Ukraine’s financial bill to pave way for gas and power market liquidity – regulator

Aura Sabadus


BUCHAREST (ICIS)–Ukraine is poised to adopt one of its most radical financial bills in a decade, paving the way for a liquid energy market and the necessary instruments to minimise risk, Timur Khromaev, chairman of the national securities and stock market commission (NSSMC), Ukraine’s financial regulator, said on Wednesday.

The 2284 bill, which was expected to be adopted earlier this spring but hearings had been postponed due to the coronavirus pandemic, aims to align Ukraine’s legal framework with that of the EU, including the Markets and Financial Instruments Directive II (MIFID II).

Speaking to ICIS, Khromaev said a number of changes have been made to clarify which contracts would be covered by financial market regulations and which would be under the remit of the energy regulator, NERC. This clarification was needed as earlier discussions had sparked a debate between NSSMC and NERC over their future remits in overseeing traded products.

Furthermore, the bill also provides clarity with regards to the bankruptcy clause and close-out netting, a key provision involving the termination of obligations under a contract with a defaulting party.


Khromaev also explained that under the new bill, which is expected to be adopted in June, the master agreement drafted by the European Federation of Energy Traders (EFET) would also be adapted to Ukrainian law, a step towards the establishment of an over-the-counter gas or electricity market.

The EFET master agreement is one of the most frequently used contract for risk management by companies active in European energy markets.

“This law will bring the biggest changes in Ukraine’s capital markets in the last 10 years. In the past we had introduced laws related to banks, but nothing of this magnitude. Everyone who has worked on this law has made sure that it would not be just a formality. [With regards to energy] it will guarantee the convergence between the commodity [physical] and financial markets,” he said.

Khromaev added that the law would help to kickstart liquidity on the local exchange, UEEX, facilitate the emergence of clearing and lead to credible price formation.

He said the financial and energy regulators would have to develop secondary legislation to complement the primary law once it receives its final approval in parliament in the upcoming weeks.


A European market source welcomed the latest developments and said Ukraine was on the right path to developing market liquidity and minimising risk.

However, he pointed out that complementary changes would have to be made to other laws such as the energy commodity exchange law or the procurement law in order to guarantee the correct implementation of the financial bill.

He pointed out that the first step towards building market liquidity on the exchange UEEX would be to attract the transmission system operator, GTSO, to balance the gas market on the platform.

Under current arrangements, GTSO is buying volumes for balancing purposes on the open Pro-Zorro e-procurement platform.

However, the source said, parliament was now in discussions to amend Law 2176 on procurement to ensure that GTSO can trade on the UEEX platform.

“With the establishment of a balancing market, you help establish a spot market which is, in turn, necessary for the launch of a financial market,” the source said, stressing that financial instruments need to settle against a spot price.





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