Intercontinental Exchange Inc to Start Rival Gas Market in London to Sidestep EU Price Cap

Intercontinental Exchange Inc. is opening a parallel natural-gas market in London to assist traders with potential disruptions due to the European Union’s new rules. This will help them deal with extreme price swings.

According to a statement, it will offer Dutch Title Transfer Facility options and futures on the ICE Futures Europe Exchange starting February 20, five days after the EU’s temporary price cap goes into effect.

The cap will not apply to London’s market. The rules of the bloc-compliant ICE Endex hub, which is based in the Netherlands, will be also changed by the bourse.

Last month, the EU reached a deal with Russia to cap gas prices at EUR180. This ends months of political debate over whether or not to intervene in an energy crisis that has caused historic inflation. The Russian invasion of Ukraine caused significant volatility in gas markets. EU officials sought to control prices and avoid any unintended consequences.

Before the cap can be put into effect, it must be activated by several triggers. ICE, which hosts the Dutch Title Transfer Gas contract in Amsterdam, previously stated that it is concerned about a possible destabilizing effect of a cap on the market.

Trabue Bland was ICE’s senior vice president for futures exchanges. He stated in a Friday statement that “ICE’s purpose is to create markets to enable our customers to manage their risk and we have a responsibility to our customers’ to provide solutions to those problems.” If customers are unable to trade or manage their risk adequately, the London market will serve as an “insurance option”.

Although gas prices have fallen significantly since August’s record-breaking spike, they remain well above the average for this time of year. The lowest level since September 2021 was EUR54.82 per megawatt hour in Dutch futures.

ICE stated that it would continue publishing settlement prices even after the price cap has been triggered.

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