EUGASMARKET
German market is that the integration of risk management JW: I think maybe the difference here is that I feel like there
tools, the integration from the offices and of front, mid and is demand for traders, or people think they want traders, when
back-offices and traders, that’s a process which is going on they’re not really in that business and I think they should real-
right now and which has not reached 100%. I think this is cer- ly think about whether they’re in that business before they go
tainly something we will see in the future, that there’s more out and hire traders and staff up and try to access that market.
competence and more know-how coming into the gas trading
departments and houses, especially in Germany. NH: Heinrich, if you were to swap your office in the
commission for a job in private industry, what would you think
NH: Historically where is that trading … has that come from the opportunities were?
people from the utilities side, of physical traders moving into HH: If I look at current dynamics, obviously I see that trading
other areas, or has it come from people in the commodities is becoming a flourishing activity on the continent and the life
financial trading sector moving into gas? And what happens would attract some young, dynamic officials.
when those two very different cultures come together? They’re
not the same sorts of people, are they? NH: Looking at the development of the Europe-wide market,
JW: Actually you’d be surprised. I think the technology is not to what extent is the existence of a whole series of different
a secret, not particularly difficult to understand. It is, however, regulatory regimes an obstacle? What needs to happen, in the
relatively difficult to implement well. I think that is one of the Commission’s view, to free things up?
problems, or one of the challenges, for a large incumbent. HH: Based on a good spirit of cooperation among regulators,
Again it gets back to my point about why there would be a ten- we are pushing for the creation of a consistent European-wide
dency to disaggregate. They are different cultures. I used to regulatory oversight. This will not come overnight. Regional ini-
work for a utility, now I work for a bank. They are totally differ- tiatives are very important to bring about consistency over time,
ent places, and in order to be successful in a very competitive but I’m convinced that, in the package, we have the right poli-
environment you have to be completely focused. You have to cy mix which is bringing about the right regulatory dimension.
have the culture, the systems, the policies, and the procedures
that are completely focused around the particular part of that
industry that you are making a living in. And I think it is very,
very difficult for a firm, for example, to have the right culture,
systems, policies and procedures to operate a fleet of nuclear
plants and simultaneously, in a different part of the firm, have
the right culture, systems, policies and procedures reporting up
to the same person, somewhere, that is focused on market
price risk. And so the tendency is that they operate them as
separate trading divisions. They have their own culture.
If your capital markets are also efficient then the investor
base starts to get confused by this and they start to look at this
and they say, well, what do I do? And you find these compa- Colin Lyle, EFET
nies’ shares start to trade at the lowest common multiple. The
net result of that is that shareholders become aware of the fact NH: To what extent are the different regulatory regimes
that they would benefit if the company were broken up, and contradictory? To what extent do they work against one other?
that’s what eventually happens. CL: I would say the fundamental problem is that they are
nationally focused because they’re national regulators.
NH: Is there also actually a physical absolute shortage of Regulators on either side of the border ought to do what is in
people with the relevant, competent expertise? the best interests for both countries or both networks, not just
JW: It’s what you put them into, and we certainly hope that think about, well, what’s the price control that I have for my
when we hire someone, our culture and our systems mould customers in my country? How is it going to work in the inter-
them. They provide them with boundaries within which they ests of the wider community?
have to keep in order to continue to stay in business. If you
don’t do that it’s a disastrous and spectacular way to go out of NH: What do you want to say about that [the cross-border
business – taking risk without managing it. issue]?
OM: I think there is a high demand for gas traders at the CL: Well, in order to develop trading hubs in Europe you need
moment and if you have some experience in gas trading it somewhere where you’re going to be able to move your gas to
should be a good market for you. or from afterwards, and at the wholesale level, if there are a
CL: I think John’s right, that the market will provide, that we number of trading points, if you can’t move your gas, say from
have enough very competent companies who have trading Germany to the Netherlands or the Netherlands back to
desks and who have the trading processes and are large and Germany, then you’re never going to get any real liquidity
established enough to bring in people who are completely fresh, developing at that hub.
have no experience, and to sit them at a desk after a few days
and help them through that initial phase, so, provided recruit- NH: Why is transparency important in the gas market, or
ment continues to take place, there will be traders available. indeed in any market, and how do we improve it?
COMMODITIES NOW SEPTEMBER 2008 71
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