Blatant mistake. The existing connection between gas prices and the already infamous TTF (Title Transfer Facility) in Amsterdam turns out to be the biggest disaster in the EU regulatory systems, writes Il Fatto Quotidiano.

This was acknowledged, in black and white, by the same Commission officials who prepared the 17-page document for the nonsensical extraordinary council of energy ministers on September 9. It is not an official act, because the non-official document, as these Commission acts are called, is a preliminary analysis of the options put on the table for the Union to make sure that member states “fight against rising energy prices” and that they ensure supply and sustainability” .

The conclusions of the technical specialists are an indictment against the European Union itself.

In further confirmation of the error, EU Energy Commissioner Kadri Simson announced during a press conference the intention to develop a “complementary index” because “the current parameter of the gas price, known as TTF, is related to a relatively small and pipeline market, which does not reflect the current reality in the EU”.

The TTF in Amsterdam is a virtual market that at best represents the supply system in the north-east of the continent, created to manage the system entering the Netherlands via a pipeline originally operated by Gasunie Transport Services, 100% controlled by Gasunie, the state’s energy arm .

Before the pandemic crisis, no one (or almost no one) was interested in the growing size of the financial Frankenstein created in Amsterdam with the support of ICE (Intercontinental Exchange), a giant of financial platforms founded in 2000 by Jeffrey Sprecher with the support of a large investment bank. ICE is a group with a turnover of 7.1 billion dollars, which since 2013 also controls the NYSE, that is, the New York Stock Exchange. Being a stock exchange, the more trades, the more ICE earns.

Large energy traders, hedge funds and a small group of companies (including Gazprom) are increasingly adopting PFT as a benchmark

By 2021, trading on FTT increased by 45%, and the ICE group saw a 10% increase in revenues from the energy sector to $1.2 billion. But large energy commodity traders, hedge funds and a small group of energy companies (including Gazprom) are increasingly adopting the FTT as a benchmark for continental gas pricing, to the point of tying supplies to the previous quarter’s trend in futures contracts (as was discovered only in July 2022 by ARERA, the Energy, Networks and Environment Regulatory Authority).

Commission officials now admit that the Dutch virtual market is small (born to be regional at best), with absolutely terrible price volatility and that it is out of control. A non-official document prepared by representatives of the commission shows that the FTT values ​​are 30% higher than the average prices recorded in the virtual gas trading points in each country (British NBP, French Peg or Iberian PVB).

Once in this place, what to do there?

The techs are offering what some observers (like me) have been talking about for a year. Freezing TTFs, “to impose such a freeze under the Article 122 instrument” (using Article 122 of the EU Treaties, which empowers the Council to take emergency measures in cases of exceptional seriousness of access to certain products, particularly in the energy sector). The technical paper also calls on ESMA (the body that is supposed to supervise the financial markets) to conduct a quick analysis of the real conditions of the Dutch market, which, due to its allegedly small size, is not subject to supervision.

Regarding this, the Greeks, who submitted the document with the request to limit PFT prices, speak much more clearly and decisively: “The errors of the market must be corrected.” Athens proposes to at least peg futures contract prices to the US Henry Hub index, excluding liquefaction and transport costs to Europe (which total about 45 MWh). From the table published in the document, it is clear that the average prices since the beginning of September are $34 per MWh, and even taking into account $30 per transmission would mean setting the FTT cap at €130 per MWh.

Apart from the results of endless political negotiations, it is now clear to everyone that a system that links gas supply to a stock exchange, where only financial contracts are exchanged, is destroying the economy of the entire European Union.

Almost nothing is known about TTF in Amsterdam. The only information is the monthly prices on the ICE platform website.

However, after the crisis of 2009, the possibilities of strong regulatory intervention are well known, and the control country, the United States, has put in place a very strict system, which obviously does not eliminate the risks of distortion, but certainly avoids the phenomena that we have been exposed to in Europe for more than a year.

After the approval of Dodd-Frank (the new financial system law desired by the Obama administration, which took effect on July 21, 2010), financial futures contracts traded in Amsterdam are subject to strict controls and clear restrictions: all actions must be transparent, limits are set for individual positions of each operator (on average no more than 10% of the volume), trading can be suspended when volatility is excessive, as well as traders.

None of this happened at the TTF in Amsterdam, about which almost nothing is known, since the only information is the monthly prices available on the website of the ICE platform. And frankly, when talking about sanctions, a question spontaneously arises that deserves an immediate answer: does anyone in Brussels know about the behavior of Gazprom, which is one of the operators of the Dutch virtual market?

Suspicions that the Russian state giant could influence the index to which major supply contracts are tied (indirectly contributing to others such as the Norwegians, who have meanwhile become Europe’s number one gas supplier) are very high and worth opening up . investigation.

Article courtesy of Rador