consolidation of the various business ap plications. In addition, we aim to exploit potential synergies in the functional areas of distribution, product portfolio and IT throughout the Group.
Special focus is placed on the constant im provement of the systems and processes for the physical settlement of power and gas transactions within ECC. The growing impor tance of shortterm trading is accompanied by the requirement to have infrastructures with a correspondingly high availability. ECC makes investments in this field on a perma nent basis and will e.g. facilitate the reduc tion of the entire lead time until delivery on local markets from at present 45 minutes to 30 minutes in future (on the basis of a renewed settlement infrastructure for the EPEX SPOT power intraday market in 2015).
RISKS
The most important risks for developing business within EEX Group originate from the following fields:
› Intensified regulation within the finance and energy sector
› Market design of the power market › Intensification of competition
INTENSIFIED REGULATION WITHIN THE FINANCE AND ENERGY SECTOR AS THE CENTRAL RISK FOR EEX
The Management Board sees the definition of financial instruments within the European MiFID II regulatory directive as the biggest risk for EEX. Certain physical derivatives on gas and power which are traded over the
exchange are not classified as financial in struments. This means that trading in such derivatives is not regulated via MiFID II. Moreover, EMIR also uses the definition of financial instruments provided in MiFID so that these overthecounter physical deriva tives are also not regulated by EMIR. As a re sult, trading in such physical derivatives has significant regulatory advantages as against the products offered by EEX (no need to ob tain a financial services licence along with the requirement of providing correspond ing equity, no position limits, no reporting requirements and no mandatory clearing according to EMIR, etc.). These less regulated products can only be traded on platforms referred to as “Organised Trading Facilities” (OTFs). As a result, OTFs have a regulatory advantage as regards trading in physical power and gas derivatives, and there is the risk of a massive shift in volumes away from the exchange and towards the OTFs. This could lead to general restraint on the part of the market participants in trading in EEX products. Moreover, a general reduction in trading activities is also conceivable. Vol umes which are registered for clearing using the trade registration channel are also sub ject to this risk since derivatives traded over the counter are converted into financial in struments via the trade registration process. Moreover, the possible introduction of a fi nancial transaction tax in Germany entails significant risks for EEX. There are plans to charge a flatrate tax on the nominal value of every commodity derivatives transaction concluded in Germany. On account of the comparatively high nominal values (e.g. of a Phelix year future) the financial transaction
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Scheduled: A reduction of the lead time on the EPEX SPOT power intraday market
Consolidated Management Report
Foreword Consolidated Notes
Consolidated Financial Statement
Group perspective, outlook report, opportunities and risks
Due to national solo efforts, the potential of the market-based European integration cannot be fully developed
tax might lead to a reduction in the trading interest. However, at present we cannot tell whether energy products will actually be de fined as commodity derivatives transactions. Even if the legislative projects regulating the energy and financial market will not take full legal effect or will not be finally applied in 2015, the projects can have an indirect ef fect on the business of EEX Group if market players anticipate certain developments and take a “waitandsee” approach.
AMENDMENTS OF THE MARKET DESIGN: NEGATIVE IMPACT ON THE ATTRACTIVENESS OF EXCHANGE TRADING
Moreover, there is a high risk of possible structural changes in energy trading which might significantly impair the business model and lead to the nonfulfilment of the growth aims in the field of power as the mainstay of revenue. The debate regarding market design which has begun in the con text of the energy turnaround in the spring of 2011 (and has recently increased in in tensity) is decisive for the power market. Discussions regarding interventions char acterised by “remoteness from the market”, such as the introduction of capacity markets or smaller price zones, can strengthen the trading participants’ uncertainty and lead to a decline in trading activities on exchanges, in particular in the long run. Specifically, a reliable energy policy framework provid ing longterm planning security is absent in this respect. Instead, the power market is increasingly facing individual regulatory measures, while competitive components
are being restricted. Such interventions in the market design can jeopardise the role of marketbased exchange prices, such as the Phelix, as reference prices. Moreover, their benchmark function would also be jeopardised if the integration of renewable energies in the market cannot be improved and if incentives cannot be created to make sure that the feedin of renewable energies is based on market prices and, hence, on the actual demand. Finally, increasing numbers of national “solo” efforts have meant that the potential of the marketbased European integration cannot be fully developed. There is even the risk that the attainments of liber alisation – and, in particular, the integration of the European power markets – might be called into question and negatively affected in the long term.
INTENSIFICATION OF COMPETITION
The increasing competition and price pres sure forms a further significant risk. In the future, a further intensification of the com petition – possibly in the form of price wars, in particular on the power derivatives mar ket – and an increasing consolidation and reduction in the number of exchanges in the energy sector in Europe have to be ex pected. In addition, the entry of USAmeri can derivatives market exchanges into the EEX markets is foreseeable. For example, in 2014 ICE launched a derivatives contract for the German power derivatives market – fol lowing its takeover of the natural gas and power derivatives business of the Dutch APX / ENDEX energy exchange in 2013. Further more, NASDAQ has also expanded its offer