Gas futures as a factor of the Ukrainian capital market development
-
DOIhttp://dx.doi.org/10.21511/imfi.19(4).2022.16
-
Article InfoVolume 19 2022, Issue #4, pp. 193-206
- Cited by
- 359 Views
-
69 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The purpose of the paper is to analyze current trends in the gas futures market and the prerequisites for their spreading in Ukraine. The analysis is based on scientific research results, search query time series provided by Google Trends, and statistical databases of derivative markets. The paper reveals the trends in the reshaping of the commodity derivatives market after 2008 in favor of commodity derivatives and the fast-growing volume of gas futures in the EU after 2017. The dual reason for these trends comes from the growing energy challenges and the tightening of financial derivatives regulation. Both reasons depend on real economic activity. This determines the presence of economic prerequisites for the spread of gas futures in the world.
The paper identifies the main institutional prerequisites for the spread of gas futures in Ukraine: an active gas exchange with growing volume of the spot trading and a situational factor of the energy market reforming. Initiatives of the gas market liberalization in Ukraine correspond to the energy market reform in EU. The identified trends, prerequisites, advantages and obstacles for the spread of gas futures allow to generalize proposals for state regulation, such as organizing the Ukrainian energy market as a hub to attract participants from other countries, as well as supporting the spread of gas futures on the capital market through the implementation of clearing mechanisms.
Acknowledgment
The paper was funded as part of the “Determination of institutional conditions for the development of the exchange segment of the gas market” research project (No. 0122U002205), conducted at the State Institution “Institute for Economics and Forecasting of the NAS of Ukraine”.
- Keywords
-
JEL Classification (Paper profile tab)G20, G12, Q48
-
References66
-
Tables1
-
Figures5
-
- Figure 1. Shares of commodity futures in the derivatives market in 2007–2020, %
- Figure 2. Number of commodity futures contracts in 2007–2020, mln
- Figure 3. Google Trends analysis of “gas futures” search queries in the world in 2004–2022 with polynomial trend line
- Figure 4. Number of natural gas futures contracts in 2017–2022 in the EU market, mln
- Figure 5. Development of gas trading on the Ukrainian Energy Exchange in 2017–2020
-
- Table 1. Market share of the largest natural gas retailer of the EU in 2013–2020, %
-
- Acworth, W. (2022). Data Spotlight – TTF gas futures see record trading amid Russia-related turmoil. FIA.
- Adekoya, O. B., & Oliyide, J. A. (2021). How COVID-19 drives connectedness among commodity and financial markets: Evidence from TVP-VAR and causality-in-quantiles techniques. Resources Policy, 70.
- Ahmed, S., Hasan, M., & Kamal, M. (2022). Russia–Ukraine crisis: The effects on the European stock market. European Financial Management.
- Anufriieva, K., Brus, S., Bublyk, Y., & Shapoval, Y. (2021). Ukrainian Financial System Development: The Path To EU. Economic Studies Journal of the Economic Research Institute at the Bulgarian Academy of Sciences, 30(3), 38-55.
- Basu, P., & Gavin, W. T. (2010). What explains the growth in commodity derivatives? Federal Bank of St. Louis review, 93(1), 37-48.
- Benton, T. G., Froggatt, A., Wellesley, L., Grafham, O., King, R., Morisetti, N., Nixey, J., & Schröder, P. (2022). The Ukraine war and threats to food and energy security. Chatham House – International Affairs Think Tank.
- Bublyk, Ye. O. (2020). Finansova vidkrytist tranzytyvnykh ekonomik [Financial openness of transitive economies] (324 p.). Kyiv: State Institution “Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine”. (In Ukrainian).
- Chikwira, C., Rawjee, V. P., & Balkaran, R. (2021). Is there a Causality between Economic Growth Variables and Derivatives Usage?. Acta Universitatis Danubius. Economica, 17(1), 108-123.
- Cinquegrana, P. (2008). The Need for Transparency in Commodity and Commodity Derivatives Markets (ECMI Research Report No. 3).
- EEX (European Energy Exchange Group). (n.d.). Monthly Volumes.
- Elias, R. S., Wahab, M. I. M., & Fang, L. (2010). Managing financial risks for natural gas-fired power plants. 7th International Conference on Service Systems and Service Management (pp. 1-6).
- FIA (The Futures Industry Association). (n.d.). News & Data.
- Flouros, F. (2022). The Energy Security in Europe. In Energy Security in the Eastern Mediterranean Region (pp. 63-90). Cham: Palgrave Macmillan.
- Frolov, S., Orlov, V., & Dykha, M. (2022). Rozvytok fondovoho rynku cherez pryzmu vzaiemozviazkiv fondovykh rynkiv svitu [Development of the Ukrainian stock market in terms of the interrelationships of the stock markets across the world]. Modeling the Development of the Economic Systems, 2, 8-18. (In Ukrainian).
- Galvani, V., & Plourde, A. (2010). Portfolio diversification in energy markets. Energy Economics, 32(2), 257-268.
- Gibbon, P. (2013). Commodity derivatives: financialization and regulatory reform (DIIS Working Paper. No. 2013:12).
- Goonesinghe, J., Aukati, A., Iakovenko, M., & Miroshnychenko, V. (2021). Development of Ukraine’s wholesale & retail gas market. Gas release program - Application in Ukraine position paper. USAID.
- Haiss, P., & Sammer, B. (2010). The Impact of Derivatives Markets on Financial Integration, Risk, and Economic Growth. Proceedings of the 10th Biennial Conference on Regulatory Responses to the Financial Crisis, conducted by the Bundesbank/Athenian Policy Forum. Frankfurt: The Bundesbank/Athenian Policy Forum.
- Hale, D. R., Lee, T., Zyren, J., Joosten, J., Kouserk, G., Rasmussen, J., & Hewlett, J. (2002). Derivatives and risk management in the petroleum, natural gas, and electricity industries. Energy Information Administration, US Department of Energy.
- Heather, P. (2021) European Traded Gas Hubs: German hubs about to merge. Oxford Institute for energy studies (2021 July Paper NG 170).
- Heren, P. (1999). Removing the government from European gas. Energy Policy, 27(1), 3-8.
- HKEX. (2020). An overview of the global commodity derivatives market (Research report) (29 p.). Chief China Economist’s Office Hong Kong Exchanges and Clearing Limited.
- Jotanovic, V., & D’Ecclesia, R. L. (2021). The European gas market: new evidences. Annals of Operational Research, 299, 963-999.
- Kalach, H. (2009). Vplyv finansovoi hlobalizatsii na fondovyi rynok Ukrainy [The impact of financial globalization on the stock market of Ukraine]. Finansy Ukrainy – Finance of Ukraine, 1, 115-121. (In Ukrainian).
- Korablin, S. O. (2017). Makroekonomichna dynamika Ukrainy: pastka syrovynnykh rynkiv [Macroeconomic dynamics of Ukraine: the trap of commodity markets] (308 p.). Kyiv: Institute for Economics and Forecasting, NAS of Ukraine. (In Ukrainian).
- Koshovyi, O. H., Tertyshnyk, V. M., & Sheludko, N. M. (Eds.). (2019). Capital market abuse: economic and legal aspects. Dnipro: Lira.
- Kovacevic, V., Subic, J., & Janković, I. (2020). Development of soft commodity derivative market in function of the risk management in CEE. Agrarian Economy and Rural Development - Realities and Perspectives for Romania, 11, 189-197.
- Krasnova I. (2014). Stock market in Ukraine: state and prospects of development. Problems of Economy, 1, 129-134.
- Kyzym, M., & Salashenko, T. (2020) The Alternative Model of Competitive Electric Energy Market of Ukraine (Part 1). Business Inform 8, 115-124. (In Ukrainian).
- Li, B. (2019). Pricing dynamics of natural gas futures. Energy Economics, 78, 91-108.
- Lutsyshyn, Z., Klapkiv, Y., Kucher, T., & Svirskyi, V. (2019). Development of innovative instruments in the financial market of Ukraine. Revista Espacios, 40(28).
- Mihaljek, D., & Packer, F. (2010). Derivatives in emerging markets. BIS Quarterly Review, December, 43-58.
- Mišík, M. (2022). The EU needs to improve its external energy security. Energy Policy, 165, 112930.
- Mo, D., Gupta, R., Li, B., & Singh, T. (2018). The macroeconomic determinants of commodity futures volatility: Evidence from Chinese and Indian markets. Economic Modelling, 70, 543-560.
- Morhachov, I., Koreniev, E., Chorna, O., & Khrystenko, L. (2019). Regional Regulation of Investment Activity in Developing Countries: Example of Ukraine. Management Theory and Studies for Rural Business and Infrastructure Development, 41(2), 168-182.
- Motorniuk, U., Terebukh, M., & Kharchuk, V. (2016). Development trends of the international derivatives market. ECONTECHMOD: An International Quarterly Journal on Economics of Technology and Modelling Processes, 5(1), 63-71.
- Nakajima, T., & Toyoshima, Y. (2020). Examination of the spillover effects among natural gas and wholesale electricity markets using their futures with different maturities and spot prices. Energies, 13(7), 1533.
- Nosić, A., Sedlar, D. K., & Jukić, L. (2017). Oil and gas futures and options market. Rudarsko-geološko-naftni zbornik (The Mining-Geological-Petroleum Engineering Bulletin), 32(4), 45-54.
- Novosad, O., Matiichuk, L., & Pavlova O. (2022). Goals and main guidelines of energy security in the conditions of the war-time economy. Herald of Khmelnytskyi National University, 2(1), 154-160.
- NSSMC (National Securities and Stock Market Commission). (n.d.). Analytical data on stock market development (2014-2021).
- Oliinyk, V., Burdenko, I., Volynets, O., & Yatsenko, V. (2019). Organized derivatives market and economical growth: Relationship and impact. Periodicals of Engineering and Natural Sciences (PEN), 7(2), 806-817.
- Oskolskyi, V. V. (2011). Dvadtsatiletiye Ukraiskoy fondovoy birzhy: itogi, uroki, zadachi [Twentieth Anniversary of the Ukrainian Stock Exchange: Results, Lessons, Tasks] (243 p.). Kyiv: UFB. (In Ukrainian).
- Parsons, J. E. (2017). The Fundamentals Underlying Oil and Natural Gas Derivative Markets. Annual Review of Financial Economics, 9(1), 283-300.
- Prymostka, L., & Krasnova, I. (2014). Birzhovyi rynok deryvatyviv v Ukraini: istoriia, suchasnist, perspektyvy rozvytku [Derivatives exchange market in Ukraine: the history, the present, and future development]. Finansy Ukrainy, 7, 49-65. (In Ukrainian).
- Qamruzzaman, M., & Wei, J. (2018). Financial innovation, stock market development, and economic growth: An application of ARDL model. International Journal of Financial Studies, 6(3), 1-30.
- Rizvi, S., Naqvi, B., Boubaker, S., & Mirza, N. (2022). The power play of natural gas and crude oil in the move towards the financialization of the energy market. Energy Economics, 112, 106131.
- Rodrigues, P., Schwarz, C., & Seeger, N. (2012). Does the Institutionalization of Derivatives Trading Spur Economic Growth? (February 15, 2012).
- Sadik-Zada, E. R., & Gatto, A. (2021). Energy security pathways in South East Europe: Diversification of the natural gas supplies, energy transition, and energy futures. In From Economic to Energy Transition (pp. 491-514). Cham: Palgrave Macmillan.
- Shevchenko, O., & Shevchenko, O. (2018). Suchasni tendentsii funktsionuvannia rynku deryvatyviv v Ukraini [Modern trends in the functioning of the derivatives market in Ukraine]. Infrastruktura rynku – Market infrastructure, 18, 9-15.
- Shi, X., Li, Y., & Reshetova, E. (2016). Bottom-up design of a gas futures market in East Asia: Lessons from the Dojima rice exchange. Natural Gas Industry B, 3(4), 377-386.
- Shyshkov, S. (2022) Imposition of martial law and its consequences for Ukrainian capital markets. Ukrainian Society, 1(80), 63-86.
- Shyshkov, S. I. (2011). Fondovi birzhi Ukrainy: vyprobuvannia kryzoiu [Stock exchanges of Ukraine: tested by the crisis] (206 p.). Kyiv: State Institution “Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine”. (In Ukrainian).
- Slobodianyk, A., & Mohylevska, O. (2022). Peculiarities of Speculative Operations on the Capital Market in Ukraine. International Science Journal of Management, Economics & Finance, 1(2), 8-14.
- Spotlight on CSEE Markets. (n.d.). EEX.
- The Verkhovna Rada of Ukraine. (n.d.). Law of Ukraine On the Introduction of Amendments to the Current Legislative Acts of Ukraine regarding the Clearance of Investments and the Provision of New Financial Instruments No. 738-IX as of June 19, 2020.
- Tretyakova, O., Kharabara, V., & Greshko, R. (2020). Fondovyi rynok Ukrainy: osoblyvosti funktsionuvannia v suchasnykh umovakh [Stock market of Ukraine: peculiarities of functioning in modern minds]. Ekonomika ta derzhava – The economy and the State, 5, 103-107. (In Ukrainian).
- UEEX (The Ukrainian Energy Exchange). (n.d.).
- Urom, C., Ndubuisi, G., & Ozor, J. (2021). Economic activity, and financial and commodity markets’ shocks: an analysis of implied volatility indexes. International Economics, 165, 51-66.
- Vo, D. H., Huynh, S. V., Vo, A. T., & Ha, D. T. T. (2019). The importance of the financial derivatives markets to economic development in the world’s four major economies. Journal of Risk and Financial Management, 12(1), 35.
- Walsh, P. (2010). The Future of Energy Derivatives in China. San Francisco, International Association for Energy Economics, 31-34.
- Wang, L., Ahmad, F., Luo, G. L., Umar, M., & Kirikkaleli, D. (2021). Portfolio optimization of financial commodities with energy futures. Annals of Operations Research, 1-39.
- WFE (World Federation of Exchanges). (n.d.). Derivative reports 2018-2020.
- Yukhymets, R. S. (2021). Rynky pryrodnoho hazu Ukrainy ta YeS: liberalizatsiia ta intehratsiia [Natural gas markets in Ukraine and EU: liberalization and integration] (196 p.). Kyiv: State Institution “Institute of Economics and Forecasting of the National Academy of Sciences of Ukraine”. (In Ukrainian).
- Zakić, V., & Kovačević, V. (2012). Importance of commodity derivatives for Serbian agricultural enterprises risk management. Sustainable Agriculture and Rural Development in Terms of the Republic of Serbia. Strategic Goals Realization within the Danube Region, Preservation of Rural Values (pp. 907-924). International Scientific Meeting. Thematic Proceedings.
- Zhang, D. (2018). Energy finance: background, concept, and recent developments. Emerging Markets Finance and Trade, 54(8), 1687-1692.
- Żuk, P., & Żuk, P. (2022). National energy security or acceleration of transition? Energy policy after the war in Ukraine. Joule, 6(4), 709-712.