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ICE launches new TTF gas futures, options market in London as planned


'Insurance option' for traders given new EU price cap

Open interest in TTF futures back above 1 million contracts

ICE also sees first TTF futures trade for Cal-30 contract

  • Author
  • Stuart Elliott
  • Editor
  • Jonathan Fox
  • Commodity
  • LNG Natural Gas

Exchange operator ICE on Feb. 20 launched as planned a new market for TTF gas futures and options contracts on its London-based exchange, an ICE spokesperson said.

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ICE announced on Jan. 27 that it would launch the new market, saying it would run in parallel to TTF trading on its ICE Endex platform based in the Netherlands.

The new London market was designed to offer market participants an "insurance option" in the event the EU's new gas market correction mechanism is at risk of being triggered.

"TTF futures and options launched in London today on ICE Futures Europe," the spokesperson said Feb. 20.

The alternative venue in the UK -- no longer an EU member state -- would give market participants optionality if the market correction mechanism prevented them from trading and adequately managing their risk exposure.

EU energy ministers agreed the mechanism on Dec. 19 after several rounds of talks, with the new regulation formally adopted Dec. 22. The mechanism came into effect on Feb. 15.

For the mechanism to be triggered, the TTF month-ahead price would need to exceed Eur180/MWh for three working days and the month-ahead TTF price to be Eur35/MWh higher than a global LNG reference price at the same time.

Current TTF prices are well below the cap level. Platts, part of S&P Global Commodity Insights, assessed the TTF month-ahead price at Eur48.28/MWh on Feb. 17, well down from the all-time high of Eur319.98/MWh on Aug. 26.

ICE said the TTF futures contracts on ICE Futures Europe would mirror those on ICE Endex but would not be subject to the market correction mechanism and related TTF price cap.

Open interest

There have been concerns that the price cap could lead to lower liquidity and more over-the-counter trading in Europe.

However, ICE data shows that open interest in TTF futures remains strong, climbing back over 1 million contracts on Feb. 14 for the first time since the end of September.

And on Feb. 16, total open interest in TTF futures rose to 1.035 million contracts, having fallen to as low as 855,000 contracts in December.

Last week also saw the first TTF Futures trade for Calendar Year 2030, ICE said, representing hedging seven years forward.

A total of 10 lots in each month from January 2030 to December 2030 were traded in the week Feb. 13-17, it said.

According to ICE, its ICE Endex exchange is the world's most liquid trading venue for TTF futures and options.

It said Jan. 27 that it would also change its rulebook to promote compliance with the price cap regulation.

It said that once the regulation entered into force, the rules of ICE Endex would forbid market participants from submitting orders to the exchange order book in TTF derivatives above the price cap when the correction mechanism is activated.

This would be the case unless clients were eligible to make use of the exemptions granted in the regulation, it said.

At the end of each trading day, ICE Endex determines and publishes settlement prices for all contracts listed on the exchange, it said.

The existing methodology and approach used to determine and publish these prices is to remain unchanged "to ensure that settlement prices continue to reflect fair market value of TTF futures and option contracts," it said.

This may mean that settlement prices of TTF futures and options deviate from the price cap when it is not reflecting fair market value, it said.