EUGASMARKET
JW: I think sometimes the costs exceed the benefits. This is requiring individual traders to start reporting information to
not something that comes for free. When you have mandatory them in some specific format, which is only for them, when
reporting of transactions, there’s a cost of collecting, there’s a actually people are trading internationally throughout
cost of compiling and there’s a cost of publishing. So I think Europe in different countries with different counterparties.
that should always be a factor in the equation. The second That is the sort of situation that we really would be very fool-
thing is, it seems to me that sometimes you can push this too ish to get into.
far and make the market unhelpful or difficult for end users,
where somebody may want, for example, to hedge a produc- NH: And are we in danger of getting into that situation?
tion unit that has gone down and all sorts of production that’s CL: There are still some worrying signs of some individual reg-
not coming in or some change in their expectations, and they ulators who are going out and saying, I need to have reporting
should be able to do that without signalling that they have a from all the companies who trade in my nation. But I hope that
problem to every other participant in the market. sense is going to prevail. It is actually detrimental to the mar-
CL: I think we need to make a very clear distinction here ket if you try to gather individual trading information at multi-
between information about the infrastructure and its use and ple locations from hundreds, if not thousands, of different
the deal reporting and market monitoring that John’s talking sources because it will be completely meaningless.
about. Infrastructure operators, particularly pipeline operators,
must provide information about the capacity and flows in their NH: Do you accept Heinrich that this is a danger?
pipelines. That has to be the starting point, and it’s still not HH: No, there may be different schools of thought and differ-
always done. ent histories but, from the meetings in which I participated, I
got the clear impression that they want to bring about a con-
sistent European level framework.
JW: Information asymmetry is one of the known causes of
market failure and it is something that should absolutely be
addressed. If information’s going to be made available it
needs to be accurate, which it isn’t always the case in either the
electricity or gas markets. It needs to be made available to
everybody in the same way at the same time. We support
transparency to the point that benefits do not exceed direct
and indirect costs.
NH: On the preponderance of OTC trades in this market,
John Woodley, Morgan Stanley
rather than exchange trades, how do you see this developing?
JW: I think it’s a very interesting feature of markets today
NH: So is there additional cost in making information and a very interesting challenge for exchanges. In some ways
available? you could say they’re competing areas – OTC markets versus
CL: There may be some small cost, but this can be a very exchange-traded markets. From our perspective, with the
naughty game that some of the transmission system operators advent of communications as they are now, the ability of an
are tempted to play. As soon as you say, well, to get access to OTC broker to access us and other market makers to bring
this pipeline I need to know what the capacity is, they say, oh transactions to us that don’t necessarily follow the specs of
good, right, we’ll go to the regulator and we’ll say to the regu- what’s on the exchange, allows you to actually deal in much
lator, this is going to cost us something to provide this service more tailored and customised products, and the exchange is,
and we're going to charge that company for giving them that on the other hand, trying to deal in very standardised products
information, whereas it should be a basic service that is provid- that you actually go into the exchange to transact. We see
ed to everybody. them as complementary and the one thing that we are not
happy with is situations where there’s a mandated use of
NH: What can the Commission do to ensure that information exchanges, which does exist in some markets (e.g. electricity).
is made available? It would be shame if this were followed in gas as well because
HH: We started by asking is it important? Do we need trans- they are complementary and, to some extent, competitive. Let
parency? Obviously, yes, it’s almost a ‘no-brainer’ and the the market decide where liquidity should go.
Commission is pushing hard on this. Then, the question is how CL: I would agree totally with what John has said and I would
far to go on transactional data transparency or fundamental expect there to be further change in the future.
data transparency. We’ll probably start first with fundamental OM: I also believe in the co-existence of these two markets.
data transparency where we need to go as far as possible. We There will always be a large interest for traders to deal through
need physical data availability in any case. an exchange with their specific setup, features and clearing but
CL: But there’s market information transparency, and there also a large interest for traders to deal through a broker
is deal reporting: one has to ask what actually is the purpose because the information they get through that relationship
of this? If we can clearly define the purpose then we can start they don’t get from an exchange. I’m quite confident that we
to establish what is the best approach. What is clearly ridicu- will, in the gas market, come up with a similar relationship
lous is to have lots of individual regulators in each country, between the exchange and the OTC market.
72 SEPTEMBER 2008 COMMODITIES NOW
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