UPDATE 1-EEX energy bourse posts higher trades in Jan-March

Wed Apr 9, 2014 10:01am EDT

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By Vera Eckert

LEIPZIG, Germany, April 9 (Reuters) - The European Energy Exchange (EEX) posted a 5 percent rise in trading of its flagship electricity futures for January through March, benefiting from declining over the counter market participation amid tighter EU financial regulation.

Continental Europe's biggest power bourse on Wednesday reported 350.3 terawatt-hours (TWh) of futures traded compared with 333.3 TWh a year earlier, according to material issued at a news briefing at the EEX in Leipzig.

This followed on from higher volumes last year, when regional expansion and cooperation with other energy market operators had boosted trading.

EEX data are a pointer to trends in energy wholesaling as trading in its annual contracts reflects the fundamentals of the European power markets.

Trading on EEX has reached 20 percent of German wholesale power market volumes, from 15 percent in 2012.

"The trend towards more participants and more volume from existing members seen last year stays intact and our market makers set more narrow spreads, which improves price reliability," chief executive Peter Reitz told reporters.

He said that the numbers across gas, carbon and power boded well for 2014 volume and earnings prospects.

"We are growing in all areas, which makes it not unlikely that 2014 results could be above 2013," he said.

"However, the market environment is difficult and the wider over-the-counter market is receding. Therefore, it is not guaranteed that we can escape the impact of overall trends."

Increasing regulation has prompted some operators to switch to exchange trading from OTC. Reitz said the transparency of the bourse as well as the clearing services of its subsidiary ECC gave traders more certainty, as Europe tightens regulations to eliminate manipulation and overly risky strategies.

However, advocates for OTC markets say they preserve participant anonymity and give more leeway to fine tune trades.

NEW PRODUCTS, NEW REGIONS

But EEX faced weak energy demand in the euro zone and supply competition from renewable energy that is not exchange-traded.

Several banks last year responded to the changing environment by pulling out of energy trading.

EEX expanded its regional reach into Italian, Dutch, Belgian, Scandinavian and Swiss power futures last year. In 2014, it is targeting Spanish products and is due to open an office in Milan, on top of Leipzig, Paris and London.

EEX last spring created a pan-European gas market with French Powernext SA called PEGAS. Gas and carbon, where the bourse widened its role of market auctions host on behalf of the European Union for 26 member states, showed big gains.

Turnover rose 30 percent to 62.6 million euros ($86.4 million) in 2013 of which carbon accounted for 1.6 million, and pre-tax profit (EBT) was up 32 percent at 17.3 million euros.

The EEX would revive the idea of coal contracts this year after meeting little interest from the trading community, Reitz said, adding there was interest from power generators.

EEX is majority-owned by German-Swiss Eurex, the derivatives unit of Deutsche Boerse.

In 2013, it bought a 52 percent stake in Singapore's CLTX exchange to get a foothold in Asian shipping and coal markets, but Reitz said the relationship would work both ways.

"If we tie Asian customers to our clearing services, we may be able to interest them in our other products as well," he said.

($1 = 0.7249 Euros) (Reporting by Vera Eckert; editing by Dale Hudson and Keiron Henderson)

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