EU watchdog wakes up to TTF speculation

UPDATE: Market regulator ‘lowers’ position limits on Dutch TTF trades — but not everything is as it seems

*** This post was updated on 4 July 2024 to include comment from ESMA and the AFM. See ‘Apples and oranges’ subsection below the paywall ***

Breaking news: European regulators have woken up to the problem of speculative capital making big bets on EU gas prices, and seem be taking action (of sorts).

The EU markets watchdog claims to have lowered the so-called ‘position limit’ that caps the size of trades on Dutch TTF — a measure that Energy Flux called for just a few days ago to tackle the speculative problem that’s inflating prices on Europe’s biggest gas trading hub.

It said a lower cap was needed because trading in TTF derivatives has exploded in recent months, while the amount of physical gas supply underpinning TTF futures and options is shrinking.

But not everything is quite as it seems. Depending on how you measure it, the new limits appear to be higher than the ones they are replacing.

In any case, they still allow market participants to make very large bets on future EU gas prices. In fact, the new limits theoretically allow for all registered TTF traders to hold aggregate net positions worth more than the GDP of Brazil (!).

Here’s what you need to know.