THE IMPACT OF CHANGE IN FINANCIAL POWER TRADING

Transcription

1 THE IMPACT OF CHANGE IN FINANCIAL POWER TRADING DANISH ENERGY DAY COPENHAGEN 2015 Bjørn Sibbern Global Head Nasdaq Commodities and President Nasdaq Copenhagen NASDAQ OMX

2 NASDAQ: WHO WE ARE NASDAQ TICKER SYMBOL: NDAQ MEMBER OF S&P 500 Over the past decade, Nasdaq has transformed its business from a U.S. based equities exchange to a diversified global financial technology company. Today, the company is firmly established as a leading provider of trading, exchange technology, information and public company services across six continents. OUR MISSION > We provide market leading technology solutions and intelligence to help businesses and investors succeed in today s global capital markets. OUR VISION > We connect business, capital and ideas to advance today s global economies. NASDAQ OMX IGNITE YOUR AMBITION 2

3 MAR E M I R MIFID MIFID II REMIT

4 EMIR BANK GUARANTEES STATUS / GOING FORWARD 4

5 Bank Guarantees on the Nordic/Baltic Power Market

6 ACTIONS ON BANK GUARANTEES LOBBY PROCESS OBJECTIVE: SECURE THAT NON FINANCIAL COUNTERPARTIES CAN USE NON FULLY BACKED BANK GUARANTEES BEYOND MARCH 2016 Where are we: Support from 7 Nordic and Baltic Governments (have written a letter to the Commission) Nasdaq has together with other parties (EFET, Eurelectric, UK Energy, CEER, EACH) included bank guarantees in the EMIR review consultation where we have asked for a prolonging of the exception when included in the review. The goal is a permanent solution Support from The Council of European Energy regulators (CEER) that also responded to the EMIR review consultation. CEER represents 33 European national energy regulators including the EU 28 Member States. Nordic FSAs written a supporting letter to ESMA in August 2015 Going forward Must stay close to the Nordic Ministries to keep up the political pressure. Stay close to other European countries where we have support and try to get support from additional European countries (Portugal, Spain and Poland have confirmed support). Keep up the pressure towards the Commission, MEPs and ESMA. The commission is now reviewing the EMIR submissions. When will the EMIR review report be sent to the European Parliament and council? 6

7 ACTIONS ON BANK GUARANTEES PLAN B Work in parallel with good solutions for our members to reduce negative effects from the loss of bank guarantees, e.g. GCM banks Listing Nordic electricity futures Q3 15 Will DS Futures be preferred by hedgers due to accounting principles (IFRS)? And/or retail needs? DS Futures will not be taken out for now Dual listing of DS futures and futures & avoid fragmentation Do we need to list futures in order to attract more financial players to the market? Nasdaq and our members will cooperate together on these issues to create the best solutions 7

8 MiFID II IMPACT ON COMMODITIES

9 WHAT IS CHANGING? Commodities Market Structure Transparancy Narrower exemption from auhorization Broader range of commodities transactions in scope Knock on effects on scope of EMIR, MAR and REMIT Position limits, management, reporting and disclosure Oliver Wyman New trading venue category: Orginized Trading Facility (OTF) Systematic internaliser category extended to non equities, including commodities Mandatory trading of liquid, clearable derivatives on orginazed venues New rules for venues and CCPs, recognition of non EU venues Harmonized EU regime for access to trading venues, CCPs and indexes Controls on algoritmic/high frequency trading New transparancy requirements for nonequities, including commodities Increased equity market transparancy requirements Consolidated tape for equities and from 2019 non equities Extension of Transaction reporting 9

10 MARKET IMPACT 1 0

11 CLEARED VOLUMES NORDIC POWER Cleared volumes Nordic Power Yearly (TWh) Low volatility Low prices Oversupply Funds and banks exiting Regulations Political influence On Orderbook Off Orderbook 11

12 BANKS RESTRUCTURING OR PULLING OUT OF COMMODITIES BUT FOR HOW LONG? 12

13 TERMINATED «FUNDS» Adapto Advisors Alfakraft Interkraft Energy Fund NK Funds Electris Energy Fund Navitas Power Fund Elexir (MK) Norden Absolute Energy Orkla Energy Fund Plenum Power Surge European Energy Fund NEF Nordic Power index Kortlongs Majority of their investments were allocated to Nordic Power. Earlier in periods with low volatility, positions were increased in the Nordic power market for the investment companies to meet return targets. Today we see increased competition from other commodities/ asset classes in periods were volatility is hovering on low levels.

14 WHAT HAPPENED TO THE OPTIONS VOLUME? The low volatility combined with several banks and funds out of the market have had a big impact on Option and Delta volumes. Existing power funds have not delivered good enough returns to get attention from potential investors. Less use of options in hedging. Historically options represented between 15 20% of total cleared volumes, in %.

15 OPEN INTEREST TWH 500 Open Interest Nordic Power Monthly (TWh) Open Interest MW ENOYR ENOYR ENOYR ENOYR ENOYR Series1 15

16 MARKET SHARE PER COUNTRY Non Nordic members market share in 2007 = 17% / 2014= 33% 16

17 MARKET SHARE PER PRODUCT CATEGORY 100% Percentages of Cleared volumes for Different Nordic Power Product Categories Yearly (TWh) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Year Week Quarter Month Day 17

18 MARKET SHARE PER CUSTOMER CATEGORY 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 TWh On Orderbook traded Market Share per Customer Category Monthly Turnover Credit Institution Finance/Fund Fundamental

19 FOCUS AREAS EUROPE Bank Guarantees Continued support for both Direct and GCM Membership models Product structure: Future vs Forwards (DS Futures) Distribution Onboard GCM Financial members outside the Nordics often prefer GCM New ISV Product development Asian options Average weighted monthly futures Nordic power futures Renewable production index New Markets Continue our success on German Power More short term contracts? Capital efficiency Reduced no. of lead days Inter Commodity Spread Credit (ICSC) on EPADs 19

20 GLOBAL STRATEGY AND GROWTH APPROACH Nasdaq Commodities strategy is to expand into a global unit Be a leading Global Commodity exchange and clearing house Our geographical extension include NFX (Nasdaq Futures, Inc.) in the US, Asian Strategy for Freight and Steel, the German Power initiative and soon other European Power markets Continue to build a global product portfolio Advantage of Nasdaq s global brand Increase distribution through GCMs / FCMs 20 GTMS Strategy 2015

21 THE NASDAQ MARKET MODEL GLOBAL PRODUCTS - SCANDINAVIAN EXCHANGE AND CCP Global Clients Norwegian Exchange Swedish Clearinghouse Europe US The Nasdaq business model is also used by the other competing exchanges and ccps Asia 21 21

22 Nasdaq Commodities Product offering EXISTING PRODUCTS FUTURE DEVELOPMENTS ELECTRICITY Nordic German UK Dutch El Cert NFX: US Futures of Electricity, Oil, Nat Gas EMISSIONS EUA EUAA CER GAS UK Gas Spark spreads FREIGHT Dry Tankers Fuel Oil LPG Iron ore Coal SEAFOOD Salmon Nordic Futures Continental energy markets Renewables Steel 22 ants

23 NASDAQ FUTURES NFX PRODUCT SCOPE Energy Trading is highly concentrated in a limited number of contracts (key benchmarks). Nasdaq Futures (NFX) are targeting the key Energy benchmarks in oil, U.S. Natural Gas, and U.S. Power The oil products includes the critical distillates needed to support the trading of the whole barrel Due to the power production mix in the U.S., there is a tight trading relationship between power and natural gas and our initial product suite will meet the hedging needs of the vast majority of the market participants We intend to expand the product suite beyond the initial scope within the first 12 months based on customer feedback and demand Benchmark Oil Complex: 1. WTI Crude Oil (CME) 1. Futures and options 2. Brent Crude Oil (ICE) 1. Futures and options 3. Fuels Heating & Gasoil, Gasoline 1. Futures Benchmark U.S. Natural Gas: 1. Henry Hub Futures and Options 2. Natural Gas Basis to Henry Hub Futures Benchmark U.S. Electricity (Power): 1. All major Independent System Operators (grid operators) including: 1. Pennsylvania/Jersey/Maryland (PJM), New England, Mid West, California 23