* Transparency rules require spending on management, admin,
* Traders, customers may choose to migrate to established
* Germany may see more concentration of trading activities
By Vera Eckert
FRANKFURT, Oct 29 EU rules to toughen laws
against market abuses in gas and power trading are likely to
drive operators to exchanges and away from the bigger
over-the-counter markets (OTC), energy and financial consultancy
Baringa said on Monday.
"The intention of the new rules is to shrink the OTC market
and make it more transparent and accountable," said Susanne
Funke, head of regulatory affairs at the consultancy, on the
sidelines of a conference.
"This means that OTC volumes will increasingly migrate to
exchanges," she said, citing the exchanges' existing
transparency functions and clearing provisions.
Experts say it is hard to gauge the size of OTC trading in
Europe's power and gas markets, which have developed over the
past decade in the wake of sector liberalisation.
But its scale dwarfs trade on official bourses.
OTC attracts 80 to 90 percent of all trades taking place
because it has allowed participants to trade informally and to
avoid bourses' fees.
OTC German electricity, the biggest power market in Europe
which sets price benchmarks, is estimated at 5,000 terawatt
hours (TWh) a year or five times actual consumption, officials
of Paris energy bourse Epex Spot said at a briefing last week.
German OTC gas trading probably grew to over 2,000 TWh last
year, which put it in third position in Europe after Britain and
the Netherlands, according to a recent
The EU late last year drew up the new rules - called the
Regulation on Energy Market Integrity and Transparency (Remit).
Currently, markets are in a phase-in period to introduce
what they need for Remit to function in 2014 and
Utility firms will need more personnel and technology to
comply with the new transparency rules which delegates heard
could easily cost sector leaders millions of euros per year.
Thus, Remit will likely benefit exchanges such as power
bourse EEX, because their reporting instruments are acceptable
to the regulators and because they have established central
This may make trading cheaper even if exchange fees have to
be factored in, delegates said.
Germany has also built up two central gas trading hubs, NCG
and Gas Pool.
In addition to trade details, utility companies must
disclose the timing of power station outages or gas field
maintenances and pipeline bottlenecks, as this is considered
sensitive detail for pricing.
German companies that lead in volunteering information about
market-sensitive disruption include E.ON, RWE
Many smaller firms - Germany has a landscape of hundreds of
local utilities with or without wholesale market activities -
were slow to integrate their trading with compliance management,
said Maik Neubauer, partner at Baringa.
"That way, they could be vulnerable if they were confronted
with any suspicions of wrongdoing," he said.
(Editing by William Hardy)