The European gas price cap could lead to a decrease in market liquidity, even if no significant effects have yet been observed on trading transactions. This writes Bloomberg.
The European Securities and Markets Authority will also announce it tomorrow. Even if the effects of the price cap – also due to its entry into force on February 15th – will not be immediately visible, this does not mean that they are not there. Trade moves are expected to exit the market once the price cap takes effect.
“It is entirely possible that some effects on the market will only become visible once the price cap is fully in effect,” the authority said. “It can cause significant and sudden changes in the market, which in turn can undermine the functioning of a market and therefore financial stability.”
Temporary
In December, the European Union agreed to introduce a temporary gas price cap to rule out large price fluctuations, such as those seen last year. However, there are now concerns about the effect a cap could have on EU inventories or the functioning of the market.
The European Union Agency for the Cooperation of Energy Regulators will also publish a report tomorrow on gas flows in the EU and how they are affected by a cap.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
