PXE Member Workshop. Prague, 30th January 2013

Transcription

1 PXE Member Workshop Prague, 30th January 2013

2 AGENDA 1. About ECC 2. ECC Clearing Processes 3. ECC Admission Process 4. Position Transfer 5. Next Steps 2

3 About ECC History st September: Spin-off of the EEX clearing department to the European Commodity Clearing AG Launch of clearing services for Dutch Energy Derivatives Exchange (now: APX-ENDEX) Launch of clearing services for French Energy Exchange Powernext Start of clearing services for newly launched energy exchanges: EPEX Spot SE and CEGH Gas Exchange of Vienna Stock Exchange 1 st October: Integration of Luxembourg-based subsidiary into delivery chain; Establishment of ECC Lux as agent for deliveries Start of clearing services (Spot) for Hungarian Power Exchange HUPX. Launch of CEGH Derivatives Market. In July 2011 launch of Futures Market for Hungarian Power Exchange HUPX. Introduction of new SPAN based X-Margining. European Commodity Clearing Luxembourg S.à.r.l st January 2013 launch of CEGH Natural Gas Within-day Market and 24/7 clearing services for CEGH Gas Exchange of Wiener Börse AG. VERTRAULICH / CONFIDENTIAL 3

4 About ECC Legal Status 56,14 % ECC AG is a 98.5% subsidiary of EEX AG / 1.5% owned by Powernext / 1 share owned by APX-ENDEX EEX AG is part of Group Deutsche Börse (through EUREX AG; % holding of EEX AG) ECC holds a banking license from the German regulator BaFin covering the role of a central counterparty according to German bank act ECC is recognized as a designated payment system according Article 10 of Settlement Finality Directive 98/26/EC. VERTRAULICH / CONFIDENTIAL 4

5 About ECC Network of Partners 18 clearing members 332 non-clearing members 24 countries 5

6 About ECC Affiliated Transmission System Operators and Registries 6

7 About ECC Cleared Products Dutch (TTF) Natural Gas Futures Belgian Power Futures Dutch Power Futures UK Power Futures Emission Futures (EUA, CER, ERU, EUAA) Phelix Futures & Options French Financial Power Futures Natural Gas Futures (GPL, NCG) Coal Futures 1 ( ARA, RB) French Natural Gas (Spot & Derivatives) German Power Futures German Natural Gas (Spot) Dutch (TTF) Natural Gas (Spot) Emission Spot Contracts Natural Gas Futures (NBP) German Power Spot French Power Spot Austrian Power Spot Swiss Power Spot Hungarian Power (Spot & Derivatives) Coal Futures API 4 (RB, South Africa) 1 Austrian Gas (Spot & Derivatives) 1 API 2 and API 4 are used under license from Argus Media Limited/The McCloskey Group Limited. All copyrights and database rights in the API 2 and API 4 indices belong exclusively to Argus Media Limited/The McCloskey Group Limited. All rights reserved. 7

8 AGENDA 1. About ECC 2. Clearing Process 3. Admission Process 4. Position Transfer 5. Next Steps 8

9 Clearing Process: General Services at a Glance Clearing House Clearing = Assumption of counterparty risk Central Counterparty Clearing Members Standard products Close-out netting 1 Margin system 2 Settlement = Settlement of trades (delivery & payment) Payment & delivery netting 1 Standard processes, stp 3 Central bank funds Delivery through TSO or registries Reporting 24/7 helpdesk 1 Combination of all individual receivables and liabilities into one net position 2 System for covering the risks for the market participants 3 straight through processing 9

10 Clearing Process: General Structure of Energy Clearing at ECC Trading Participant 1 (Business) Transaction 3 Collection of securities 4 Exchange License Clearing License Balancing Group Agreement (Clearing Member) 3 2 (Business) Takeover 4 Nomination/Delivery 10

11 Clearing Process: General Process Overview (1/2) 07:30 Start of daily processes (daily) Processing of transactions from partner exchanges (every 5 minutes) 08:00 Cash Settlement (on TARGET2 days only) Variation Margin, Margin Calls and Deliveries from last business day To be found in CD010, CD009 (delivery amount), CC050 (Margin amount) Distribution Delivery-Reports Power & Natural Gas (D-1) 08:00 08:30 Processing of emission rights (on TARGET2 days only) Update of internal accounts Processing of registry transactions 08:00-09:00 Start derivatives trading Dependent on product and exchange 11:00 Day-Ahead auction CH (daily) Day-Ahead auction HUPX (daily) Processing of transactions Nomination of Futures positions (Power and Natural Gas) 12:45 Day-Ahead auction D/A/F (daily) Processing of transactions 14:00 Nomination D/A/F/CH/HU (daily) Nomination of day-ahead transactions for D/A/F/CH/HU 11

12 Clearing Process: General Process Overview (2/2) 14:00 Distribution Delivery-Reports Power (D+1) 16:00 Booking Cut (on TARGET2 days only) Creation of payment transactions for the following TARGET2 day Distribution of Payment Reports approx. 16:45 (Payments overview T+1) Distribution of Spot Trade Reports approx. 16:45 (Transaction overview) 18:00-18:45 End of day processing Final Nomination for Natural Gas Distribution of (updated) Delivery Reports for Power, Natural Gas and EUA (D+1) 19:00 Publication of Settlement-Prices Dependent on product and exchange from 21:00 Calculation of Variation Margin and other Margin-Requirements 22:30 Nomination of French Intra-Day positions approx. 6:00 Distribution of EUREX Reports of the previous day End of month Invoicing Creation and distribution of invoices until the 5th working day of the new month at the latest Distribution of Invoice Reports Direct Charge of Clearing Fees through Clearing-Member 12

13 Clearing Process: General Clearing Calendar Holiday Calendar enables you to import dates on holidays of partner exchanges and ECC maintenance windows. ECC Business hours ECC is available for its clients on every weekday from Monday until Friday 7:30 a.m. until 7:00 p.m. ECC 24/7 hotline For scheduling problems on ECC s 24/7 markets a 24 hours hotline is available. 13

14 Clearing Process: General Clearing Systems Trading Spot Market Trading System of the exchanges Derivatives Trading System of the exchanges Trade transfer from the Partner Exchange to ECC Clearing Spot Market Settlement System (SMSS) ECC Member Area EUREX Clearing System Reporting ECC Reports delivery, payment, trades, invoicing EUREX Reports Margining & Position Management 14

15 Clearing Process: Spot Market Setup EnCC constitutes the counterparty to PXE participant trades on the OTE/PXE day-ahead market, with ECC acting as payment agent for the respective commodity values. Scheduling of trades is done by OTE. ECC will use its standard business processes for PXE settlement. The net payment from/to OTE participants is settled between EnCC and ECC. Said settlement is undertaken through the TARGET2 infrastructure. To this end, EnCC will be set up as a technical member in the clearing system of ECC. It should be noted that ECC, acting solely as payment agent, does not guarantee the fulfilment of trades. Yet, the envisaged setup is such that obligations are sufficiently collateralized. EnCC will invoice all commodity values and relevant PXE fees, while ECC will invoice the respective clearing fees. Settlement of clearing fees is undertaken through the TARGET2 infrastructure. 15

16 Clearing Process: Spot Market Financial Settlement (1/3) ECC established a daily booking cut at 16:00:00 CET. All trades concluded before the booking cut are financially settled on the following TARGET2 operating day, all other trades are settled one day later. The commodity amounts of all trades are netted to one net payment amount per Clearing Member and are reported in daily Payment Reports available as a summary or a detailed report. Payments in EUR are processed on TARGET2 operating days at around 8 a.m. CET before market opening via the EUREX infrastructure. Payments in USD and GBP are processed overnight at fixed times on all currency-specific business days according to Clearstream Banking Luxembourg payment cycles. 16

17 Clearing Process: Spot Market Financial Settlement (2/3) All transactions concluded until 16:00:00 CET (booking cut) will be financially settled at the next TARGET2 day as follows: Trades concluded on Thursday Friday Saturday Sunday Monday Tuesday Thursday Friday Saturday Sunday Monday Transactions concluded after 16:00:00 CET will be settled on the next TARGET2 settlement day (T+2). ECC will provide daily payment reports (XML/PDF) after the booking cut including the net payment amount across all commodities and the respective single transactions. The payment amounts will be uploaded into the EUREX system for further processing. Spot Trade Report Payment Report booking cut financial settlement 17

18 Clearing Process: Spot Market Financial Settlement (3/3) The aggregated cash transactions are uploaded into the EUREX system on every ECC business day (TARGET2 day) and settled on the following TARGET2 day. The EUREX cash transactions per Clearing Member use the following transactions types: TranTyp Miscellaneous Member Cash Debits TranTyp Miscellaneous Member Cash Credits Reporting: EUREX cash transactions are reported in the EUREX report CD009/ CD010 and in ECC s payment reports. 18

19 Clearing Process: Spot Market Spot Market Reports Spot market reports are offered as Detail Reports or as Summary Reports. Detail Reports contain all individual transactions in accordance with the filter criteria of the report (e.g. all transactions of the respective trading day in a Spot Trade Report). Report Spot Trade Report Payment Report Delivery Report Invoice Report Description contains all Spot Market transactions (Day-Ahead and Intraday) per trading day; (daily distribution) contains all Spot Market transactions (Day-Ahead and Intraday) per settlement day; (distribution each TARGET2 day) contains all Spot Market transactions as well as delivery instructions from expired future positions per delivery day; (daily distribution) contains all Spot and Derivatives Market transactions as well as delivery instructions from expired futures and options positions which have fallen due per invoice (monthly distribution) Additional data could be requested through the ECC Member Area real-time update up to 15 min. delay. 19

20 Clearing Process: Spot Market Reporting Subscription Reports can be subscribed / unsubscribed by the Member in SMSS. Changes become effective immediately. Reports can be selected by: Report type: detailed and aggregated Report frequency: daily / monthly Report format: XML / PDF Distribution: , SFTPserver Reports are available on ECC s FTP server or via download link send to the mailbox of each user. Overview Report Subscriptions Subscription of additional reports 20

21 Clearing Process Derivatives Market Accounts for Derivatives Transactions Proprietary position accounts Principal Position Account Market Maker Position Account Customer position accounts Agent Position Account L P1- P2 S L M1- M2 S L A1- A9 S Only trades for their own account. Account kept gross, i.e. netting out of long and short positions only upon instruction to that end. Trades for their own account. Account keeping net, i.e. long and short positions are always netted out. Only trades on behalf of a customer/client. Account kept gross, i.e. netting out of long and short positions only upon instruction G1/G2 as sub-accounts for give-up trades Margin Calculation across all accounts Margin Calculation for every single account 21

22 Clearing Process: Derivatives Market PXE Power Futures with Financial Settlement Commodity Contracts traded (cleared) Expiry Day Month Futures Min. Volume Transaction type Trading Days PXE Financial Power Future Base/Peak Month Futures for CZ, SK and HU (next 7) Base/Peak Quarter Futures for CZ, SK and HU (next 7) Base/Peak Year Futures for CZ, SK and HU (next 6) One business day before the last delivery day of the delivery month 1 MWh Exchange and OTC transactions To be determined by PXE Comment Peak Load is from 8am to 8pm from Monday through Friday Cascading: Year into three Month and next three Quarters Quarter into three Months for this given Quarter Physical fulfillment on the PXE/OTE Day-Ahead Market VERTRAULICH / CONFIDENTIAL 22

23 Clearing Process: Derivatives Market PXE Power Futures with Physical Settlement Commodity Contracts traded(cleared) Expiry Day Month Futures Min. Volume Transaction type Trading Days Delivery period PXE Physical Power Future Base/Peakload Month Futures for CZ, SK and HU (next 7) Base/Peakload Quarter Futures for CZ, SK and HU (next 7) Base/Peakload Year Futures for CZ, SK and HU (next 6) Two business days before the last delivery day of the delivery month 1 MWh Exchange and OTC transactions To be determined by PXE The delivery of electricity with a constant value of an hourly output of 1 MW during all hours of all days of the delivery period. VERTRAULICH / CONFIDENTIAL 23

24 Clearing Process: Derivatives Market Process Overview Trading Margin calculation Variation Margin calculation Provision of reports Margin requirement Financial settlement Cascading: Years, Seasons and Quarterly Contracts Final Settlement Price Margincalculation + Expiry-Month- Factor End of Variation Margin Financial Settlement 1. nomination exception: close out Volume of the monthly contract is reduced by the daily volume 1. delivery Monthly invoice Payment of fees Batch 6:00 8:00 Delivery Report SMSS TARGET2 day TARGET 2 day 3 days delivery period 2 days 1 day end of month 24

25 Clearing Process: Derivatives Market Settlement of Energy Futures YEAR/SEASON FUTURE BoM Processing QUARTER FUTURE MONTH FUTURE DAY Cascading Payment date (d-1) Delivery date (d) End of delivery month PAYMENT / SCHEDULING PHYSICAL DELIVERY MARGIN RELEASE Delivery and payment 25

26 Clearing Process: Derivatives Market Financial Settlement Until contract expiry daily variation margin payments. Deliveries are financially settled based on the Final Settlement Price. Payment amount = delivery volume x final settlement price Payments are usually due one day before delivery (BoM) and will be processed via the EUREX infrastructure via TARGET2 accounts. Reporting: Daily variation margin: EUREX report CB010/CB095 Delivery payments for each position including final settlement prices: EUREX CE120 report Cash movements: EUREX CD010/ CD009 report: Daily Cash Account Statement Transaction type 285: DLVRY AMNT PAID Transaction type 287: DLVRY AMNT RECEIVED Transaction type 281: VAT RECEIVED Transaction type 283: VAT PAID Transaction type 297: Miscellaneous Member Cash Debits Transaction type 298: Miscellaneous Member Cash Credits 26

27 Clearing Process: Derivatives Market Physical Settlement of Physcial Power Futures The Luxembourg-based ECC subsidiary European Commodity Clearing Luxembourg S.à.r.l. steps into the delivery chain as an additional contractual party. As central counterpart, ECC assumes the role of a market participant in the grid of the Transmission System Operators. Physical Settlement is provided by ECC Lux which has concluded a balancing area agreement with all major European TSOs. Trading participants opting for physical settlement need to conclude a balancing area agreement with the relevant TSO. Alternatively, a third-party account permitting access to a balancing area can be used. 27

28 Clearing Process: Derivatives Market Balance of Month (BoM) Settlement Process BoM Positions remain during delivery in the EUREX system. Volume is reduced each business day. (report ce120) Each TARGET2 day ECC imports the BoM positions into SMSS for physical settlement. Determination. of final settlement price by Exchange Integration of delivery positions for the next 5 days into ECC s system The financial settlement will take place at least one day before delivery day. During holidays and for the weekend the payment will be processed one day earlier or respectively on Friday. Financial settlement is carried out through the EUREX system. Physical delivery will be performed by ECC on a net basis Integration of delivery positions for the next 5 days into ECC s system Integration of delivery positions for the next 5 days into ECC s system All transactions will be included into existing ECC reports (EUREX/ ECC delivery reports) or are available for online view / download via the ECC Member Area. Integration of delivery positions for the next 5 days into ECC s system Payment of commodity amount for 1 st delivery (Friday) Payment of commodity amount for weekend and Monday Payment of commodity amount for Tuesday Payment of commodity amount for next delivery day ECC Delivery Report with positions for next delivery day ECC Delivery Report with positions for next 3 delivery days ECC Delivery Report with positions for next delivery day ECC Delivery Report with positions for next delivery day ECC Delivery Report with positions for next delivery day ECC Delivery Report with positions for next delivery day Expiry Date (E) E + 1 1st Delivery 2nd Delivery 3rd Delivery 4th Delivery X Delivery WED THU FRI SAT SUN MON TUE VERTRAULICH / CONFIDENTIAL 28

29 Clearing Process: Derivatives Market Derivatives Market Reports Report RPTCB010 RPTCB030 RPTCB095 RPTCB130 RPTCB140 RPTCB150 RPTCB160 RPTCC050 RPTCD009 RPTCD010 RPTTC810 Description Position Detail Position Transfer Overview Variation Margin Overall Summary Give-up Trades History Accepted Give-up Trades Take-up Trades History Accepted Give-up trades Daily Margin Daily Cash Transaction Daily Cash Account Statement (cash movements) Daily Trade Confirmation Eurex reports are available as text files and XML reports free of charge. XML reports can easily be customised to meet your needs. Please see Eurex XML Report Reference Manual (PDF) for more details. 29

30 Clearing Process: Derivatives Market Reporting Subscription for Derivatives Market The report subscription can be done in the EUREX Clearing GUI or via the new Common Report Engine. Facts MISS Architecture has been decommissioned Common Report Engine has been introduced All EUREX reports (derivatives clearing) available History of at least 10 business days Members access from different locations possible (depending on their business requirements) Security is based on SFTP protocol Common Report Engine MISS Architecture ECC FTP (SMSS Reports) Decommissioned Client Planned enhancements ECC currently evaluates the possibility of providing ECC XML and PDF reports via CRE as well to offer a single reporting interface 30

31 Clearing Process Invoicing ECC creates monthly invoices at the latest until the 5th business day of the following month. ECC issues invoices for Clearing Fees and commodity amounts. The invoices are sent to the customers by post. An invoice copy (Invoice Report Summary IRS) and a detailed report (Invoice Report Detail IRD) are available via and/or FTP server and can be subscribed to in the ECC Member Area. Fees are debited on the 10th business day of the following month via the TARGET2 account of the participant's clearing bank and are reported via ECC s standard payment reports. 31

32 Clearing Process: Risk Management Risk Management at ECC Security in Risk Management As the central counterparty, ECC is positioned between the buyer and the seller in every trading transaction. In the event of a default of a trading participant ECC assumes the replacement risk (counterparty risk) and guarantees payment and delivery under the transactions (settlement risk). ECC uses an internationally accepted risk management system comprising various security levels for collateralising the positions. Improvement General trend towards the introduction of more sophisticated risk management methods To this end, ECC has optimised its margining with the so-called crossmargining, i.e. possible offsetting of opposite positions: - This reduces utilisation of collateral. - This increases economies of scope. 32

33 Clearing Process: Risk Management Lines of Defense ECC has final liability. All CMs have joint liability through Clearing Fund ECC CF-Contribution (3 m ) CMs Margins ECC equity Replenishment clearing fund Clearing fund contribution - rest ECC clearing fund contribution CM clearing fund contribution Margin requirement Variation Margin/Intraday Cashcall CM is liable for NCM Minimum requirement for CM 33

34 Clearing Process: Risk Management Multiple Layers of Security ECC equity Coverage of the default of a Clearing Member Stress Scenario Expected Scenario Clearing Fund Initial Margin Coverage of the Daily Risk Variation Margin 34

35 Clearing Process: Risk Management Utilization of Clearing Fund The contribution to the clearing fund made by a Clearing Member can be used in order to remove the financial consequences of a default on the part of this or other Clearing Members. In case of a compensation for cases of damage arising on account of a default, ECC shall utilize the margins in the order specified herein below: 1. Other margins as such on the part of the Clearing Member which is subject to the obligation to perform in accordance with section et seqq. of ECC Clearing Conditions. 2. Contribution to the clearing fund by the Clearing Member which is subject to an obligation to perform. 3. Contribution to the clearing fund of ECC to the current amount, 4. Contributions to the clearing fund by all other Clearing Members; in this context, the contributions shall be utilized to the same proportionate shares. 35

36 Clearing Process: Risk Management Calculation of Clearing Fund The size of the clearing fund is calculated according to the requirements in CPSS-IOSCO and EMIR: Financial resources should be sufficient that the CCP withstands the default of the Member to which it has the largest exposure or the simultaneous default of the second and third largest Member if their combined exposure is higher under extreme but plausible conditions. For CCP clearing multiple markets coverage of default of two biggest Members is required; ECC also observes this. For identifying extreme but plausible conditions the history for all products cleared by ECC has been analysed. Sets of extreme events (characterised by price movements larger than the historic margin parameter) have been extracted and used to build scenarios. Scenarios are run on current portfolios daily; size of clearing fund is adjusted if necessary. Clearing fund contribution is allocated to Members according to their margin requirement in relation to the total margin requirement across all Members; minimum contribution 3 m. Adjustments are infrequent (about every 3 months) and are announced with sufficient lead time. Any history of default management? MF Global (2011) and Lehman (2008) both were Clearing Members of ECC. Defaults have been processed without using the clearing fund. 36

37 Clearing Process: Risk Management PXE Spot Limit PXE and ECC will preserve the familiar spot limit functionality at PXE with ECC assuming responsibility for the maintenance process. Functionality Description The spot limit for orders on the common day-ahead platform of OTE/PXE routed via PXE constitutes a financial limit. It is thus equivalent to the maximum financial amount up to which the Trading Participant can trade through regular spot orders. The overall financial volume of any regular spot order, given by the product of volume and price, is calculated for buy (sell) orders with positive (negative) price and compared to the spot limit. Maintenance Process The specification of spot limits is undertaken at Non-Clearing Member level at ECC. It is important to note that it is mandatory for Clearing Members to maintain PXE spot limits for their associated Non-Clearing Members. Modifications are communicated to ECC via . 37

38 Clearing Process: Risk Management Spot Margin: PXE Participants and EnCC In order to guarantee the entirety of spot market payments ECC will call a spot margin from all PXE participants trading on the OTE/PXE day-ahead platform. Said spot margin may also be used to collateralize the counterparty risk between ECC and EnCC. Spot Margin for PXE Participants Spot market risk for ECC arises from regular spot orders (limited) and market orders (unlimited) for physical fulfillment of financial power futures. For PXE participants that solely trade on the day-ahead platform of OTE/PXE, the spot margin will be capped at the spot limit. Yet, for PXE participants that have been admitted to trading in either said financial power futures or any other ECC-cleared spot product, the spot margin is calculated the standard way. 38

39 Clearing Process: Risk Management ECC Derivatives Market Margining Methodology ECC previously used EUREX RBM. However, EUREX margin methodology is not optimized for commodity clearing: insufficiently consideration of spread positions and of near risk free positions No margin offsetting between different commodities (e.g. no offsetting between gas and power) After analysing different options ECC has decided to implement SPAN 1 to facilitate better cross margining (across commodities, maturities and exchanges). SPAN (Standard Portfolio Analysis of Risk) is an off the shelve margin system that is used by 50 exchanges and clearing houses worldwide. SPAN ECC will provide standard SPAN files containing the margin parameters. Clients can use the existing PC-SPAN margin calculator. ECC has purchased a license to use the SPAN algorithm and a software tool to calculate margin requirements (SPAN Clearing Manager). 'SPAN ' is a registered trademark of Chicago Mercantile Exchange Inc. Chicago Mercantile Exchange Inc. assumes no liability in connection with the use of SPAN by any person or entity." 39

40 Clearing Process: Risk Management Calculation Levels for Derivatives Margining Level 1 Offesetting of Common Combined Commodities for Options vs Futures Physical vs Financial Level 2 Perfect Spreads between products with perfect overlapping delivery period and profile: A year against its 4 quarters Baseload against peakload and offpeak of the same delivery period Level 3 Spreads between all possible combinations of two products with different: Commodities Delivery area Delivery profile Delivery period Maturity Netting efficiency 100% Netting efficiency 99% Netting efficiency 0% - 99% 40

41 Clearing Process: Risk Management Recalculate SPAN Initial Margin To recalculate the SPAN Initial Margin Requirement you need: a) PC-SPAN (The tool can be obtained from CME for 500 USD. The link to the software site is on ECC s website b) The current SPAN parameter file. This can be obtained from: ECC s FTP site ftps.ecc.de; login required from ECC Clearing and Settlement (NCM04p) (contract detail file ECCs website (no login required) CME s FTP site ftp://ftp.cmegroup.com/pub/span/data/ecc/; no login required) c) Current Positions. This can be obtained by A position file in SPAN Format Manual Entry of positions in PC-SPAN 41

42 Clearing Process: Risk Management Example for Cross Margin Savings 200 Phelix Base 2013 vs. Emissions December % (Positions according inverse ratio of margin parameter) Current Margin: X-Margining: Doubled overall margin due to emissions position Overall margin requirement decreased by just 2%, which means savings of 51%. 0 Current Margin X-Margining 200 Phelix Base 2013 vs. NCG Gas % (Positions according inverse ratio of margin parameter) 100 Current Margin: Doubled overall margin due to gas position X-Margining: Overall margin requirement decreased by 14%, which means savings of 57% 0 Current Margin X-Margining 200 Phelix Base 2013 vs. Coal API % (Positions according inverse ratio of margin parameter) 100 Current Margin: Doubled overall margin due to coal position X-Margining: Overall margin requirement decreased by 2%, which means savings of 51% 0 Current Margin X-Margining 42

43 AGENDA 1. About ECC 2. ECC Clearing Processes 3. ECC Admission Process 4. Position Transfer 5. Next Steps 43

44 ECC Admission Process Trilateral Relationship between CM NCM ECC Non-Clearing Members (NCM): are trading participants that only need to fulfill basic clearing requirements sign a trilateral agreement between the NCM, Clearing Member (CM) and ECC to provide for the necessary infrastructure 44

45 ECC Admission Process Non-Clearing Member Requirements Application Forms NCM Forms NCM01 APPLICATION FOR ADMISSION AS NON-CLEARING MEMBER NCM02 NCM AGREEMENT NCM04 APPLICATION FOR SETUP/ MODIFICATION / DELETION OF USER-IDs KNOW YOUR CUSTOMER QUESTIONNAIRE TRADING PARTICIPANT FORMS TP 22 a-c for PXE Hungarian Power TP 23 a-c for PXE Slovakian Power TP 24 a-c for PXE Czech Power VAT Assessment TP07 T06 SETUP FOR COMMON REPORT ENGINE VERTRAULICH / CONFIDENTIAL 45

46 ECC Admission Process Non-Clearing Member Requirements Documents Documents for ECC Audited Annual Report or Business Plan Audited Annual Report of the main shareholder Audited Annual Report of the ultimate parent Company House Act (Proof of Registration) Organizational Chart (Company Structure) Proof of signatures Documents for CM Audited Annual Reports (last 2-3 years) Organizational Chart (Company Structure) Proof of guarantee of parent company Documents can be submitted centrally at PXE. After proof of correctness and completeness the documents will be forwarded to ECC and CM in parallel. VERTRAULICH / CONFIDENTIAL 46

47 Member Readiness KYC Process & Scoring - Introduction Background The emission allowances market within the EU was hit heavily by tax evasion schemes (VAT fraud) Markets and participants where tax evasion schemes have been detected suffered reputational damages and are facing legal charges. Problem was reduced by introducing reverse charge or by eliminating VAT on emission allowance sales BUT it is expected that fraudsters now target the power and/or gas market, ECC s major markets Measures ECC improved the Know-Your-Customer (KYC) policy and developed a KYC questionnaire The provision of the KYC questionnaire is one of several preconditions to become a Non-Clearing Member at ECC and must be resubmitted in certain time intervals KYC questionnaire is evaluated with the help of a scoring methodology which incorporates the recommendations by the German Tax Authorities and has been verified by independent external auditors 47

48 Member Readiness KYC Process Fast Track Admission Standard Decision Committee If the applicant itself or the parent company (majority holding) of the applying company fulfills certain criteria a - Fast Track Admission (FTA) - without detailed scoring can be applied after agreement/ approval by ECC admission: Listed/well known energy provider/producer (Stadtwerke ) Financial Institutions (with external investment grade rating) Already admitted/ authorized participants (ECC or partner exchanges) for financial settled products exclusively Application for clearing of financial settled derivatives exclusively Exchange sends out admission package - including ECC KYC questionnaire - to applicant. Exchange performs - completeness check - regarding customers ECC KYC and related documents before forwarding it to ECC to avoid unnecessary queries. Exchange prepares score and communicates result to ECC. ECC reviews score and is entitled to raise dissent if there are sufficient concerns regarding the applicant. If score is in a critical range ECC might request additional information (i.e. additional to the information already submitted in the KYC). This might be requested by ECC from Exchange or from customer directly. If the score is still in a critical range the case is handed over to ECC Decision Committee that decides about admission request. ECC communicates the result to the Exchange. 48

49 AGENDA 1. About ECC 2. ECC Clearing Processes 3. ECC Admission Process 4. Position Transfer 5. Next Steps 49

50 Position Transfer Position Transfer Position transfer will be organised by PXE and ECC ECC has experience in sizable position transfers Position transfer will be completed via standard trade registration interface Trades will be batch-imported on the cut-off day at last settlement price List of all trade files with trade IDs will be used to ensure completeness Reporting to trading participants will be provided Margins transfer to ECC in cash Prerequisites: All Clearing Member and participants are admitted at ECC to trade PXE products The current and the new Clearing House and all members have declared their technical and operational readiness for the transfer and to each other All relevant parties have entered into the deed of novation. 50

51 AGENDA 1. About ECC 2. ECC Clearing Processes 3. ECC Admission Process 4. Position Transfer 5. Next Steps 51

52 AGENDA - February 2013: ECC Clearing Information with all details (product setup, processes, member readiness etc.) Preparation for member readiness of all existing PXE members (ECC forms, forms for position transfer etc.) - February/ March 2013 Common ECC PXE Tests - April 2013 Member simulation Preparation Position Transfer - May 2013 (subject to regulatory approval and depending on member readiness) Position Transfer and Go-live 52

53 Thank you for your attention! Srdečné díky! Anja Drosdziok Head of Clearing Initiatives & Cooperations Phone: Arne Vogler Phone: