by EEX and Powernext
APEX CONFERENCE 2008 IN SYDNEY | 13 October 2008Dr. Wolfgang von Rintelen • Director Legal & Compliance European Energy Exchange AG
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The Situation
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1998 Liberalization of the European Energy Markets in 1998
Spin-off of the EEX Clearing business into the subsidiary European Commodity Clearing AG
Merger of the former Leipzig Power Exchange LPX and the EEX, Frankfurt, to the European Energy Exchange AG
EEX, created as a result of the EU liberalisation of the European energy markets
Launch of the German Gas Exchange:EEX covers 60% of the German H-gas market volumewith the market areas BEB and E.ON GT
Further spin-offs within the European Growth Strategy of EEXSpot market (Power): EEX Power Spot GmbH Derivatives market (Power): EEX Power Derivatives GmbH
2002
2006
2007
2007+
2005Start of Trading of Emission Allowances within the EuropeanEmission Trading System (EU ETS)
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1992: energy exchanges in Europe- an empty landscape
5Source: Regional markets in Europe according to a strategy paper by the EU-Commission
2004: EU Vision - Through regional markets to European electricity markets
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1993 – 2004:History of the EU Regulation
1993: Investment Services Directive (ISD) 93/22/EEC 2004: Markets in Financial Instruments Directive (MiFID) 2004/39/EC
- Market Abuse Directive (MAD)- Capital Requirement Directive (CRD)- Capital Adequancy Directive (CAD)
Many of this regulations are currently under review Comittees of regulators in charge:
- ERGEG (European Regulators' Group for electricity and gas)- CEER (Council of European Energy Regulators)- CESR (Committee of European Securities Regulators)- CEBS (Committee of European Banking Supervisors)
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Today: overview of the national regulationsfor power spot markets in Europe
NordREG* recently made a assessment about the national regulationsin Europe (eight exchanges)
Summary for the power spot markets: Legislation/Ministry:
energy, exchange, financial and a mix of them Regulator/Supervisory Authority:
energy, exchange, financial and more of one Market Surveillance (MS):
All exchanges monitor compliance with the rulesbut only two exchanges have MS as a independent body
If more than one authority is in charge it is not common praxis to share information and work together on a formal basis.
*NordREG is a working group of Scandinavian Energy Regulators
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2008: Power exchanges and other market places in Europe - a colorful landscape
APX B.V.
Belpex SA
Borzen, organizator trgaz elektricno energijo, d.o.o.
ENDEX N.V.
European EnergyExchange AG
EXAA EnergyExchange Austria
Gestore del mercatoelettrico S.p.a.
Nord Pool Spot AS
Operadorde MercadoIbérico de Energia(Pólo Português) S.A.
Operador del MercadoIbérico de Energía(Polo Español) S.A.
Operátor trhu selektrinou a.s.
Operatorul Pietei deEnergie Electrica
OPCOM SA
Powernext SA
Towarowa GieldaEnergii SA
OMX AB /Nord Pool ASA
Tender to build anPower Exchange in UK
IntercontinentalExchange
Borsaitaliana TSO-initiative in Hungaria
EnergetickáBurza Praha
New CO2 market place
Auction officeCASC-CWE
Energy brokers,mainly London-based
Bolsas y MercadosEspañoles plansCO2 spot trading
European Market CouplingCompany (EMCC) GmbH
Imarex Group
Climex
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First Remarks
In Europe there is not a common standard for energy exchanges. MiFID covers only Commodity Derivatives Markets, not Spot Markets. Commodity Derivatives Markets are not the major task of MiFID, from
its origin it is a regulation for stock exchanges. The Regulation for Power Spot Markets as well as its structure of
supervision/legislation is quite different within Europe. There are (too) many commissions of regulators or supervisors in
charge for the Energy Markets within Europe.
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The Merger of Power Spot Markets
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These countries representmore than a third of European electricity production
Around 70% of Powernext participants are EEX participants
Around 30% of EEX participants are Powernext participants
Price correlation: over 90 percent
Early 2008: EEX and Powernext agreed on a cooperation
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Key aspects of the cooperation
Common Power Spot Exchange based in Paris
Common Power Derivatives Exchange based in Leipzig
Clearing of all spot and derivatives energy products through European Commodity Clearing AG (ECC)
Cooperation model open to further partners
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Implementation steps
Establishment of a common spot trading company namedEPEX Spot SE with registered offices in Paris.
The partner exchanges will integrate their entire spot trading activities in power under the umbrella of the SE by the end of the year. Both partners hold 50 percent of the shares.
EEX has transfered its trading in power derivatives to the newly established EEX Power Derivatives GmbH in Leipzig.
Retroactively as of 1st January 2009, Powernext will contribute the French power futures to the new GmbH [German limited liability company] in Leipzig and, in return, it will receive 20 percent of the shares in the company.
14Source: Regional markets in Europe according to a strategy paper by the EU-Commission
Fulfilling a big part of the European Vision
Western European market (2006-08?)
Nordic market
Baltic market (2008?)
Eastern European market (2006-08?)
South Eastern European market (2006-08?)
Italian market (2004)
Iberian market (2004)
GB/IRL market separate 2005integrated 2010?
Western European market (2006-08?)
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Impacts on the Power Spot Markets
The French Power Market will continue to be traded in Paris. The German Power Market will be traded in Paris as well as the Austrian and
Swiss Market. Will the French Energy Authority be responsible for this “new” Power
Markets? The German Exchange Authority will lose its responsibility for the German
Spot Market, but remains to be in charge for the Derivatives Markets.
The Task:
The Parties agreed to harmonise the Powernext Power Spot Market and the EEX Power Spot Market Rules and organisational structure and to have“the best of both”. That means inter alia:- Rules for transparency and proper market behaviour - Independent Market Surveillance Office- Exchange Council
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Differences and its handling
EEX Spot Market Governed by Public Law Exchange bodies are:
- Exchange Council (elected)- Exchange Board- Market Surveillance Office
Exchange has own rules and regulations and the opportunityto develop it
The Exchange Council decides about the rules and its changeson request of the Board
Traders become a member of the Exchange by admission
Powernext Spot Market Governed by Private Law No exchange specific bodies
necessary
Everything has to be ruled by agreements with the participants
Solution: We will „translate“ the contribution governed by German Public Laws into agreements to be accepted by the exchange participants under French Private Law.
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Open issues:legislative and regulatory level
But there are still some open issues:
How long will the energy market be a annex to the stock markets or is there a chance for tailor made regulations for the energy markets?
How will the interactions between the spot and the derivatives markets across country borders be handled by the authorities?
How long takes it to have harmonisation or at least information sharing of the authorities?
Who will supervise the European energy market across borders? When will the European energy exchanges have harmonised rules
and a harmonised organisational structure?
In future the European energy market needs tailor madepan-European regulation and supervision.
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Thank you very much for your attention!