Nasdaq to transfer European power business to EEX bourse

By Vera Eckert and Nora Buli

FRANKFURT/OSLO (Reuters) -Nasdaq will transfer its European power trading and clearing business to the European Energy Exchange (EEX), the U.S. exchange operator and EEX announced on Tuesday.

Nasdaq will transfer existing open positions in its Nordic, French and German power futures as well as in European carbon emission allowance futures (EUAs) to EEX clearing house the European Commodity Clearing (ECC), it said in a statement.

"We see the transaction as an opportunity for us to better align our core strengths and strategic priorities with evolving client needs," a Nasdaq spokesperson said.

The companies did not provide financial detail and the deal is still subject to regulatory approvals. A note on the EEX website said the transfer should be finalised by the first half 2024.

Sweden's Nasdaq Clearing AB is not part of the sale. It will continue to own and operate services for Nordic equity derivatives, fixed income derivatives and other European financial derivatives contracts.

EEX, Europe's leading electricity and natural gas exchange, serves 800 participants.

It is expanding its core products as well as its carbon, freight, agricultural and hydrogen products, hoping to benefit from synergies between different markets.

EEX European power futures trading in January-April 2023 totalled 1,373 terawatt hours (TWh), down 3% from a year earlier. While Nordic power futures accounted for just 7.1 TWh of that, volumes were down 42% from a year earlier.

Nordic power trading volumes at Nasdaq were also down, totalling 110.4 TWh, down 35% from a year earlier.

EEX said it plans to change the structure of the current Nordic power market and replace the Electricity Price Area Differential (EPAD) contracts currently offered by Nasdaq with zonal futures contracts, in line its continental European offering, a move estimated to go live in the fourth quarter of 2023.

The Nordic power market consists of 12 bidding zones, but financial contracts are settled against a Nordic system price. EPAD contracts allow participants to hedge price differences between a bidding zone and the system price.

Nordic power contracts volumes have been in decline for a number of years with liquidity squeezed by too few counterparties in the individual zones as well as by diverging area prices.

Last year also saw an excessive market strain when prices soared due to the Russian gas supply crisis and operators were left exposed to higher margin payment requirements which discouraged trading.

The move offers EEX a chance to expand its foothold in the Nordic region, said Tobias Federico, analyst at Berlin-based Energy Brainpool, and might increase trading volumes as it will make it easier to find counterparties.

"The question is whether Nordic market participants can switch to the zonal contracts. They tend to be smaller customers, unlike the typical EEX clientele," he said.

(Reporting by Baranjot Kaur in Bengaluru, Vera Eckert in Frankfurt and Nora Buli in Oslo; editing by Christina Fincher and Jason Neely)