Eurex Sees Clearing-Fueled Opportunities In Natural Gas
May 29 2009 - 3:30PM
Dow Jones News
Eurex is weighing the launch of natural gas futures as part of a
broader push into energy contracts and other new asset classes by
the derivatives exchange operator.
Listed natural gas futures remain a less mature market in Europe
than in the U.S., but the broad industry move toward more central
clearing has helped reduce the time-to-market for fledgling
contracts, according to Brendan Bradley, global head of product
strategy for Eurex.
"Given that central counterparty services are more and more
valued after the credit crunch of last year, we're now looking at
getting into those markets much earlier than we have in the past,"
Bradley said in an interview with Dow Jones Newswires.
Interest rate and equity index futures constitute the vast
majority of trading on Frankfurt-based Eurex, co-owned by Deutsche
Boerse AG (DB1.XE) and SWX Swiss Exchange, but in recent weeks the
exchange has added metals and agricultural futures.
While new asset classes diversify Eurex's source of revenues,
Bradley said the product launches followed investors' directing
more money toward these areas during the recent commodities
boom.
Energy markets are another area of potential expansion, Bradley
said, though Eurex doesn't plan to challenge the dominance of CME
Group Inc. (CME) or IntercontinentalExchange Inc. (ICE) in crude
oil.
Natural gas is among the most actively traded energy products in
the United States, but the picture is different in Europe, where
regulators' efforts to spur competition among dominant suppliers,
many of which are government-owned utilities, have stalled.
Bradley said any plans for natural gas futures on Eurex would
depend on continued development of the underlying market, but
participants' growing inclination to clear trades in
over-the-counter energy products will help establish open interest,
and eventually, listed products.
"It's a lot easier then, because you know the players and have
the open interest, rather than starting from scratch," Bradley
said.
In natural gas, Eurex would join the European Energy Exchange
AG, which operates spot and futures markets in natural gas; Eurex
holds a 44% stake in EEX, and the exchanges maintain a partnership
in emissions trading, which Bradley said could extend to other
markets.
EEX, which also trades power and coal futures, saw record volume
in natural gas spot trading last January, with 237,126 megawatt
hours traded across about 350 transactions.
Eurex would also contend with ICE Futures Europe, which
facilitates trade in a handful of U.K. natural gas futures, though
these represent a fraction of overall trading activity.
-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117;
jacob.bunge@dowjones.com