With the European Union (EU) pushing ahead with its proposal to cap gas prices, leading energy exchanges are warning that the decision could pose a serious economic threat to the region.
In a Nov. 19 letter to members of the European Commission, the Association of European Energy Exchanges (“Europex”) pointed out that gas derivatives were a crucial tool for producers and consumers to hedge against gas spot price volatility. If price caps on gas derivatives, like the Title Transfer Facility (TTF) front-month futures contracts, are put into place, it could trigger “major risks to financial stability and security of supply.”
If the real gas price were to exceed the price cap of the TTF futures, market participants might move the trading into over-the-counter (OTC) space which will create a “significant decrease in transparency.”…