EEX bourse sees power futures trade rise amid expansion

The European Energy Exchange (EEX), Europe's biggest electricity bourse, expects a rise in futures trading volumes this year as it expands in more countries and products, its chief executive said. The EEX, which has widened its coverage in Italy, Spain and to the east after buying two-thirds of Czech exchange PXE, is benefitting from moves towards bourse-based power trading due to tighter financial market regulations.
The Germany-based bourse, which is part of the Deutsche Boerse Group, reported a 54 percent rise in power futures trading in the first five months of the year from 2015 to 1,593 terawatt hours (TWh). "We expect the positive trends to continue," Chief Executive Peter Reitz told Reuters said in an interview at a conference. "Developments in Spain are much better than expected and Italy has become a big mainstay," he said, adding that its core markets Germany and France were also performing well.
As of next week, EEX will offer day and weekend contracts for peakload power delivery in the French and Italian markets. The EEX also transferred trading and clearing procedures it developed in its German market to Spain last year, where they took off rapidly. Some clients of existing players, OMIP and MEFF, switched to EEX while its customers in other markets entered Spain.
"We did not just take away business from others, but also generated new volumes," Reitz said. EEX has become the biggest single market operator in Spain with more than 30 percent of the market. Apart from the two local exchanges much of the market is still traded by brokers over-the-counter. The German exchanges Spanish volumes amounted to 28 TWh in January-May, a 476 percent year-on-year increase and above 22.4 TWh recorded over the full year of 2015.
The EEX is one of the few multi-country power trading bourses and uses a central clearing house, the European Commodity Clearing (ECC). This means participants can use spread trading products and cuts their costs because they can lower margin limits across their portfolio. Italian power futures volumes were up as the EEX model took hold while in France prices were drifting below formerly guaranteed levels, which was encouraging hedge trades, Reitz said.
The EEX faces more of an uphill battle in Britain and the Nordic countries where there are more established competitors, he said. EEX also trades spot power, gas, CO2, and, after taking over Singapore's Cleartrade, a range of international freight, iron ore and bunker fuel contracts. In Germany, it plans to introduce a wind futures contract by the end of this year.