A key part of COAG-led gas reforms, the Wallumbilla Gas
Supply Hub, has started operations.
Australia's first voluntary short-term forward gas supply
hub, the new Wallumbilla Gas Supply Hub in Queensland, started
Located at the junction of three gas pipelines, the hub is
operated by the Australian Energy Market Operator (AEMO), which
will offer spot and forward-dated products, including a
"day-ahead" product, a "balance-of-day"
product, and pipeline capacity.
Unless certain exemptions were obtained, AEMO's procedures
for netting of physical gas settlements across multiple
transactions and parties may have amounted to a derivatives
exchange and a clearing and settlement facility. In the absence of
those exemptions, the multilateral netting and clearing
arrangements in the hub rules would have had to have been left
deactivated, or otherwise:
AEMO would have needed a market operators licence and a
clearing and settlements facility providers licence; and
traders in the hub would have needed an Australian Financial
Services Licence in relation to market-making and/or dealing in gas
trading "derivatives" that were capable of being cleared
by netting rather than purely by physical delivery.
However, on 13 March 2014 the necessary legislative changes to
enable netting and clearing of gas transactions in the Exchange
were made. The Corporations Laws Amendment (2014 Measures No. 1)
Regulation 2014 exempts the activities of exchange operators and
trading participants in a "qualifying gas trading
exchange" from the definition of financial services that would
otherwise require them to hold licences under the Corporations
Participants and operators in the qualifying gas trading
exchange are also exempted from the market misconduct and inside
information provisions of Part 7.10 of the Corporations Act if they
are engaging in conduct in relation to a qualifying gas trading
This is reasonable, given that the contracts for physical
delivery of gas (or other commodities) entered outside the exchange
have never been subject to those market misconduct and inside
information provisions of the Corporations Act. There are already
significant conduct and other regulatory provisions contained in
the National Gas Law and the Australian Competition and Consumer
Act which would apply to regulate conduct in the exchange and
non-exchange transactions anyway.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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