ESMA and ACER published assessment reports on the market effects resulting from the gas market correction mechanism (MCM), following Jan. 2023 preliminary reports.
Follows ESMA and ACER Jan. 2023 reported MCM preliminary data, see #161284.
Report explores whether some shift of trading has unfolded as a consequence of MCM.
Based on this analysis, ESMA notes that no changes in the EU gas derivatives trading could be identified so far that could be unequivocally and directly attributed to MCM.
Describes impact of the MCM on CCPs’ capacity to conduct risk management activities, in particular to calculate exposures and to manage potential clearing member defaults.
The analysis performed did not result in the identification of noticeable changes in CCP risk management or in margin requirements that could be attributed to the MCM.
The impact of the MCM could be different as the market environment changes.
Announcements by ICE Endex, EU Enrg Exc to offer trading of TTF contracts in UK and EU OTF, both outside scope of MCM Regulation, confirm market participants preparing for a scenario where MCM could be activated in future (see #161551, #163345).
The effects assessment covers time horizon since adoption of the MCM in Dec. 2022, and granular market indicators regarding trading activity, liquidity and execution.
ACER Summary
Neither ACER nor ESMA identified significant impacts (positive or negative) that could be unequivocally and directly attributed to adoption of MCM; should not infer that MCM will not have impact on financial and energy markets or security of supply in future.
ACER and ESMA continue to emphasize need to regularly monitor gas markets and gas trading activities to identify risks and assist in detecting potential impacts of the MCM.
Found valid arguments for extending MCM only to virtual trading points (VTPs) where liquidity of gas derivative trading is modest to high; considers that the extension of the MCM to other VTPs would not likely lead to significant negative effects in gas markets.
Found valid arguments for using the same activation and de-activation conditions, making use exclusively of the Dutch TTF front-month price and the same dynamic price-bidding limit at the EU VTPs (where the MCM is extended to other VTPs).
Did not identify need for revising price references used for reference price calculation.
And ACER could not identify technical reasons to change the current activation or de-activation conditions of the MCM or for changing the dynamic price-bidding limit.
Will continue monitoring effects of MCM in energy markets and on security of supply.
Dec. 2023 MCM Extension
On Dec. 20, 2023, EU ACER said EU energy ministers have agreed to extend the gas market correction mechanism (MCM) for a period of one year, until Jan. 31, 2025.
Ministers reached a political agreement to extend the period of application of three EC regs (adopted in Dec. 2022) designed for emergency situations, including gas MCM.
Next, the EU CNCL will aim to formally adopt the regulations by written procedure.
Follows EC Dec. 2023 reached agreement on emergency measures, see #195679.
Regulators
EU ACER; EU ESMA
Entity Types
B/D; Depo; Exch; OTC
Reference
PR, 12/20/2023; PR, Rp ESMA70-445-794, 3/1/2023; MCM Reg 2022/2578
