2023-05-12 14:34:46
Europe’s $4.5 trillion natural gas derivatives market has become less transparent since Russia’s invasion of Ukraine and faces risks from a small number of market participants and low liquidity, the European Union securities watchdog said on Friday.
The European Securities and Markets Authority (ESMA) said gas prices rose amid high volatility and a significant deterioration in liquidity following the invasion.
Europe weaned itself off Russian natural gas and turned to other suppliers.
“The market is characterized by a high degree of concentration of market participants active in clearing and trading activities, and some energy companies hold relatively large positions in derivatives,” ESMA said. in a study.
Annual turnover in EU futures markets reached €4.1 trillion ($4.5 trillion) in 2022, with open positions among EU counterparties totaling around €500 billion euros at the end of 2022.
“The recent migration of some equity market activity to OTC derivatives markets raises concerns due to more limited transparency and more tailored margin and collateral requirements in this segment. market,” said ESMA.
Natural gas faces storage constraints, which makes prices more dependent on external factors such as geopolitical events.
“Looking forward, risk analysis in natural gas derivatives markets requires additional work to fill data gaps and fragmentation. In this context, increased cooperation between energy and financial market regulators is justified.”
(1 $ = 0,9084 euros)
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