Info Workshop Central European Gas Hub. General Presentation of ECC

Transcription

1 Info Workshop Central European Gas Hub General Presentation of ECC Vienna, 6 th November 2012

2 AGENDA 1. About ECC 2. Clearing Process - Spot market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 2

3 About ECC History st September: Spin-off of the EEX clearing department to the European Commodity Clearing AG Launch of clearing services for Dutch Energy Derivatives Exchange (now: APX-ENDEX) Launch of clearing services for French Energy Exchange Powernext Start of clearing services for newly launched energy exchanges: EPEX Spot SE and CEGH Gas Exchange of Vienna Stock Exchange 1 st October: Integration of Luxembourg-based subsidiary into delivery chain; Establishment of ECC Lux as agent for deliveries Start of clearing services (Spot) for Hungarian Power Exchange HUPX. Launch of CEGH Derivatives Market. European Commodity Clearing Luxembourg S.à.r.l In July 2011 launch of Futures Market for Hungarian Power Exchange HUPX. Introduction of new SPAN based X-Margining. VERTRAULICH / CONFIDENTIAL 3

4 About ECC Legal status 56,14 % ECC AG is a 98.5% subsidiary of EEX AG / 1.5% owned by Powernext / 1 share owned by APX-ENDEX EEX AG is part of Group Deutsche Börse (through EUREX AG; % holding of EEX AG) ECC holds a bank license from the German regulator BAFin covering the role of a central counterparty according to German bank act ECC is recognized as a designated payment system according Article 10 of Settlement Finality Directive 98/26/EC. VERTRAULICH / CONFIDENTIAL 4

5 About ECC Network of Partners 15 Clearing Members 308 Non-Clearing Members 25 countries 5

6 About ECC Clearing Member for CEGH Spot Market 6

7 About ECC Cleared Products Dutch (TTF) Natural Gas Futures Belgian Power Futures Dutch Power Futures UK Power Futures French Natural Gas Spot & Derivatives (GRTgaz PEG Nord/ PEG Sud, TIGF) German Power Spot French Power Spot Austrian Power Spot Swiss Power Spot Coal Futures API 4 (RB, South Africa) 1 Emission Futures (EUA, CER, ERU, EUAA) Phelix Futures & Options French Financial Power Futures German Natural Gas Futures (GPL, NCG) Coal Futures 1 (ARA, RB) German Natural Gas Spot Contracts (GPL, NCG) Dutch Natural Gas Spot Contracts (TTF) Emission Spot Contracts (EUA, EUAA) Hungarian Power (Spot & Derivatives) 1 API 2 and API 4 are used under license from Argus Media Limited/The McCloskey Group Limited. All copyrights and database rights in the API 2 and API 4 indices belong exclusively to Argus Media Limited/The McCloskey Group Limited. All rights reserved. Austrian Gas (Spot & Derivatives) 7

8 About ECC Affiliated transmission system operators and registries 8

9 AGENDA 1. About ECC 2. Clearing Process - Spot market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 9

10 Clearing Process Services at a glance Clearing house Clearing = Assumption of counterparty risk Central Counterparty Clearing Members Standard products Close-out netting 1 Margin system 2 Payment & delivery netting 1 Standard processes, stp 3 Central bank funds Delivery through TSO or registries Reporting 24/7 helpdesk Settlement = Settlement of trades (delivery & payment) 1 Combination of all individual receivables and liabilities into one net position 2 System for covering the risks for the market participants 3 straight through processing 10

11 Clearing Process Structure of Energy Clearing at ECC Trading Participant 1 (Business) Transaction 3 Collection of securities 4 Exchange License Clearing License Balancing Group Agreement (Clearing Member) 3 2 (Business) Takeover 4 Nomination/Delivery 11 11

12 Clearing Process Financial Settlement All payments are effected at fixed payment times and according to a currency specific payment calendar. In general financial settlement takes place on every ECC business day (Monday to Friday, except TARGET2 holidays). Payments in EUR are processed on TARGET2 operating days at around 8 a.m. CET before market opening. 12

13 Clearing Process Financial Settlement - VAT / Reverse Charge NCM 1 guarantees for guarantees for CM 1 CM 2 payment delivery in money / paying agent payment payment payment and acceptance in money / paying agent payment NCM 2 delivery ECC Lux delivery delivery ECC Lux delivery Payment of delivery fees Payment for commodity Payment of delivery fees The VAT treatment of natural gas spot market trades and the respective deliveries depend on the residency of the recipient. The VAT related delivery point is located in the country of the recipient. From a VAT point of view transaction based fees are treated the same way as the underlying delivery. Due to the Reverse Charge procedure ECC only creates invoices with VAT for entities based in Luxemburg. 13

14 Clearing Process Physical Settlement The Luxembourg-based ECC subsidiary European Commodity Clearing Luxembourg S.à.r.l. steps into the delivery chain as an additional contractual party. As central counterpart, ECC assumes the role of a market participant in the grid of the Transmission System Operators. Physical Settlement is provided by ECC Lux which has concluded a balancing area agreement with all major European TSOs. Trading participants opting for physical settlement need to conclude a balancing area agreement with the relevant TSO. Alternatively, a third-party account permitting access to a balancing area can be used

15 Clearing Process Invoicing ECC creates monthly invoices at the latest until the 5th business day of the following month. ECC issues invoices for Clearing Fees and commodity amounts. The invoices are sent to the customers by post. An invoice copy (Invoice Report Summary IRS) and a detailed report (Invoice Report Detail IRD) are available via and/or ftp server and can be subscribed to in the ECC Member Area. Fees are debited on the 10th business day of the following month via the TARGET2 account of the participant's clearing bank and are reported via ECC s standard payment reports. 15

16 Clearing Process Process overview 24x7 Processing of trade data and nomination Processing of transactions from partner exchanges (every 5 minutes) 08:00 Cash Settlement (on TARGET2 days only) 08:00-09:00 Start derivatives trading Dependent on product and exchange 11:00 Nomination of Futures positions (Power and Natural Gas) 16:00 Booking Cut (on TARGET2 days only) Creation of payment transactions for the following TARGET2 day Distribution of Payment Reports approx. 16:45 (for deliveries) Distribution of Spot Trade Reports approx. 16:45 18:00-18:45 End of day processing Final Nomination for Natural Gas 19:00 Publication of Settlement-Prices Dependent on product and exchange from 21:00 End of month Calculation of Variation Margin and other Margin-Requirements Invoicing Creation and distribution of invoices until the 5th working day of the new month at the latest Distribution of Invoice Reports Direct Charge of Clearing Fees through Clearing-Member 16 16

17 AGENDA 1. About ECC 2. Clearing Process - Spot market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 17

18 Connectivity, Software and Reporting Clearing Systems Trading Spot Market Trading System of of CEGH Trade transfer from from CEGH to ECC Clearing Spot Market Settlement System (SMSS) ECC Member Area Reporting ECC Reports delivery, payment, invoicing 18

19 Connectivity, Software and Reporting Spot market reports Spot market reports are offered as Detail Reports or as Summary Reports. Detail Reports contain all individual transactions in accordance with the filter criteria of the report (e.g. all transactions of the respective trading day in a Spot Trade Report). Report Spot Trade Report Payment Report Delivery Report Invoice Report Description contains all Spot Market transactions (Day-Ahead and Intraday) per trading day; (daily distribution) contains all Spot Market transactions (Day-Ahead and Intraday) per settlement day; (distribution each TARGET2 day) contains all Spot Market transactions as well as delivery instructions from expired future positions per delivery day; (daily distribution) contains all Spot and Derivatives Market transactions as well as delivery instructions from expired futures and options positions which have fallen due per invoice (monthly distribution) Additional data could be requested through the ECC Member Area real-time update up to 15 min. delay. 19

20 Connectivity, Software and Reporting Reporting subscription for the Spot market Reports can be subscribed / unsubscribed by the Member in SMSS. Changes become effective immediately. Reports can be selected by: Report type: detailed and aggregated Report frequency: daily / monthly Report format: XML / PDF Distribution: , SFTPserver Reports are available on ECC s ftp server or via download link send to the mailbox of each user. Overview Report Subscriptions Subscription of additional reports 20 20

21 AGENDA 1. About ECC 2. Clearing Process - Spot market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 21

22 Risk Management and Spot Margining Risk Management at ECC Security in Risk Management As the central counterparty, ECC is positioned between the buyer and the seller in every trading transaction. In the event of a default of a trading participant ECC assumes the replacement risk (counterparty risk) and guarantees payment and delivery under the transactions (settlement risk). ECC uses an internationally accepted risk management system comprising various security levels for collateralising the positions. Improvement General trend towards the introduction of more sophisticated risk management methods Further improvements for Spot market margining have been successfully implemented in summer

23 Risk Management and Spot Margining Lines of Defence ECC has final liability. (22 m ) All CM have joint liability through Clearing Fund (87 m ) ECC CF-Contribution (3 m ) CMs Margins (1.310 m ) ECC equity Replenishment clearing fund Clearing fund contribution - rest ECC clearing fund contribution CM clearing fund contribution Margin requirement Variation Margin/Intraday Cashcall CM is liable for NCM Minimum requirement for CM 23

24 AGENDA 1. About ECC 2. Clearing Process - Derivatives market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 24

25 Membership Requirements Trilateral Relationship between CM NCM ECC Non-Clearing Members (NCM): are trading participants that only need to fulfill basic clearing requirements sign a trilateral agreement between the NCM, Clearing Member (CM) and ECC to provide for the necessary infrastructure 25

26 Membership Requirements Non-Clearing Member Requirements Application Forms NCM Forms NCM01 APPLICATION FOR ADMISSION AS NON-CLEARING MEMBER NCM02 NCM AGREEMENT NCM04 APPLICATION FOR SETUP/ MODIFICATION / DELETION OF USER-IDs KNOW YOUR CUSTOMER QUESTIONNAIRE TRADINGPARTICIPANT FORMS TP 15 a-b for CEGH VAT Assessement TP07 T06 SETUP FOR COMMON REPORT ENGINE VERTRAULICH / CONFIDENTIAL 26

27 Membership Requirements Non-Clearing Member Requirements Documents Documents for ECC Audited Annual Report or Business Plan Audited Annual Report of the main shareholder Audited Annual Report of the ultimate parent Company House Act (Proof of Registration) Organizational Chart (Company Structure) Proof of signatures Documents for CM Audited Annual Reports (last 2-3 years) Organizational Chart (Company Structure) Proof of guarantee of parent company Documents can be submitted centrally at CEGH. After proof of correctness and completeness the documents will be forwarded to ECC and CM in paralell. VERTRAULICH / CONFIDENTIAL 27 27

28 Membership Requirements KYC Process & Scoring Background The emission allowances market within the EU was hit heavily by tax evasion schemes (VAT fraud) Markets and participants where tax evasion schemes have been detected suffered reputational damages and are facing legal charges. Problem was reduced by introducing reverse charge or by eliminating VAT on emission allowance sales; However it is expected that fraudsters now target the power and/or gas market, ECC s major markets Measures ECC Risk Controlling & Compliance together with PwC and EEX Admission has improved the Know-Your-Customer (KYC) policy and developed a scoring methodology to identify potential fraudsters The scoring methodology incorporates the recommendations by the German Tax Authorities and has been verified by independent external auditors Workshops were held with main market participants to incorporate their feedback 28 28

29 Membership Requirements KYC Process Fast Track Admission Standard Decision Committee If the applicant itself or the parent company (majority holding) of the applying company fulfills certain criteria a - Fast Track Admission (FTA) - without detailed scoring can be applied after agreement/ approval by ECC admission. Exchange listed/well known energy provider/producer (Stadtwerke) Financial Institutions (with external investment grade rating) Already admitted/ authorised participants (ECC or partner exchanges) Exchange sends out admission package - including ECC KYC questionnaire - to applicant. Exchange performs - completeness check - regarding customers ECC KYC and related documents before forwarding it to ECC to avoid unnecessary queries. Exchange prepares score and communicates result to ECC. ECC reviews score and is entitled to raise dissent if there are sufficient concerns regarding the applicant. If score is in a critical range ECC might request additional information (i.e. additional to the information already submitted in the KYC). This might be requested by ECC from Exchange or from customer directly. If the score is still in a critical range the case is handed over to ECC Decision Committee that decides about admission request. ECC communicates the result to the Exchange. 29

30 AGENDA 1. About ECC 2. Clearing Process - Spot market 3. Connectivity, Software and Reporting 4. Risk Management and Spot Margining 5. Membership Requirements 6. Rules and Regulations 30

31 Rules and Regulations Legal Framework aligned with Market requirements High legal security Uniform clearing conditions for all markets in accordance with the international standards for central counterparties. Clearing members are not integrated in physical settlement; subsidiary in Luxembourg steps into physical delivery => Reverse Charge Mechanism Outlook EMIR 1 /Basel III creates new requirements for separate booking (segregation) and transferability of customer positions in the event of the default of a clearing member (portability) ECC has already implemented the expected requirements: Back-up clearer and faster change of clearers permit the transfer of the position at the request of a trading participant 1 European Market Infrastructure Regulation VERTRAULICH / CONFIDENTIAL 31

32 Rules and Regulations Contractual relationships Spot Market (2) and (1) Clearing Conditions CM guarantees for delivery in money / paying agent guarantees for payment and acceptance in money / paying agent CM NCM payment payment payment payment NCM delivery ECC Lux delivery delivery ECC Lux delivery delivery payment ECC guarantees the Trading Participants the fulfilment of these transactions 32 32

33 Rules and Regulations Contractual relationships Spot Market legal background (2) Clearing Conditions Spot market transactions are concluded between ECC and ECC Lux and between ECC Lux and the Trading Participant at the same time (1) Clearing Conditions Physical delivery of transactions is exclusively provided through ECC s subsidiary ECC Lux. Trading Participants exclusively fulfil their delivery or purchase obligations arising from spot market transactions towards ECC Lux. ECC guarantees the Trading Participants the physical fulfilment of these transactions by ECC Lux, (1). Payments to NCM are guaranteed by ECC until payment is affected to the CM (payment agent) of the NCM, see (2)

34 Contacts Regine Scholz Clearing & Settlement Relationship Management Phone: