The Commission is proposing today a new emergency regulation to address high gas prices in the EU and ensure security of supply this winter. This will be done through joint gas purchasing, price limiting mechanisms on the Title Transfer Facility (TTF) gas exchange, new measures on transparent infrastructure use and solidarity between Member States, and continuous efforts to reduce gas demand.
Specifically in the area of financial services Commission is proposing a number of measures covering derivatives, trading and benchmarks, while preserving the price formation process and ensuring that financial stability risks are contained and adequately mitigated:
On derivatives, the Commission has adopted – in line with advice from ESMA – two measures designed to ease liquidity stress some energy companies are currently experiencing. The first measure will raise the commodity clearing threshold from €3 billion to €4 billion. It means that energy companies will be allowed to enter into more over-the-counter transactions without being subject to margin requirements. The second measure will temporarily expand the list of eligible assets that can be used as collateral to meet margin calls, e.g. adding public guarantees and uncollateralised bank guarantees, subject to conditions.
On trading, the Commission proposes a time-limited measure to manage excess volatility in gas and electricity derivatives markets, while preserving the price formation processes. The new temporary intra-day price spike collar, a volatility management mechanism, will avoid excessive price volatility and prevent extreme price spikes in prices on energy derivative market. Such a mechanism will ensure sounder price formation mechanism in those markets, protecting EU energy operators from large intra-day upward price movements and helping them secure their energy supply in the medium term.
Finally, on benchmarks, the Commission is taking steps to create a LNG benchmark that better reflects the price the EU pays for its gas imports. The Commission has observed a gap price between LNG spot prices and some indexes used as a proxy for LNG imports prices into Europe and that are influenced by constraints such as the effects of pipeline deliveries, and gas manipulation by Russia. This warrants the creation of a dedicated LNG benchmark. The Commission has, therefore, proposed to empower the ACER to collect, process and publish price assessments on LNG transactions.
