Updated: ICE Endex plan natural gas exchange and OTC price integration for June

23 May 2014 13:00 Source:ICIS

Additional detail has been added in the ninth paragraph about the OTC/exchange hybrid model

European energy commodity bourse ICE ENDEX will integrate the price of gas traded on the exchange with the spot over-the-counter (OTC) market in June in a move to boost liquidity.

Speaking to ICIS, ICE ENDEX’s commercial director Wouter de Klein said the plan to mingle the prices from the OTC and exchange spot markets was a response to feedback from traders.

The plans for a hybrid of OTC and exchange pricing comes in the run up to the 3 June launch of a more market-based mechanism to balance gas within-day in the Netherlands, which will oblige traders to buy and sell gas on the exchange.

This will make it important that there are enough companies active on the exchange so they can easily find a counterparty able to deliver, or take delivery of, gas on the same day.

Currently, traders balance their gas within-day through the Dutch grid operator Gasunie Transport Services (GTS) in a system called the bid price ladder.

From next month, however, these balancing actions will be performed on the exchange in the hope of making the within-day market more liquid.

“We will have our prices co-mingled with the OTC market, which was not the case before and we have made some changes to better align our product with the wider market,” de Klein said.

All contracts on the TTF Spot and Belgian virtual hub ZTP Spot will be part of this price integration process. The OTC/exchange hybrid model already exists for ICE ENDEX futures contracts. OTC prices will be sourced through brokers and will sit alongside price feeds from the exchange. Users will have the option to have these prices aggregated or features on separate feeds.

Most of the gas traded for within-day delivery is dealt OTC rather than on the exchange, according to ICIS comparisons earlier this year, but the share of exchange trade is growing. Total traded TTF within-day volumes on ICE ENDEX rose by 64% year on year in 2013 to 90GW ( see ESGM 24 March 2014 ). Overall within-day volumes are low compared to other contracts in the fast-growing Dutch OTC market, with Day-ahead the most active contract.

“I think from the current bid price ladder position, the shift will certainly help because the transmission system operator will directly balance on the market itself. Migration of the TTF and [Belgian] ZTP markets to the WebICE platform is also expected to increase the distribution of prices and increase the number of front-end screen providers from just Trayport to up to 41,” de Klein said.

Interest in trading at the exchange is coming from utilities, trading houses and small proprietary firms that were not previously active, de Klein said. Kirsty Ayakwah

By kirsty ayakwah