Market Notice (Hungarian Gas Market) on the importance of settlement integrity and safety

KELER CCP Central Counterparty Ltd. (hereinafter KELER CCP) as a backbone of the post-trade infrastructures plays an important role on the Hungarian gas markets providing central counterparty clearing and guarantee undertaking services to the network users of the Hungarian gas transmission system. KELER CCP as a service provider was appointed by the FGSZ Földgázszállító Zrt. (the Hungarian gas TSO) and by CEEGEX Zrt. and HUDEX Zrt. to undertake this role more than a decade ago.

KELER CCP and its supervisory authority the Central Bank of Hungary closely monitor the activity of the market participants on the organized gas markets and especially in respect of the balancing market due to it’s relevance to the widest range of market participants and the risks that are inherited from the nature of this activity.

KELER CCP has created and operates a robust risk management framework in line with the European regulations and best practices. The risk management policy, framework and practices are maintained and continuously adjusted in line with the regulatory regime and market developments to comply with the primary goal: to protect the market participants from a financial default.

In the past weeks KELER CCP has experienced unprecedented a series of imbalances in the Hungarian gas transmission system, which during the settlement also required active operational and risk management, as the imbalanced member was in delay with its fulfilling its obligations and defaulted on 27 May.

Thanks to the multilevel risk management system operated by KELER CCP, and the steps taken during the past weeks, when in line with the experienced rising risks, KELER CCP increased the additional financial collateral required from the member; KELER CCP was finally able to protect the market by ensuring continuous operation and settlement of the default fully from the own financial collaterals and contributions of the defaulting member. Thus KELER CCP was successful in protecting the market participants from financial losses.

The stress experienced on the balancing markets however also resulted in the growth of the respective default fund. Therefore KELER CCP’s personalised notice will arrive to the affected clearing members, whose contribution is now needed to reset the appropriate size of the balancing market default fund.

Further to the above, KELER CCP calls the Clearing Members’ attention on one hand on the importance of own risk management activities with regards to their OTC trading partners to prevent imbalances on the market, and calls the market attention to the continuous compliance with the rules and procedures declared in KELER CCP’s General Business Rules and the connecting regulating documents, as these are the backbone of the safety of the market.

KELER CCP will continue to be a fully committed clearing service provider for the domestic gas markets, and will similarly continue working on the development of the clearing and guarantee system operated. KELER CCP trusts that as a result, the market will continue to experience efficient trading and smoothly operated and guaranteed financial settlement. The growing security of the natural gas supply system is a common interest and KELER CCP’s primary aim.