ICE warns it may pull gas market from EU over Brussels price cap

Intercontinental Exchange has warned it may pull its gas trading market out of the Netherlands if Brussels presses ahead with a plan to introduce a cap on prices.

The stark threat comes as tensions among EU ministers rise following a month of divisive talks over a European Commission proposal to cap the derivatives price of gas traded in Amsterdam.

The market, known as the Dutch Title Transfer Facility (TTF), is the region’s main centre for trading and setting the price of gas, and has become a symbolic issue as the bloc tries to respond to its broadening energy crisis.

In an effort to quell the rapid rise in energy prices in the wake of Russia’s invasion of Ukraine, the EU has implemented a series of measures including mandatory gas storage and consumption reduction targets.

But governments from countries including Belgium, Spain and Greece have insisted that a cap on the price of gas is also necessary to protect consumers and industry from the volatile prices. Others, including Germany and the Netherlands, fear a cap would threaten the security of gas supplies and put financial stability at risk because it would put unbearable costs on market users.

On Tuesday, ministers failed for a second time to find a resolution to the debate and have delayed approval of the measure to their final meeting of the year next Monday.

In a memo sent to member states on Thursday, and seen by the Financial Times, ICE warned that the rapid imposition of a cap would give it no time for customers to adapt or for the market operator to test the system’s resilience and risk management systems. A cap would likely force traders to immediately recalculate their prices, risks and costs, putting greater strain on the market, it said.

“As a consequence, it is the responsibility of ICE as the market operator to consider all options if this mechanism is agreed, up to and including whether an effective market in the Netherlands is still viable,” the memo said.

ICE declined to comment further. The exchanges operator, based in Atlanta, has warned a cap could add unsustainable costs to the utility companies and other traders that use it, and force prices for consumers higher.

The EU’s latest proposal would see a cap triggered when TTF futures prices hit €220 per megawatt hour for five days and are €35 per MWh higher than average prices for liquefied natural gas.

Brussels also wants to expand its original plan from including only month-ahead futures contracts to ones that settled three months hence. ICE has warned gas traders would be forced to find another $47bn in margin payments, around double the current levels they pay, if a revised plan went ahead.

The European Central Bank also warned last week that a cap could “in some circumstances, jeopardise financial stability in the euro area”.

The Commission originally proposed a cap of €275 per MWh when prices hit that level for 10 days, and contingent on gas prices being €58 per MWh higher than an average of global LNG prices. Several ministers from pro-price cap countries deemed that level “a joke” as it would not have been triggered even when prices hit record highs in August.

In 2018, ICE transferred trading in hundreds of energy futures contracts from London to the US to help customers escape the burdens of new Mifid II rules governing European financial markets. Last year, it moved EU carbon trading from London to Amsterdam in the wake of Brexit.