ISDA, the Association for Financial Markets in Europe (AFME) and FIA have published a position paper on the European Commission’s (EC) market correction mechanism proposal for natural gas prices in the European Union. The proposed mechanism would set a price cap on the TTF front-month future contract price when certain conditions are met.
The associations urge the EC to avoid imposing any price cap on the wholesale gas market and instead focus effort on securing supply, reducing demand, supporting the liquidity needs of energy firms and accelerating the energy transition.
The paper highlights the detrimental implications the proposed mechanism would have on liquidity and risk management, and warns that it would introduce unacceptable levels of systemic and operational risk while not necessarily achieving the primary policy objective to reduce power and gas prices for consumers.
The paper also asserts that this measure could undermine trust in the European gas market, discouraging market participant activity.
Read the position paper here.
For Press Queries, Please Contact:
Nick Sawyer, ISDA London, +44 20 3808 9740, nsawyer@isda.org
Lauren (Dobbs) Springer, ISDA New York, +1 212 901 6019, ldobbs@isda.org
Joel Clark, ISDA London, +44 20 3808 9760, jclark@isda.org
Christopher Faimali, ISDA London, +44 20 3808 9736, cfaimali@isda.org
Nikki Lu, ISDA Hong Kong, +852 2200 5901, nlu@isda.org
Documents (1) for ISDA, AFME and FIA Publish Paper on EC Market Correction Mechanism Proposal
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