Seminar organized by XM Compañía de Expertos en Mercados
Medellín, May 18th, 2012
About ECC
1st September: Spin-off of the EEX clearing department to the European Commodity Clearing AGLaunch of clearing services for theDutch Energy Derivatives Exchange (now: APX-ENDEX)
2006
2005Launch of clearing services for the French Energy Exchange Powernext2008
2
2010
20062006
2009
2008European Commodity Clearing Luxembourg S.à.r.l.
2009Start of clearing services for newly launched energy exchanges:France: EPEX Spot SEand Austria: CEGH Gas Exchange1st October: Integration of Luxembourg-based subsidiary into delivery chain; Establishment of ECC Lux as agent for deliveries
2010Start of clearing services (Spot) for Hungarian Power ExchangeHUPX.
In July 2011 launch of HUPX Futures Market.2011
Belgian Power FuturesDutch Power FuturesDutch (TTF) Natural Gas FuturesUK Power Futures
Phelix Futures & Options German Power FuturesFrench Power Futures
EUA FuturesCER FuturesEUA Options
Overview: Partners and Products
French Natural Gas(Spot & Derivatives)
Coal FuturesAPI 4 (RB, South Africa)2
German Power SpotFrench Power SpotAustrian Power SpotSwiss Power Spot
French Power FuturesGerman Natural Gas (Spot & Der.)Coal Futures API 2 (ARA)2
Dutch (TTF) Natural Gas Spot
Hungarian Power Spot
Hungarian Power Derivatives
Austrian Gas (Spot & Derivatives)
2 API 2 and API 4 are used under license from Argus Media Limited/The McCloskey Group Limited.All copyrights and database rights in the API 2 and API 4 indices belong exclusively to Argus Media Limited/The McCloskey Group Limited. All rights reserved.
3
3
3
6
5
16
30
16 clearing members272 non-clearing members21 countries
Overview: Members
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5
8
16
18
3
41828
4
86 7
1
1
2
12
4
Overview:Transmission System Operators and Registries
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Trading ParticipantTrading Participant
Clearing LicenseClearing License Balancing Group Agreement
Balancing Group Agreement
Exchange LicenseExchange License
Safe Business:Straight Trough Processing
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(Clearing Member)
Settlement: Central Bank orcommercial money / CSD
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As a central counterparty, ECCassumes the role of a marketparticipant in the grid of theTransmission System Operators.Physical Settlement is provided byECC Lux which has concluded abalancing area agreement with allmajor European TSOs.
Safe Business:Physical Settlement as core service
7 7
major European TSOs.
Trading participants opting forphysical settlement need abalancing area agreement with therelevant TSO. Alternatively, a third-party agreement permitting accessto a balancing area can beconcluded.
ECC has final liability.
All CM have joint liability.
ECC equity
Replenishment clearing fund
Clearing fund contribution - rest
Safe Business: Lines of Defense
ECC has joint liability.
CM is liable.
ECC clearing fund contribution
CM clearing fund contribution
Margin requirement
Variation Margin/Intraday Cashcall
CM is liable for NCM
Minimum requirement for CM
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Safe Business:Regulation
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Services:Main Services at a glance
INTERFACE SERVICES• Capture and confirmation of transactions• Capture and checks of settlement prices• STP Interfaces for registration and clients• EUREX System as clearing system with
world wide connectivity• Interface to transmission capacity owners
and transmission system operators
SETTLEMENT SERVICES• Mark-to-market evaluation of open positions• Expiry of derivatives positions• Deliveries: physical (on behalf) and financial
deliveries (currently USD, GBP and EUR)• 24x7 procedures for intraday Markets.• Clearing services for spot market coupling • Payments: central bank & settlement agentand transmission system operators
TRADE AND POSITION MANAGEMENT SERVICES• Give-Up/Take-Up, trade modification,
account transfers and positions transfers• Updating real-time or during batch-
processing: new transactions, trade and position adjustments, expiries and cascading of derivatives.
• Payments: central bank & settlement agent
RISK MANAGEMENT / OTHER SERVICES• Risk Management services (e.g. margining)• Collateral Management (e.g. haircuts,
maintenance)• Intraday and end-of-day reporting • admission of participants (incl. KYC)• Clearing Helpdesk 24x7• Invoicing services on behalf of the partner
exchange• Fee settlement services (exchange/clearing
fees)
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Börse
ECC
Pay
men
ts(e
.g. V
aria
tion
Mar
gin)
Exchanges
ECC takes over transactions ofthe exchanges
CM depositsown collateral
Der
ivat
ives
sec2
Börse
ECC
Exchanges
sec
Der
ivat
ives CM
depositsNCM‘s
Pay
men
ts
(e.g
. Var
iatio
nM
argi
n)
ECC takes over transactions of the exchanges
Risk Management Collateral Pass-Through, Segregation, Portability
CM
NCM
Pay
men
ts(e
.g. V
aria
tion
Mar
gin)
sec1
NCM depositsown collateral
Der
ivat
ives
Der
ivat
ives
sec2
sec1
Pay
men
ts(e
.g. V
aria
tion
Mar
gin)
Forwarding of collateral reduces the clearing member‘s costs of liquidity.In this process, the forwarded collateral is protected.
CM
NCM
Der
ivat
ives
Der
ivat
ives
NCM‘s collateral
CMpledges collateral withsubordinate priorityN
CM
dep
osits
co
llate
ral
sec
sec
Pay
men
ts
(e.g
. Var
iatio
nM
argi
n)
Pay
men
ts
(e.g
. Var
iatio
nM
argi
n)
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0
200,000
400,000
600,000Daily flow of money / Variation Margin [€]
Example portfolio:
25 MW saleFrench Power
Risk ManagementPayment Netting
-600,000
-400,000
-200,000
0
Jan Feb Mar Apr May Jun Jul
Baseload Year
25 MW purchase German Power Baseload Year
Separate clearing
Integrated clearing
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Payment Netting reduces the need for Liquidity and the amount of Risk incurred through timing incongruences for Clearing Members but also for ECC.
This allows ECC to also collect Margins for Spot Energy with Cross Margining.
German
Power
French
Power
Belgian
Power
Dutch
Power
UK
Power
Hungarian
PowerEmissions
Gas NCG
Gaspool
Gas
TTF
Gas
France
Gas
NBP
Gas
CEGHCoal
German
Power
54% 40% 52% 45% 44% 31% 42% 40% 42% 39% 37% 37% 32%(100%) (74%) (71%) (80%) (57%) (68%) (51%) (57%) (60%) (58%) (49%) (43%) (51%)100% 74% 76% 83% 57% 68% 53% 57% 60% 58% 51% 43% 51%
French
Power
40% 39% 47% 38% 37% 27% 32% 32% 32% 35% 32% 34% 30%(74%) (100%) (68%) (72%) (54%) (57%) (48%) (55%) (57%) (55%) (45%) (42%) (47%)74% 100% 75% 72% 54% 57% 51% 55% 57% 55% 47% 42% 48%
Belgian
Power
52% 47% 54% 53% 38% 37% 38% 39% 42% 41% 36% 38% 33%(71%) (68%) (100%) (72%) (54%) (63%) (47%) (56%) (58%) (55%) (43%) (44%) (45%)76% 75% 100% 77% 54% 63% 50% 56% 58% 55% 46% 44% 47%
Dutch Power45% 38% 53% 53% 41% 32% 39% 38% 35% 38% 35% 36% 32%
(80%) (72%) (72%) (100%) (57%) (65%) (50%) (57%) (61%) (58%) (49%) (44%) (46%)83% 72% 77% 100% 57% 65% 52% 57% 61% 58% 49% 44% 48%
UK Power44% 37% 38% 41% 57% 30% 46% 51% 59% 52% 52% 43% 34%
(57%) (54%) (54%) (57%) (100%) (49%) (46%) (62%) (67%) (74%) (63%) (49%) (52%)
X-MarginingCross Margin Savings Overview*
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UK Power57% 54% 54% 57% 100% 49% 46% 67% 74% 74% 68% 53% 52%
Hungarian
Power
31% 27% 37% 32% 30% 26% 31% 29% 29% 24% 24% 31% 25%(68%) (57%) (63%) (65%) (49%) (100%) (45%) (49%) (52%) (51%) (37%) (46%) (43%)68% 57% 63% 65% 49% 100% 47% 50% 52% 51% 39% 46% 44%
Emissions42% 32% 38% 39% 46% 31% 73% 37% 41% 43% 43% 33% 38%
(51%) (48%) (47%) (50%) (46%) (45%) (100%) (44%) (45%) (43%) (46%) (33%) (40%)53% 51% 50% 52% 46% 47% 100% 46% 45% 43% 47% 33% 40%
Gas NCG
Gaspool
40% 32% 39% 38% 51% 29% 37% 52% 51% 54% 49% 45% 29%(57%) (55%) (56%) (57%) (62%) (49%) (44%) (100%) (75%) (70%) (63%) (47%) (47%)57% 55% 56% 57% 67% 50% 46% 100% 80% 78% 65% 56% 47%
Gas TTF42% 32% 42% 35% 59% 29% 41% 51% 69% 58% 57% 49% 30%
(60%) (57%) (58%) (61%) (67%) (52%) (45%) (75%) (100%) (76%) (63%) (49%) (48%)60% 57% 58% 61% 74% 52% 45% 80% 100% 84% 66% 60% 48%
Gas France39% 35% 41% 38% 52% 24% 43% 54% 58% 56% 49% 48% 30%
(58%) (55%) (55%) (58%) (74%) (51%) (43%) (70%) (76%) (100%) (61%) (51%) (48%)58% 55% 55% 58% 74% 51% 43% 78% 84% 100% 65% 60% 48%
Gas NBP37% 32% 36% 35% 52% 24% 43% 49% 57% 49% 71% 31% 33%
(49%) (45%) (43%) (49%) (63%) (37%) (46%) (63%) (63%) (61%) (100%) (38%) (49%)51% 47% 46% 49% 68% 39% 47% 65% 66% 65% 100% 46% 53%
Gas CEGH37% 34% 38% 36% 43% 31% 33% 45% 49% 48% 31% 61% 27%
(43%) (42%) (44%) (44%) (49%) (46%) (33%) (47%) (49%) (51%) (38%) (100%) (35%)43% 42% 44% 44% 53% 46% 33% 56% 60% 60% 46% 100% 35%
Coal32% 30% 33% 32% 34% 25% 38% 29% 30% 30% 33% 27% 57%
(51%) (47%) (45%) (46%) (52%) (43%) (40%) (47%) (48%) (48%) (49%) (35%) (100%)51% 48% 47% 48% 52% 44% 40% 47% 48% 48% 53% 35% 100%
* First 3 maturities; first 2 maturities for Power UK; only spreads for the same load profile (base, peak, offpeak) and delivery periods (month, quearter etc.)In brackets the benchmark front year is shown; for UK Power and PEG Nord front season; for power baseload profile
Phelix Base 2013 vs. Emissions December 2012(Positions according inverse ratio of marginparameter)
Phelix Base 2013 vs. NCG Gas 2013(Positions according inverse ratio of marginparameter)
Current Margin: Doubled overall margin due to emissions position
X-Margining: Overall margin requirement descreased by just 2%, which meanssavings of 45%.100 98
100
0
50
100
150
200
Current Margin X-Margining
200
- 51%
- 57%
X-MarginingCross Margin Savings Examples
(Positions according inverse ratio of marginparameter)
Phelix Base 2013 vs. Coal API # 2 2013(Positions according inverse ratio of marginparameter)
Current Margin: Doubled overall margin due to gas position
X-Margining: Overall margin requirement decreased by 14%, which meanssavings of 57%
Current Margin: Doubled overall margin due to coal position
X-Margining: Overall margin requirement decreased by 2%, which meanssavings of 51%
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100 86
100
0
50
100
150
Current Margin X-Margining
100 98
100
0
50
100
150
200
Current Margin X-Margining
- 57%
- 51%
Example position: + 10 Future German Baseload Front Year vs. - 16 Future German Gas Front Year
Total margin€ 476k (separate)
€239k
-60%
Gas
Services: Cross Asset / Cross Exchange margining
€ 191k (integrated):
Savings = -60% (of the total margin)€237 k
€191k
Separate Integrated
Power
ECC uses SPAN® for cross commodity and cross exchange margining.ECCs Implementation optimizes energy related offset capabilities
'SPAN®' is a registered trademark of Chicago Mercantile Exchange Inc. Chicago Mercantile Exchange Inc. assumes no liability in connection with the use of SPAN® by any person or entity."
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Spot Market Settlement System
Spothandels-systeme
Spothandels-systemeSpot Market
Spothandels-systeme
Spothandels-systemeFutures Market
EUREX
Trading
expiredfutures
Member InterfaceOverview
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Spot Market Settlement System
TSO TARGET2 account
Spot Clearing GUI ECC GUI
EUREX
Futures Clearing GUI
Clearing
cash
futures
ReportsReports
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• Possibility to subscribe reports
• Existing report subscription can be edited or deleted
• Registered Member Area user can choose between different report combinations
Member Interface: ECC Member Area Report subspription
VERTRAULICH / CONFIDENTIAL
report combinations
• Report types: Trade, Payment, Delivery, Invoice
• Report scope: Summary, Detail
• Report format: XML, PDF
• Report frequency: daily, monthly
• Report channel: FTP, e-mail
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Internal Delivery Account
Member Interface: ECC Member AreaInternal Delivery Accounts Emissions
VERTRAULICH / CONFIDENTIAL
Export as XML/PDF
Delivery Account Balance
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• Registry Transfer Requests have to be approved by 4-eyes-principle
• Beneficiary registry account can be chosen by the participant itself
Member Interface: ECC Member Area Registry transfer request
VERTRAULICH / CONFIDENTIAL
Entry of Registry Transfer Requests
• Transfers from primary to secondary market accounts are possible by entering ECC’s DEHStaccount as beneficiary account
• Delivery date has to be at least one day in the future
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• Licence to provide banking services (bank licence) by the respective local regulator
• Liable equity capital of EUR 30 mio. for GCMs / EUR 7.5 mio. for DCMs
• TARGET2 account (own or third party account)
MembershipRequirements for GCMs and DCMs
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• Pledged collateral account with Clearstream Banking or Sega Intersettle for depositing collaterals
• Technical connection to the ECC clearing systems (EUREX/SMSS)
• Adequate back office technology and qualified staff
• Contribution to the ECC Clearing Fund (EUR 3.0 mio. for GCM / EUR 0.5 mio. for DCMs)
VERTRAULICH / CONFIDENTIAL20
The following requirements are necessary for admission as NCM by ECC:
•conclusion of a corresponding NCM Agreement with the co-operating Clearing Member and ECC
MembershipRequirements for NCMs
•the clearing license of the Clearing Member co-operating with said Non-Clearing Member has to comprise the products concerned
•in case of physical delivery, the conclusion of a balance group agreement with the respective TSO is required
•admission as an exchange participant at the market, where the respectiveproducts are traded
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Fees for Clearing Members:
• Annual fee of ECC (12.500,- €)
• Technical connection fee to EUREX system (to be discussed)
• Fees for collateral account with Clearstream Banking
• No fees transaction based fees etc.
MembershipFees
• No fees transaction based fees etc.
Fees for Trading Participants:
• ECC will charge from Trading Participants a clearing fee (e.g. 1 ct/MWh for power deliveries)
• No annual fees etc.
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