According to the Danish competition authorities, the Danish wholesale market for natural gas has a high degree of market concentration with very few players and limited activity. However, an actual market place for natural-gas trade has been created with the opening of the first gas exchange in Denmark, Nord Pool Gas. This will intensify competition on the wholesale side and contribute to a more efficient market.
The exchange offers trade in six different products. The first two products are gas for delivery next day and gas for delivery next month. These are the most traded physical products on other European gas exchanges and the products highest in demand by Danish customers. Two new products were introduced 1 April 2011, a within-day product that makes it possible to trade gas with physical delivery on the same gas day and a weekend product that makes it possible to trade gas with physical delivery Saturday and Sunday of each week in one contract. The exchange also offers trade in a product that enables the purchase of gas for delivery in the rest of the current month. This product is called “Balance of Month Contracts". Finally, the exchange offers a swap product that makes it possible for the shippers to trade gas for physical delivery in Denmark and Germany. Trade in financial products may be an option in the long term
Trading on Nord Pool Gas is anonymous as the exchange is the counterparty in all transactions, which are electronic and in real time. Nord Pool Gas uses Trayport as its trading system, so that purchase and sales bids on other gas hubs/exchanges can be seen on the same screen. This gives an integrated market, providing an overview of the market situation.
The trading principle on Nord Pool Gas is continuous trading. This means that traders on the exchange can place purchase and sales bids all the time. This type of trading is best suited for a market with a moderate number of players and limited liquidity.
A customer must be registered with Nord Pool Gas and Energinet.dk to be able to trade on the gas exchange. Customers must sign a framework agreement with Energinet.dk, regulated by the Rules for Gas Transport. For further information, see Gas – how to become a player on the gas market.
Nord Pool Gas has been established by Energinet.dk in collaboration with the Nordic power exchange, Nord Pool Spot, with each party owning 50 per cent. The establishment of the gas exchange is in line with Energinet.dk’s overall strategy for creating the framework for an efficient and well-functioning gas market.
Procedures for trading on Nord Pool Gas
Nord Pool Gas, possibly together with the customers, submits the transactions made on the exchange to Energinet.dk once a day. This is done by nominating all trading schedules to the exchange point, Nord Pool Transfer Facility (NPTF). The NPTF is a new virtual trading point established by Energinet.dk in the Danish transmission system.
The exchange must always strike a balance. That is why the principle of ‘the exchange is always right’ applies for nominations to the NPTF as opposed to the GTF (Gas Transfer Facility) where the rule of ‘lesser of’ applies. Energinet.dk’s matched nominations constitute the customers’ allocations in the exchange point.
Customers can trade on the exchange up to 13:00 for products to be delivered next day. This gives customers at least one hour for nominations before the deadline at 14:00. Subsequent renominations to the exchange point are not allowed.