Market Dynamics Report

OCTOBER 13 2014

September 2014

Another record month in TTF, CME increases share in Euro Coal, and volumes up across all markets

Volumes in September were up across all commodity classes in the European Energy markets, with Emissions and European Coal and Power registering the largest increases. By monthly contract equivalents traded, total Euro Commodity September 2014 volume matches the volume we witnessed earlier in July.

September 2014 saw the NBP market grow 26% YTD, while smaller than the TTF market growth of 65% YTD 2014, nevertheless remains a strong growth figure. August 2014 was the first month in which ICE exchange executions broke the 50% market share barrier. This was not maintained in September as broker bilateral took back market share at the expense of exchange executions; the market share split in September was 47% broker bilateral / 7% broker cleared / 46% exchange execution.

TTF volumes increased in September by 11% MoM and 75% YoY to 1,281 TWh, the largest volume since we began reporting. The TTF cleared market increased to 15% this month, while YTD 2014 the cleared market stands at 12% vs. 8% YTD 2013. Are we seeing a shift to clearing in TTF? Will this predominantly bilaterally traded market see further growth in the cleared market share in the near future? Given NBP's increased liquidity this month, TTF dropped back to 86% the size of the NBP market, from 92% in August.

The European coal markets of API2 and API4 saw their combined volumes increase by 51% to their highest level during 2014. API4 continues its strong growth year-to-date, with volumes up by 7% vs. a decrease of 11% in API2. Year-to-date 2014 API4 stands at 24% of API2 compared with 20% year-to-date 2013.Both CME & ICE registered an increase in volumes in September. CME remains the preferred choice of clearing venue with cleared market share in September 2014 of 79% in API2 and 91% in API4. Front month prices fell in both API2 and API4 by 6% and 7% respectively to their lowest levels since our records began. Is the drop in coal prices fuelling the high volumes we are witnessing in these two markets or are the high volumes purely seasonal?