Intercontinental Exchange Inc. will open a parallel natural gas market in London to help traders cope with any potential disruptions caused by the European Union’s new rules to prevent extreme price swings.
(Bloomberg) — Intercontinental Exchange Inc. will open a parallel natural gas market in London to help traders cope with any potential disruptions caused by the European Union’s new rules to prevent extreme price swings.
It will offer Dutch Title Transfer Facility futures and options on the ICE Futures Europe exchange from Feb. 20, five days after the EU’s temporary price cap takes effect, according to a statement.
The London market won’t be subject to the cap. The bourse’s Netherlands-based ICE Endex hub will also change its rulebook to comply with the bloc’s regulation.
The EU last month reached a deal to cap gas prices at €180, ending months of political wrangling over whether to intervene in a region-wide energy crisis that has contributed to historic inflation. Gas markets saw significant volatility as Russia curbed supplies following its invasion of Ukraine, and EU officials have sought to tame prices while avoiding any unintended consequences of market intervention.
The cap, which will be in place for a year, requires several triggers before it can take effect. ICE — which hosts the benchmark Dutch Title Transfer gas contract in Amsterdam — previously said it’s concerned a cap could have a potential destabilizing effect on the market.
“ICE’s purpose is to create markets to allow our customers to manage their risk and we have a duty to our customers to provide solutions to the problems they face,” Trabue Bland, ICE’s senior vice president for futures exchanges, said in the statement Friday. The London market will act as an “insurance option for customers” if the EU rules prevent them from trading and adequately managing exposure to risk.
Gas prices have slumped considerably since spiking to record levels in August, though they still remain above average for the time of year. Dutch futures settled Thursday at €54.82 per megawatt-hour, the lowest level since September 2021.
ICE said it would continue to publish settlement prices, even after the price cap is triggered.
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