European Energy Exchange AG

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European Energy Exchange
Logo EEX new2.jpg
Founded 2002
Headquarters Leipzig, Germany
Key People Peter Reitz, Steffen Köhler, Iris Weidinger, Dr. Thomas Siegl
Employees 150
Products Spot and derivatives markets for power, natural gas and emission allowances, financial coal futures
Website http://www.eex.com/en

The European Energy Exchange (EEX) is a regulated energy exchange. It develops, operates and connects secure, liquid and transparent markets for energy and related products. On the EEX spot and derivatives markets, power, natural gas, CO2 emission allowances, coal and guarantees of origin are traded.[1]

EEX uses the "T7" trading platform for its Derivatives Markets for Power, CO2 Emission Allowances, Coal and Guarantees of Origin. “T7” is a new derivatives market trading system developed by Deutsche Börse AG and has replaced the previous EUREX trading system.[2] The EEX Spot Markets for Emission Allowances are operated on the trading system ComXerv. Within the context of PEGAS, the Natural Gas Spot and Derivative Markets are operated on the Trayport ETS trading system.

All exchange trades and OTC trades registered on the exchange are cleared as well as financially and physically settled through the exchange's clearing house, European Commodity Clearing AG ECC. The ECC is a subsidiary of EEX and also provides clearing services for other European exchanges.

Since 2008, the exchange has worked in partnership with the French Powernext. The two partners integrated their power spot and derivatives markets.

History

The current EEX emerged as a result of a merger between LPX Leipzig Power Exchange and the Frankfurt-based EEX in 2002.[3]

ECC AG - a subsidiary of EEX AG which was spun off in 2006 – is a clearing house safeguarding settlement of EEX's transactions. ECC offers cross margining of accounts, which reduces the total margin that must be furnished.

EEX and the Amsterdam-based ENDEX European Energy Derivatives Exchange N.V. (today: APX-ENDEX Group) began cooperating in the settlement of energy trading transactions in July 2006.[4]

In 2007, the power spot trading company of EEX was spun off into an independent company called EEX Power Spot GmbH, wholly owned by EEX. In 2008, the derivatives market has also been spun off into an independent subsidiary that is now called EEX Power Derivatives GmbH.

On Oct. 10, 2007, EEX and Eurex announced cooperation in the field of emissions trading.[5]

On Dec. 11, 2007, the supervisory board members of EEX AG approved the integration of the power spot and derivatives markets of EEX and the French exchange Powernext into independent companies: the Spot Market Company, based in Paris, and the Derivatives Market Company, based in Leipzig. The clearing and settlement of all products from the spot and derivatives market would be provided by European Commodity Clearing AG (ECC) in Leipzig.

On Sept. 19, 2008 EEX and Powernext announced the incorporation of the new Spot Trading Company under the name EPEX Spot SE – European Power Exchange. Both partners hold 50 percent of the shares in the new Societas Europaea (SE), which has its registered offices in Paris. EEX and Powernext integrated their entire spot power trading activities into EPEX Spot SE.[6]

On Apr. 2, 2009, European Commodity Clearing AG concluded the transfer of the positions in Powernext Power Futures. EEX Power Derivatives, in which EEX holds 80 percent of the shares while the Paris-based Powernext holds the remaining 20 percent, continues power derivatives trading for France, completing the integration of the power derivatives markets. [7]

On June 25, 2009, the EEX clearing house European Commodity Clearing AG (ECC), the Vienna Stock Exchange and the Central European Gas Hub said ECC would provide clearing and settlement for the new natural gas exchange in Austria. [8]

EEX Power Spot was merged into EPEX Spot SE based in Paris on Sept. 1, 2009, as the final step of the cooperation. An EPEX Spot branch in Leipzig continues to support the German customers. The joint company EPEX Spot SE operates the short-term power trading activities for the market areas Germany/Austria, France and Switzerland. [9]

On Oct. 30, 2009, the website “Transparency in Energy Markets” was launched. EEX and the four German transmission system operators (TSOs), 50 Hertz Transmission GmbH (formerly Vattenfall Europe Transmission GmbH), Amprion GmbH, TransnetBW (formerly EnBW Transportnetze AG) and TenneT TSO GmbH (formerly transpower stromübertragungs gmbh) implemented a new central transparency platform for generation and consumption data. This step fulfills the publication requirements under the “Congestion Management Guidelines”. [10] Austrian TSO Austrian Power Grid AG joined the platform as the sixth member in December 2010 and started transmitting data for the APG control zone in July 2011. [11]

EEX received the award as the ‘Energy Exchange of the Year’ in the Energy Business Awards in 2009. The awards were announced at the 25th Asia-Pacific Petroleum Conference (APPEC) in Singapore.[12]

In January of 2010 EEX began running the primary auction for European emission allowances (EUA) in Germany on behalf of the German Federal Ministry for the Environment at the invitation of the Ministry. [13]

Deutsche Boerse became a majority stakeholder in EEX following the purchase of a 22.96 percent stake in the exchange from Landesbank Baden-Wuerttemberg (LBBW). According to Deutsche Boerse the deal would push its equity stake to 58.19 percent in EEX, from its prior 35.2 percent holding.[14] [15]

EEX opened a London office in July 2011, the first office outside of Leipzig, Germany. [16] In January 2012 EEX officially opened its political representation in Brussels.[17]

In December 2013, EEX acquired Cleartrade Exchange (CLTX), a Singaporean Futures Exchange founded in 2010, to create a new global commodities offering. The acquisition resulted in a combined group with over 300 members and 10 major asset classes. CLTX adds to EEX’s current product offering such products as freight, iron ore, fuel oil and fertilizer.[18]

Product innovations and other developments

  • On March 1, 2010 EEX launched Within-Day trading on its Natural Gas Spot Market. The Within-Day product enables the exchange participants to trade natural gas for the current gas delivery day for the GASPOOL and NCG market areas in the course of the day. This product constituted a further step towards the integration of control energy trading on the exchange.
  • On March 29, 2010 EEX supplemented the product range of tradeable Phelix Futures on the Power Derivatives Market, allowing participants to trade financially settled futures on a weekly basis. The Phelix Week Futures is a financial derivatives contract which refers to the average Power Spot Market prices of future delivery periods.
  • In June of 2010 EEX made the EEX spot and futures products visible and tradeable for all participants via Trayport’s GlobalVision front-end.
  • On 30 June 2010, EEX and Eurex expanded their offer of EUA Futures with contracts which will reach maturity from the third commitment period of the European Emission Trading System (EU ETS).
  • Starting on 19 July 2010, the platform Transparency in Energy Markets also included data on solar energy, rounding out the fundamental data regarding energy generated from wind and other energy carriers (e.g. lignite, natural gas, run-of-river, hard coal, uranium, oil) provided on www.transparency.eex.com.
  • On 27 January, 2011 EEX launched the European Gas Index (EGIX), based on all exchange trades concluded in the current front month contracts of the NCG and GASPOOL market areas on the Derivatives Market.
  • On May 31, 2011 the European Energy Exchange (EEX) launched 24/7 gas trading and expanded the GASPOOL and NCG market areas connected to exchange trading with the Dutch TTF market area. The move enabled short term gas transactions to be traded on EEX without any interruptions 24 hours a day and 7 days a week.
  • In September 2011 EEX was awarded the contract for the Dutch Primary Market Auction. Later on in November it was announced that EEX would also carry out EU Emission Allowances (EUA) Auctions for Lithuania. EEX was chosen as cooperation exchange for the NER30 program of the European Investment Bank (EIB).
  • In February 2011, EEX won the tendering procedure for the transitory auctioning platform for the EUA auctioned off by Germany for the third emissions trading period.
  • EU Aviation Allowances (EUAA) Derivatives Market was launched on April 30, 2012 along with new futures on Emission Reduction Units (ERU).
  • On 29 May 2013, EEX and Powernext launched their Pan-European Gas Cooperation PEGAS. In the framework of this cooperation, both companies have combined their natural gas markets to create a pan-European gas offering.
  • On 6 June 2013, the EEX launched trading in Guarantees of Origin for Green Power (GoOs). With the purchase of a green power certificate, energy suppliers can prove that one megawatt hour of power has been produced from renewable energy. Clearing and settlement of all trading transactions are provided by the clearing house ECC.
  • EEX introduced a new fee model for exchange membership on January 1, 2014. With this fee model, EEX restructured the cost of annual membership and reduced the fees for becoming a trading participant. The number of membership categories was reduced from eight to five. The “full membership” category now costs EUR 15,000 per year (compared to the previous annual cost of EUR 25,000).[19]

Exchange Products and Services

Power

Spot Market Power

EEX AG and Powernext SA integrated their power spot markets into the joint exchange EPEX Spot SE which was incorporated in September of 2008. It is a company according to European law (Societas Europaea) based in Paris. EEX holds 50 percent of the shares in the Paris-based EPEX Spot SE which operates the spot market for power for Germany, France, Austria and Switzerland. EPEX Spot also operates intra-day trading for German, Austrian, French and Swiss market areas.

  • Intraday/Spot: In intraday trading, power contracts with delivery on the same or on the following day are traded. EPEX members can trade hourly deliveries of power up to 45 minutes before the beginning of the hour concerned.
  • Day Ahead: On the day-ahead market, power is traded for the next day. The trading participants use the day-ahead market to optimize the procurement and sale of quantities of electricity in the short term. The bids of the hourly auctions allow different buy and sell quantities to be placed at different respective prices in the auction. On every day of the week, EPEX SPOT operates day-ahead trading for three market areas: Germany/Austria, France and for Switzerland with physical delivery in the respective grid areas on the next day.
  • Phelix: The "Phelix Day Base" (Phelix =Physical Electricity Index) is the daily average of all power prices for the hours 1 to 24 traded on the Spot Market for delivery in the German/Austrian market area.

Derivatives Market Power

On the EEX Power Derivatives Market financially settled futures for Germany/Austria and France (Phelix Futures and French Futures) and Phelix options can be traded as well as physical Belgian, Dutch and French Power Futures. At present, EEX offers trading of day, week, month, quarter and year futures. Moreover, trading participants can register OTC trading transactions for Romania, Scandinavia, Italy and Switzerland for clearing on EEX.

  • Phelix Futures: The Phelix Future is a financial derivatives contract referring to the average power spot market prices – more specifically to the EPEX Index Phelix – of future delivery periods on the German/Austrian market area. Phelix futures are traded for days, weekends, the current week and the next four weeks, the current month and the next nine months, the next eleven quarters and the next six years. Base load, peak load and off-peak are the tradable load profiles.[20] Since November 2009, Eurex customers are able to trade and clear EEX power derivatives via their existing Eurex access. Since December 2007, EEX and Eurex have already been cooperating in emissions trading.[21]
  • Phelix Options: EEX offers trading in options on the Phelix Base Future (Month, Quarter, Year). In addition, EEX offers four expiry dates for options on Phelix Base Year Futures, the so-called Short Dated Options. Regardless of the different maturities, the corresponding futures position of the underlying asset is booked upon exercising of the option.

Guarantees of Origin

Guarantees of Origin (GoO) are certificates which confirm that a given Megawatt Hour of power has been generated from renewable resources. These are exclusively issued for disclosure and transparency purposes and they are cancelled upon use. Trading in Guarantees of Origin on EEX is not connected with the delivery of power. Guarantees of Origin can be traded up to three years into the future. There are two maturities per year.

EEX offers three products on the Derivatives Market:

  • Nordic Hydro - Guarantees of Origin for Hydropower from Scandinavia (Denmark, Finland, Norway and Sweden)
  • Alpine Hydro - Guarantees of Origin for Hydropower from the Alpine region (Germany, Austria and Switzerland)
  • Central Northern European Wind - Guarantees of Origin for Wind Power from north-western Europev (Belgium, Denmark, Germany and the Netherlands)

Natural Gas

In July 2007, EEX launched natural gas trading on the spot and derivatives market. Meanwhile, PEGAS - the cooperation between EEX and Powernext - offers exchange trading in natural gas for the GASPPOL, NetConnect Germany (NCG), Title Transfer Facility (TTF) and PEG (Nord, Sud and TIGF) market areas.[22]

PEGAS

PEGAS is a cooperation between European Energy Exchange (EEX) and Powernext, which was launched on May 29, 2013. In the framework of this cooperation, both companies have combined their natural gas markets to create a pan-European gas offering. The arrangement provides members with one common gas trading Trayport platform with access to all products offered on the exchanges: spot and derivatives products for the German, French and Dutch market areas. Furthermore, spread products between these market areas are offered on the same trading platform.

Spot Market Natural Gas

On the day-ahead market, natural gas is traded for the next, the next-but-one day and the weekend. The day-ahead market is used for the short-term optimization of the procurement and sale of gas quantities. EEX offers day-ahead trading for three market areas: Gaspool Natural Gas Day Contracts, NCG Natural Gas Day Contracts and TTF Natural Gas Day Contracts. [23]

In 2011, EEX introduced 24/7 trading on the Natural Gas Spot Market. On the Spot Market, companies can trade natural gas on a continuous basis for the current day (within day), one day and two days in advance as well as for the following weekend. Since the launch of 24/7 trading EEX has also offered continuous trading with a minimum lot size of 1 MW (in addition to the 10 MW contracts).

Derivatives Market Natural Gas

On the derivatives market, natural gas is traded for the current month, for the next six months, the next seven quarters and the next six calendar years. The derivatives market is used for medium-term optimization of the procurement and sale of quantities of natural gas. On every exchange trading day, continuous trading of GASPOOL Natural Gas Futures Contracts and of NCG Natural Gas Futures Contracts takes place for the respective market area. On the EEX Derivatives Market the Balance of the Month (BoM), the respective next six months, seven quarters and six years can be traded for each market area and, in addition, the respective next four seasons (summer and winter season) can be traded in the NCG market area. [24]

As of 27 January 2011 EEX publishes a new European Gas Index – EGIX – which is based on all exchange trades concluded in the respective current front month contracts of the NCG and GASPOOL market areas on the Derivatives Market.[25]

Emission Allowances

Spot and Derivatives

Since 2005, EEX operates both spot and derivatives markets in emission allowances.[26] EEX has offered trading of emission allowances on the basis of the EU Emissions Trading Scheme (EU ETS) since 2005. EEX currently runs a secondary market for continuous trading on a Spot and Derivatives basis for EU ETS allowances (EUA, EUAA) and Kyoto credits (CER, ERU).[27]

EEX and Eurex - Joint Forces in CO2 Trading

Since December 2007, EEX and Eurex have been successfully cooperating in emissions trading. The alliance combines EEX’s energy market membership and connectivity to the European power trading community with Eurex’s financial market membership and global distribution network. The cooperation initially started with trading of the already available EUA Futures on EEX for the Kyoto phase 2008-2012.

As of March 26, 2008, it is possible to trade CER Futures on the EEX (Certified Emission Reductions), global emission credits in accordance with the Kyoto Protocol. On 14 April 2008 EEX and Eurex launched trading of options on EUA Futures.

On Oct. 27, 2009, EEX and Eurex launched new emission rights contracts. In addition to the contracts already offered, EUA and CER Futures with a different maturity and delivery date were introduced. [28]

EEX awarded EU Primary Market Auction

Since January 2010 EEX AG runs the auctioning of the Emission Allowances issued by the Federal Ministry of the Environment. All trading participants admitted to trading in emission allowances on EEX are able to take part in the auction without any further preconditions regarding licensing. From the very beginning, this also included all trading participants taking part in the existing Eurex cooperation on the Derivatives Market.

In addition, EEX also carries out the EUA auctions for Lithuania (in 2011 and 2012) and the Netherlands (in 2011 and 2012). Furthermmore the European Energy Exchange (EEX) has won the tendering procedure for the transitory auctioning platform for the EUA auctioned off by Germany for the third emissions trading period in February 2012 and it was chosen as cooperation exchange for the NER30 program of the European Investment Bank (EIB).

As of 30 April 2012, emission allowances for the aviation industry (EU Aviation Allowances – EUAA) will also be offered for trading. Furthermore, Futures on Emission Reduction Units (ERU) will be launched at the end of April. In March, EEX extended the futures on Certified Emission Reductions (CER) for all maturities of the third trading period.

Coal

EEX offers exchange trading of coal futures and Trade Registration of coal futures. Amsterdam-Rotterdam-Antwerp (ARA) and Richards Bay (RB) coal futures referring to API 2 (ARA) and API 4 (RB) indices can be traded. The contracts are financially settled on the basis of these two indices.[29]

Transparency

EEX operates "Transparency in Energy Markets”, the neutral platform for energy market data which fulfils the statutory publication requirements and implements the market participants’ voluntary commitments. The platform was established by EEX and the four German transmission system operators and launched in October 2009. In 2011, the Austrian transmission system operator Austrian Power Grid AG joined the cooperation. EEX is in charge of the operation of the platform, which comprises plausibility checking, anonymisation, aggregation and publication of the data reported.

On September 2, 2014, the European Energy Exchange (EEX) launched its new transparency site. At www.eex-transparency.com, visitors can gain access to comprehensive fundamental data and relevant information for wholesale energy trading. The website is a further development of the existing platform “Transparency in Energy Markets” and contains information about capacity, utilization and availability of facilities for the production of electricity as well as new information on the storage of electricity and natural gas consumption.

Key People

  • Peter Reitz, Chief Executive Officer (CEO)
  • Steffen Köhler, Chief Operating Officer (COO)
  • Iris Weidinger, Chief Financial Officer (CFO)
  • Dr. Thomas Siegl, Chief Risk Officer (CRO)

Web links

References

  1. EEX Product Brochure 2014. EEX.
  2. Press Release. EEX.
  3. "Date Set For German Power Bourse Merger". Power Engineering International.
  4. Press Release. ECC.
  5. Press Release. Eurex.
  6. Press Release. EEX.
  7. Press Release. EEX.
  8. Press Release. ECC.
  9. Press Release. EPEX.
  10. Press Release. EEX.
  11. Press Release. EEX.
  12. Press Release. Commodities Now.
  13. Press Release. BMU.
  14. Deutsche Boerse unit buys majority in EEX. Reuters.
  15. Press Release. EEX.
  16. Press Release. EEX.
  17. Press Release. EEX.
  18. EEX and CLTX Creating a Combined Global Offering. MondoVisione.
  19. European Energy Exchange to introduce new fee model and lower entry barriers to exchange trading. EEX.
  20. Phelix Futures. EEX.
  21. Phelix Futures. EEX.
  22. PEGAS. EEX.
  23. Website. EEX.
  24. Website. EEX.
  25. Website. EEX.
  26. Emission Allowances Overview. EEX.
  27. Emission Allowances Secondary Market. EEX.
  28. EEX and Eurex expand cooperation to power derivatives – Phelix contracts also tradable for Eurex clients as of 25 November 2009. EEX.
  29. Coal. EEX.

Resources