At a London roundtable hosted by Trayport, senior industry specialists identified counterparty risk as the most pressing concern for energy markets in the coming year. The roundtable discussed the effect of the current financial crisis on energy, commodities and emissions markets.
The participants debated how innovations in regulations and credit affect trading in European gas and power markets. Some expressed concerns about how OTC market participants handle counterparty credit, which was seen as the most challenging element in energy trading over the last six months. The countries whose markets had fared best were those that had set up energy markets that separated financial transactions from clearing and regulatory bodies. Participants expected to see more emphasis in the coming year on physical transactions rather than regulation.
For the emissions exchanges, credit and managing counterparty risk was seen as a greater issue than regulation next year.
The roundtable also discussed how the regulatory and political landscape could change next year with a new European Parliament and potentially a new European Commission. The consensus was that the European Commission should take a more active role in the trading of commodities in Europe as the energy markets expand.
The roundtable concluded that oil trading would be the key market for 2009, being the main driver for prices in other commodities markets. They predicted that Russia’s influence in this market was likely, which could lead to swaps and increased liquidity in oil markets.
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