South-East Europe entered 2025 with record day-ahead and intraday trading volumes across multiple exchanges. Price coupling expanded and forward products were available in most national markets. Despite this market activity, the region still could not internalise its own electricity price risk. Instead, it continued to export volatility outward, primarily toward Hungary and further into core European futures markets.
Demand for forward price certainty was described as strong across the region in 2025. Industrial buyers, utilities and trading desks showed a growing appetite for hedging. Electricity exposure in South-East Europe was characterised as large and concentrated, with increasing volatility linked to hydro dependency, thermal fleet ageing and grid congestion. The issue was therefore attributed to market architecture rather than hedging demand.
Open-interest concentration limits dynamic use of forward hedges
A key factor identified is open-interest concentration in South-East Europe forward markets. Liquidity was said to collapse rapidly outside a narrow set of instruments. Annual baseload contracts dominated trading, while quarterly products traded intermittently and monthly products remained shallow. This was described as producing a forward curve that exists but cannot be used dynamically.
In this setup, participants can place a hedge but cannot actively manage it without incurring material slippage. The structure was contrasted with mature markets where open interest is spread across multiple tenors. In South-East Europe, once an annual hedge is placed it becomes effectively static. Rolling, reshaping or partially unwinding positions was described as introducing price impact risk that many participants prefer to avoid.
Liquidity depends on a small set of utilities and trading houses
A second constraint highlighted is participant concentration in forward liquidity formation. Forward liquidity in South-East Europe was described as generated by a narrow group of dominant utilities and a small number of trading houses. Industrial end-users were present but typically acted as price takers rather than liquidity providers. This was linked to reduced competitive depth and a higher likelihood that a single large order can shift the market.
Clearing fragmentation affects margining, collateral and arbitrage
A third structural constraint relates to regulatory and clearing fragmentation across exchanges. Margining rules, collateral requirements and clearing access differ between trading venues in the region. These differences were described as discouraging arbitrage liquidity that would otherwise smooth price differences and deepen order books. Maintaining multiple collateral pools across South-East Europe exchanges was said to outweigh potential benefits for most market makers.
Long-term cross-border instruments remain limited for congestion risk
The most critical gap identified is the lack of effective long-term cross-border risk instruments in South-East Europe. Physical congestion risk was described as unhedgeable beyond short horizons. As a result, forward prices were said to embed implicit congestion premia that fluctuate unpredictably. Without financial transmission rights or equivalent long-term tools, price convergence was described as fragile and forward hedges exposed to geographic risk.
By 2025, these structural features led to an outcome where South-East Europe power markets could price electricity efficiently in the short term but could not warehouse risk over time. That role was described as being delegated to HUPX, and ultimately to EEX. Deeper pools of capital and broader participation at those venues were said to absorb volatility that South-East Europe markets could not manage internally.
The situation was characterised as leaving South-East Europe structurally dependent despite improving visible liquidity. Until open interest broadens across tenors, participant diversity increases, and cross-border risk instruments mature, the region was described as behaving not as a self-contained market but as a price-taking appendage of the European core.
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