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Intercontinental Exchange Plans to Launch London Gas Market – WSJ

The European Union has agreed to impose an emergency limit on gas prices.
The European Union has agreed to impose an emergency limit on gas prices. (Krisztian Bocsi/Bloomberg)

Joe Wallace,WSJ

EnergiesNet.com 01 28 2023

Intercontinental Exchange plans to set up a new market for natural gas in London to give traders a way to bypass a European Union cap on prices.

The EU agreed in December to impose an emergency limit on gas prices, which rocketed after the invasion of Ukraine. The ceiling would cap gas derivatives if prices shoot above certain levels. The EU can trigger it from Feb. 15.

Besides owning the New York Stock Exchange, ICE runs the main derivatives market for European gas, which is called TTF and is based in the Netherlands. It has said the cap will endanger financial stability.

The exchange operator said Friday it would:

  • Launch a parallel market for TTF futures and options outside the EU, in London, if it gets regulatory approval. The cap wouldn’t apply in this market.
  • Apply the cap at its Dutch exchange. Here, ICE will forbid traders from submitting orders above the cap if it is triggered by the EU.
  • Publish settlement prices at the end of the day that reflect the market value of gas, even in the Netherlands. These prices could rise above the cap.

The cap was subject to torturous discussions between advocates such as France and Italy, and Germany, which initially opposed the plan.

graph wholesale natural-gas prices in northern europe
Source: FactSet

Since the December agreement, gas prices have plunged below the level at which they could trigger the cap. Mild weather has helped to push TTF prices down by a third over the past month, to around 53 euros a megawatt-hour.

TTF would have to trade above 180 euros a megawatt-hour for three consecutive working days for the cap to take effect.

wsj.com 01 28 2023

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