ESMA finds that MCM had no measurable impact on financial markets under current market conditions

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, has today published its Effects Assessment of the introduction of the market correction mechanism (MCM) on gas derivative markets. The results confirm the findings of the preliminary data report that, to date, no measurable impact of the MCM can be identified.

In the report, ESMA explores whether some shift of trading has unfolded as a consequence of the MCM. Based on this analysis, ESMA notes that no changes in the EU gas derivatives trading could be identified so far that could be unequivocally and directly attributed to the MCM.

In addition, the report describes the impact of the MCM on the CCPs’ capacity to conduct their risk management activities, in particular, to calculate their exposures and to manage potential clearing member defaults. The analysis performed did not result at this stage in the identification of noticeable changes in CCP risk management or in margin requirements that could be attributed to the MCM.

The absence of a significant impact of the MCM on the trading and clearing environment should not be understood as the MCM not having any impact and reflects the current market environment characterized by low gas prices and high storage levels. The impact of the MCM could be different as the market environment changes and the activation of the MCM is anticipated by market participants.

Last, the recent announcements by ICE Endex and EEX to offer respectively the trading of TTF contracts in the UK and on an EU OTF – both outside the scope of the MCM Regulation – confirm that market participants are preparing for a scenario where the MCM could be activated in the future.

The Effects Assessment is covering the time horizon since the adoption of the MCM in December 2022, and granular market indicators regarding trading activity, liquidity, and execution.

ACER also published its Effects Assessment today. See here.

The EU Regulation establishing an MCM to protect Union citizens and the economy against excessively high prices was adopted by the Council of the EU on 22 December 2022 and entered into force on 1 February 2023.

ESMA and ACER published preliminary data reports concerning the adoption of the MCM in January 2023. The provisions governing the MCM started applying on 15 February 2023

Next steps
ESMA will continue monitoring developments in the trading and clearing of EU gas derivatives and is ready to provide further technical advice, including where the activation of the MCM is imminent and in case of the activation of the MCM.

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