Turkish energy exchange expects liquidity growth in 2022 after launch of three platforms – CEO

LONDON (ICIS)–Turkey’s energy exchange (EXIST) expects trading activity growth across all traded commodities in 2022 as it has already completed the launch of three platforms this year and awaits market changes, the bourse’ CEO Ahmet Turkoglu said.

Speaking to ICIS, Turkoglu confirmed the natural gas futures market (NFM) was launched on 1 October and said he expected the number of participants who are now active on the spot gas platform to rise from 50 to 300 across both as power plant operators, distribution companies and industrial consumers are set to join.

NFM will allow companies to trade monthly, quarterly and annual contracts.

“Seventeen contracts will be open for trading,” he said.

“Our participants will be able to make transactions for the following 12 months, the following 4 quarters, and the following year. On the other hand, I can say that we have robust collateral and default management, market operations and financial settlement mechanism for our natural gas futures market,” he said.

An important feature of the market is that the base price for future contracts will be calculated using a combination of the Turkish spot reference price data, Brent, Henry Hub and TTF prices.

EXIST already operates a spot gas market and Turkoglu said close to 5 billion cubic metres traded on the platform since it was launched three years ago.

Some Turkish shippers said the volumes were small compared to Turkey’s annual demand, which is set to reach a record 60bcm/year in 2021. They say the market could only develop once it is deregulated and the monopoly of the incumbent BOTAS whittled down.

However, Turkoglu says he is confident volumes may grow as more participants will be attracted to the spot and futures market.

Proposed amendments to unbundle the incumbent BOTAS and reduce the market share of the new BOTAS trading offshoot could help promote competition and increase liquidity, shippers say.

EXPANDING ELECTRICITY TRADING

Turkoglu said that EXIST had also clocked up achievements in the electricity sector, where it launched a power futures market in June 2021.

“We have observed a steady increase in the number of registered market participants. We believe the power futures market platform will provide a strong price signal for the market in the near future,” he said.

Since its launch in 2015, the Turkish daily spot electricity market has attracted 1461 participants, who are now active on the platform.

Turkoglu says traded volumes on the spot electricity market saw a year-on-year increase of 17% in the first eight months of 2021. Volumes traded over the same period last year stood at 181.36TWh.

“Looking at these figures, I can say the day ahead market operated by EXIST is one of the biggest day-ahead markets in Europe.”

“This is the market with the highest volume [operated by EXIST]. It is also the most complex one with an algorithm-based structure and the software of this market has been developed completely in-house and that works smoothly.

“We also encourage academics and young professionals to contribute improvements in the technical infrastructure of our market through participating in algorithm competitions that we organise each year. Additionally, we have a dedicated optimisation team working on developing and improving the algorithm,” he added.

Turkoglu said the biggest expectations for 2022 was for the electricity and gas spot and futures markets to harmonise, giving companies the possibility to trade seamlessly across platforms.

Finally, he said the launch of green certificates, so-called YEK-G in Turkish, in June 2021 allowed companies to track the origin of renewable energy and to ensure they reached emission reduction targets.

“I can say that 2021 was the year of EXIST. I think 2022 will be an active year for the natural gas market and we will focus more on becoming a regional natural gas hub,” he added.