Regulatory projects and, in particular, the current uncertainty regarding their exact form influence the trading participants’ activities
Furthermore, the introduction of a financial transaction tax in individual EU member states may also have a lastingly negative im pact on derivatives trading and lead to a shift in trading to trading platforms in countries unaffected by such a tax. The question as to whether a financial transaction tax shall be introduced and whether it will include de rivatives is still the subject of political discussions.
Changes to the power market design as a re sult of political or regulatory decisions can have an impact on the importance of the exchange price signal and, as a result, also lead to a decline in liquidity on the energy markets. This includes, in particular, the need for establishing a capacity mechanism
to finance the provision of conventional pow er plants, in addition to the existing power market (energyonly market). Moreover, the reduction of the market area sizes due to grid bottlenecks and insufficient grid expansion (which is currently being discussed) would also have a negative impact on the power trading markets.
The regulatory projects and, in particular, the current uncertainty regarding their ex act form influence the trading participants’ activities and sometimes lead to delayed decisions and lower trading activities. The specific effects of the individual regulatory measures on EEX are explained in detail un der “Risks” in chapter 8 below.
812
TWh
of the German power derivatives market volume accounted for exchange trading
In spite of the difficult market environment, the profound structural changes in the pow er market and the continuing uncertainty on the market because of the Ukraine and euro crises, as well as unresolved questions of regulation, EEX successfully continued its growth strategy in the 2014 financial year. This growth was primarily driven by the natural gas spot markets, which achieved threedigit growth rates. Moreover, the pow er markets and clearing cooperations also generated significant growth. The previous year’s forecasts were partly significantly ex ceeded in this respect.
POWER
EEX further expanded its position in conti nental European power trading and in the cleared OTC segment in 2014 and, moreover, it also succeeded in enhancing its position as regards the competition, in particular in trading on the German power market. In addition to other European energy exchan ges, the principal competitors of EEX Group include, in particular, brokers and non regu lated trading platforms. On the German power derivatives market (which declined overall by 13 percent), EEX was able to further increase its trading volume (by 10 percent). As a result, the market share of the trading volumes settled through EEX and ECC in the overall market increased to, on average, 25 percent from an average of 20 percent in 2013. This is essentially due to the improved quality of the order book as a result of closer spreads (i.e. the spread between the bid and ask prices offered in the order book) as well as EEX’s improved technical infrastructure and improved connectivity. In combination with the further development of the services offered by EEX and ECC, the higher basic li quidity resulting from this led to these gains in market share. Nonetheless, the majority
of trades are still concluded off the exchange and settled bilaterally between the trading participants.
The transaction fees for trading, clearing and settlement on the power spot and de rivatives markets still form the main source of revenue within EEX Group. In 2014, this business field accounted for 64 percent of the sales revenue (2013: 64 percent).
POWER DERIVATIVES MARKET
Compared with the previous year, the trad ing volumes on the EEX power derivatives market increased significantly by 24 percent. In December, a new alltime monthly record was reached at, in total, 205.1 TWh. In addi tion to further developments of the technical infrastructure, it was, first and foremost, the improved quality of the order book (closer spreads) as well as the increased relevance of credit risks for trading participants and, as a result, the need for trades to be settled through the exchange or a central clearing house which contributed to this. Overall, the power derivatives market within EEX Group accounted for a revenue contribution of 49 percent (2013: 50 percent).
Significant growth on the existing markets in 2014
On the German power derivatives market, exchange trading accounted for 812 TWh in 2014 (2013: 669 TWh). This corresponds to a 21percent increase compared to the previous year. Trade registration accounted for 557 TWh (2013: 575 TWh) thereof. This corresponds to a decline of 3 percent as against the previous year. As a result, the share of the transactions traded through the exchange in the total volume increased from 54 to 59 percent. This underlines the in creasing attractiveness of EEX order book for
3 DEVELOPMENT OF BUSINESS
Consolidated Management Report Development of business
Foreword Consolidated Notes
Consolidated Financial Statement Growing Together The Company
83
TWh
Trading volumes on the French power derivatives market increased significantly
the German power derivatives market. This development of trading volumes and liquid ity is positive and exceeded expectations by far. At the same time, the share of the Ger man power derivatives market in the total trading volume of the EEX power derivatives market declined from 98 percent in 2013 to 87 percent in 2014. This is due to the strong growth of the other market areas offered by EEX and, as a result, confirms EEX’s success ful diversification strategy.
The volume traded on the French power derivatives market in France increased sig nificantly, in particular during the second half of 2014, and totalled 83 TWh in that year. This means the trading volume increased by 315 percent compared to 2013 and, as a result, it also significantly exceeded the previous record in 2011. This development is based, in particular, on an amendment of the NOME Act (which requires the sale of generated volumes of nuclear power at a regulated price). An increase in this regu lated price in 2014 led to a corresponding decline in power sales at regulated charges. As a result, exchange and trade registration transactions have recently played a more im portant role again because of their increased competitiveness. Moreover, the volatility of prices on the French derivatives market and, as a result, the demand for risk hedg ing transactions has increased. In the 2014 financial year, French futures accounted for a share of 5 percent in the total trading volume on the EEX power derivatives market. EEX successfully establishes a position in the Italian market
In addition to the German and French power derivatives market, trading in Italian pow er products, in particular, generated an ex traordinarily positive development in 2014.
In addition to the existing possibility of registering overthecounter transactions for clearing, exchange trading in Italian power futures was launched in April 2014. There after, EEX evolved into the biggest exchange platform for trading in futures on Italian power within a very short time. This devel opment was also, and in particular, boost ed by the establishment of a sales office in Milan. In addition to the attractive product offering and the local sales structure, the increased interest in hedging trading par ticipants’ default risks on the Italian market (as well as differences in the price structure compared with other European reference markets) was decisive for the positive devel opment of trading volumes. In addition, EEX was also able to use competitive advantages with regard to price setting and the clearing offering within the Italian market. Overall, a trading volume of 116 TWh was recorded in 2014, which corresponds to a share of 7 percent in the total volume of the EEX power derivatives market. In the previous year, a volume of 1.1 TWh was settled following the launch in October 2013.
Growth in further market areas
Physical futures on Dutch and Belgian pow er, which were introduced in 2013, also generated significant growth in 2014, albeit at a continuing low level. Overall, a trad ing volume of 1 TWh was reached in 2014 (2013: 0.1 TWh).
The initiative for introducing products for trade registration (i.e. the offer for the regis tration of overthecounter transactions on the exchange), which had been launched in 2012, was continued in 2014. For example, EEX added financially settled power deriva tives contracts for the Spanish (in March 2014) and the Greek (in December 2014)
15
%
Revenue contribution made by clearing the spot market transactions of EPEX SPOT