What is an energy exchange? They flourished in Europe from the late 1990's with the liberalization legislative packages influencing the way, in which energy is traded. Today they are the vital part of Europe energy markets, and still will be in the EU Internal Energy Market.
The need for formal definition of the "energy exchange" araised more urgently with the REMIT Regulation implementation, which put strict market abuse restrtictions - equivalent to those applying in the financial market - on energy physical market.
Definition elaborated for purposes of REMIT records of transactions describes energy exchange as a multilateral system operated and/or managed by a market operator, which brings together or facilitates the bringing together of multiple third-party buying and selling interests in wholesale energy products – in the system and in accordance with its non-discretionary rules – in a way that results in a contract, in respect of the wholesale energy products admitted to trading under its rules and/or systems.
Thus, the distinctive feature of the energy exchange appears the scope of products traded, mainly being the REMIT-defined wholesale energy products.
When it comes to the types of the key products traded at energy exchanges, they are:
- in the physical market - day-ahead and intraday spot contracts,
- in the financial market - derivatives contracts such as futures, swaps and options, and
- OTC clearing in forward markets.
ACER's REMIT Annual Report 2014 describes interactions of physical and financial elements of trading on energy exchanges with the following words:
"Electricity and natural gas markets involve both physical and fnancial elements. The physical markets include the trading of and payment for the physical commodities, while the financial markets include the buying and selling of financial products derived from physical natural gas and electricity. Physical products are those whose contracts involve the physical delivery of natural gas or electricity. Physical market participants are those who are in the market to make or take delivery of the commodity. Financial products do not involve the delivery of gas or electricity; they only involve the exchange of money. Some of the energy exchanges within the EU operate both in the physical and financial markets, whilst other exchanges operate in only one of the two market segments."
The above Report enumerates the following major organised market places for electricity in Europe:
1. NASDAQ OMX Commodities
2. Nord Pool Spot N2X
3. N2EX
4. Gaspoint Nordic
5. BaltPool UAB
6. EEX European Energy Exchange
7. POLPX
8. OTE a.s.
9. OKTE a.s. – Organizátor krátkodobého trhu s elektrinou
10. PXE, Power Exchange Central Europe
11. EXAA, Energy Exchange Austria
12. CEGH, Central European Gas Hub
13. OPCOM SA, Operato Pietei de Energie Electricia
14. HUPX, Hungarian Power Exchange15BSP Regional Energy Exchange (SouthPool)
16. GME, Gestore dei mercato energetici S.p.a.
17. Borsa italiana
18. OMIE, Operador del Mercado Ibérico de Energia S.A.
19. OMIP, Operador de Mercado Ibérico de Energia S.A.
20. Powernext SA
21. EPEX Spot SE
22. Belpex SA23APX NL
24. SEMO, Single Electricity Market Operator
25. ICE Endex
26. ICE Futures Europe
27. APX UK
28. LAGIE, Electricity Market Operator S.A
29. IDEX, Italian Derivatives Energy Exchange.
The above succession does not give priority to any trading venue, when it comes to the largest spot traded volumes in 2013 in Europe in the first place was Nord Pool Spot covering Nordic and Baltic markets, while the second rank was assigned to EPEX Spot's (German and Austrian market segment).
Considering market and legislative developments in Europe, energy exchanges will for certain play a major role in the energy market infrastructure. Latest developments energy exchanges are involved with are market coupling (linking partitioned energy markets of EU Member States) as well as transparency platforms.
A not-for-profit association of European energy exchanges that represents the interests of the exchange based wholesale markets for electrical energy, gas and environmental markets is Association of European Energy Exchanges (EUROPEX).
Regulatory chronicle
17 December 2020
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Nominated Electricity Market Operator (NEMO)