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EU Gas Price Cap Could Curb Market Liquidity

NATURAL GAS

The EU’s gas price cap could impact financial stability and weigh on the liquidity of Europe’s exchange-traded gas markets, ESMA said in a document seen by Reuters.

  • It appeared likely that market participants would shift to trading in contracts or venues where the gas price cap doesn't apply - either by moving to non-EU trading platforms or OTC trading. That could deal a blow to liquidity on regulated markets for TTF contracts, ESMA said it its report.
  • The full impact of the price cap may only become clear when it is close to being triggered, ESMA added.
  • The market correction mechanism, starting from 15 Feb, will be automatically activated if the month-ahead TTF price exceeds €180/MWh for the working days and the TTF price is €35/MWh higher than a reference price for LNG on global markets for the same three days.
  • ESMA and energy regulator ACER were tasked with producing an initial analysis by 23 Jan and a full report by March, on whether the gas price cap could have negative consequences for financial and energy markets.

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