In 2015, the energy markets were again shaped by discussions regarding adjust ments of existing and the introduction of new regulatory measures. The most impor tant projects for energy trading are or were:
› The process for designing the revised EU Markets in Financial Instruments Directive (abbreviated: MiFIR II) and the appertaining EU MiFIR regulation › The development of an EU regulation
with binding rules for the preparation of indices which are used as reference values for market players (Benchmark Regulation) in order to avoid conflicts of interest and abuse
› The discussion of the power market design with a view to the further integration of renewable energies, the flexibilisation of the market, and safeguarding the security of supply › Intense discussion regarding the division
of the German-Austrian price zone into several smaller market areas as a result of network congestion and the insuffi cient grid expansion
› Institutionalisation of the role of ex - changes in market coupling by means of a guideline for Capacity Allocation and Congestion Management (CACM)
The revised EU Markets in Financial Instru ments Directive (MiFID II) significantly changes the rules for trading in commodity derivatives. The general exception for com modity derivatives, which has applied so far, was cancelled and replaced by an “ancillary activity exemption”. As a result, only trading participants with relatively low trading ac- tivities will be exempt from the MiFID II requirements. This could lead to a situation in which a number of energy traders might be
forced to reduce their trading activities ac cordingly. In addition to this, certain trading activities which are carried out at an Organ ised Trading Facility (OTF) – a new trading plat form category introduced under MiFID II – will be exempt from MiFID II. Compared with this, similar transactions which are con - cluded at a regulated market or on an ex change are part of the scope of application of MiFID II. It cannot be ruled out that such un equal reg ulatory treatment might entail shifts in vol umes from regulated markets to OTFs.
In the framework of the Benchmark Regu- lation, a proposed regulation by the EU Com mission suggests that the preparation and administration of indices classified as bench marks should be made more transparent and conflicts of interest should be avoided. It has to be assumed that the commodity bench marks will be part of the directive’s scope of application. However, the exact design of these and, as a result, all their effects on the business of EEX Group will only be estab lished with the Level-II legislation over the coming years.
Adjustments to the power market design on account of political or regulatory decisions can both influence the significance of the exchange price signal and, as a result, lead to a reduction in liquidity on the energy markets. Moreover, the discussion of potential adjust ments leads to uncertainty among the trading participants regarding the future framework conditions and their reliability. This also in cludes the debated realignment of the bid ding zones on the power market on account of grid congestion and insufficient grid expansion.
Especially these regulatory projects and the associated uncertainty regarding their exact design influence the activities of the trading participants and, at times, lead to a “wait-
andsee” approach and reduced trading ac tivities. The concrete effects of the individu al regulatory measures on the markets of EEX Group are outlined in more detail in the section “Risk and Opportunities Report”.
Originally, the guideline for Capacity Alloca tion and Congestion Management (CACM) was designed as the form of the network codes relevant for the power spot markets within the meaning of the third internal mar ket package and, in the form of a non-bind ing technology and operations guideline, it was intended to permit the stronger border- crossing cooperation between the respec tive Transmission System Operators.
On 14 August 2015, the guideline took effect in the form of a regulation and, broadly speaking, it pursues three aims: Firstly, it is to promote competition at all levels of value creation and provide the corresponding framework conditions for this. Secondly, the optimal use of the transmission infrastruc ture (i.e. the capacity calculation mode and the definition of the bidding zones) is fol lowed. Thirdly, the focus is on ensuring oper ational safety.
For the exchanges, the CACM Regulation is of major importance, in particular, because it introduces a new concept: that of the “Nom i- nated Electricity Market Operator” (NEMO). This helps to institutionalise the role of the exchanges in the context of market coupling – a role which has only been perceived factu ally so far. In other words, it formulates and validates the roles and tasks in legal terms. The concrete rules, however, are also submit ted to a review and developed further, if re quired. As a result, new rules for the cooper ation between NEMOs and the Transmission System Operators are introduced and a system is created which also permits NEMOs to ac
CACM Regulation introduces a new concept:
tively operate in other member states. Specif i cally, in future, exchanges will be regulated by the national authorities in the context of the CACM Regulation in the fields of activity af fected by it. This will have a lasting influence on the relationship with the regulators.
The CACM Regulation provides for a stringent schedule for the establishment of the rules and systems specified. Over the coming months, regulators, Transmission System Ope rators and NEMOs will have to use significant effort to attain those aims in the cooperative manner provided for. Therefore, in 2016 / 17, the CACM Regulation will probably remain the main motor for the creation of the internal energy market in the spot market segment.
The effects of the framework conditions on the development of business in the respec tive business fields are outlined in the chap ter “Development of business” for 2015 and in the section “Risk and Opportunities Re port” with a view to the future.