Secretariat kicks off first Energy Derivatives Coordination Group virtual meeting

The Secretariat is delighted to announce the establishment of the Energy Derivatives Coordination Group (EDCG).

The evolution of energy markets in Europe brought new trading venues and trading instruments. In order to manage market and counterparty risk, energy market participants developed energy derivatives contracts which qualify as financial instruments. In most cases, such contracts are traded and/or cleared centrally. This means that the risk is transferred into a central clearing counterparty. In parallel, the framework regulating activities in financial instruments and activities of the central clearing counterparties has evolved creating stricter rules in dealing with derivatives contracts. While financial markets are less developed in the Contracting Parties and in most cases there is no regulatory framework related to commodity derivatives, it is very important that energy regulators and financial regulators cooperate and coordinate activities related to energy commodity derivatives, and in particular electricity and gas derivatives.

In this context, the EDCG is composed of representatives from both the energy and financial regulatory authorities of the Energy Community Contracting Parties and will serve as a meeting and coordination platform for regulators. The work of the group is facilitated by the Energy Community Secretariat. The first virtual meeting took place on 5 November 2020, with the aim to formally establish the EDCG and introduce the participants to the objectives of the coordination group.

Janez Kopac, the Director of Energy Community Secretariat, opened the meeting noting: “Energy touches many fields but above all there is a strong correlation with markets in financial instruments. Coordination between regulators from financial and energy sectors is a must and we are happy to facilitate this.”

The establishment of the EDCG received many positive remarks from the participants. In the next stage, several workshops on more specific topics will be organized. The Secretariat will draft a work programme of the group for 2021 and looks forward to the next meeting of the EDCG.