(ZH) Secretive B-21 Raider To Be Unveiled To Public In December

Secretive B-21 Raider To Be Unveiled To Public In December

Northrop Grumman Corporation and the US Air Force will unveil the highly-classified, next-generation stealth bomber, known as the B-21 Raider, as early as the first week of December.
USAF hasn't solidified a final date but announced the unveiling event would take place at Northrop's facilities in Palmdale, California.
"We are still working to nail down all the plans," Air Force acquisition executive Andrew Hunter said during a discussion with reporters at the Air Force Association's Air, Space, and Cyber conference, on Tuesday.
Northrop disclosed that it has six B-21s in "various stages of final assembly" at the Palmdale facility, with the first flight scheduled for 2023.
"The B-21 is the most advanced military aircraft ever built and is a product of pioneering innovation and technological excellence.
"The Raider showcases the dedication and skills of the thousands of people working every day to deliver this aircraft," said Doug Young, sector vice president and general manager, Northrop Grumman Aeronautics Systems.
December's event will be the first time in 34 years Northrop has unveiled a stealth bomber. In 1988, Northrop gave the first public display of the B-2 bomber that flew the following year and was introduced into service in 1997.
"Northrop Grumman is proud of our partnership with the US Air Force as we deliver the B-21 Raider, a sixth-generation aircraft optimized for operations in highly contested environments," said Tom Jones, corporate vice president and president, Northrop Grumman Aeronautics Systems.
Northrop has been preparing to unveil the B-21 well before the war in Ukraine. China and Russia have also revealed renderings of stealth bombers, but the US could beat them to the skies. As far as hypersonic missiles, that's a different story...
When the B-21s are ready for service, Whiteman Air Force Base in Missouri will be their new home.

WSJ : Faraday Future Says It Faces Death Threats Amid Effort to Raise Capital

Faraday Future Says It Faces Death Threats Amid Effort to Raise Capital
Statement comes after one of the electric-car startup’s largest shareholders sued the company in Delaware court

Electric-car startup Faraday Future Intelligent Electric Inc. FFIE -7.61% said Thursday its company leaders are facing death threats and a misinformation campaign as they try to raise money for the production of its first vehicle.

The statement by Faraday comes after one of the Los Angeles-based startup’s largest shareholders sued in Delaware Chancery Court on Monday, alleging that its current board “has driven the company into the ground” since merging with a special-purpose acquisition company, or SPAC, earlier this year. The group is seeking the resignation or removal of two directors, including executive chair Susan Swenson.

The shareholder group, FF Top Holding LLC, controls about 36% of voting power in Faraday. SPACs, also known as blank-check companies, have no operations and are designed to merge with private companies to take them public.

“Unfortunately, efforts to raise capital have been impacted by a misinformation campaign of completely baseless allegations that certain directors are conspiring to pursue an unnecessary bankruptcy for their own personal gain,” Faraday said in its statement.

Faraday has faced delays to the launch of its flagship FF 91 vehicle. It has also amassed substantial debt and lost top executives to a rival electric-vehicle startup. The company said last month that it would need more funds by early September to continue operations, and it has since focused on reducing costs and preserving its cash position.

The company’s shares reached a record intraday low on Thursday of 74 cents. Trading has fallen since July 18, when shares reached an intraday high of $7.85, with a brief rally in early August, according to FactSet.

The startup said it hired a law firm to conduct an independent investigation into the allegations against its directors but found them to be “without merit.”

But the allegations have continued, and “threats that began with lawsuits have escalated to threats of physical violence and even death threats,” Faraday said.

The startup said it was referring the threats to law-enforcement authorities, including the Federal Bureau of Investigation and the U.S. Securities and Exchange Commission, as well as the Justice Department and international authorities.

Faraday earlier this year said that certain employees and members of its management team had received subpoenas from the SEC regarding an investigation into the startup’s financial statements. The company in June said it had also received a related preliminary request for information from the Justice Department.

FF Top said in its lawsuit that Faraday missed its own forecast that it would begin production of its model FF 91 car in July and squandered the company’s cash. The firm said Faraday is “suffering from a crisis of leadership at the board level” and that urgent changes are needed before the company raises more capital.

Faraday spokesman Mark Connelly said the dispute with FF Top has limited Faraday’s ability to raise money in a difficult market.

“We are in active negotiations with a number of parties to raise funds,” he said. “The board’s focus is raising funds and getting the car on the road.”

Representatives for FF Top didn’t immediately return a request for comment.

FTY : Energy crunch threatens to shatter European unity, warns IEA boss

Energy crunch threatens to shatter European unity, warns IEA boss
Fatih Birol says a continental scramble for winter fuel supplies would unleash a ‘wild west scenario’

The head of the International Energy Agency has warned European countries against a scramble for energy security this winter that threatens to shatter EU unity and trigger social unrest.

Fatih Birol, the IEA’s executive director, said he feared “a wild west scenario” if European countries restricted their own trade or stopped collaborating with neighbours amid mounting anxieties about fuel shortages.

“The implications will be very bad for energy, very bad for the economy, but extremely bad politically,” Birol said Thursday in an interview at the inaugural Global Clean Energy Action Forum in Pittsburgh. “If Europe fails this test in energy, it can go beyond energy implications.”

European relations have grown more fractious as countries try to maintain a united front amid soaring energy prices that have brought the continent to the brink of an economic recession. But the mounting crisis has prompted fears that some countries may cut side deals for Russian supply or restrict power exports to their neighbours.

There were “two scenarios”, said Birol, whose Paris-based watchdog agency is mainly funded by members of the OECD. “EU and members will work in solidarity, supporting each other . . . or there is another scenario, if everybody is for himself.”

“One of the founding values of the EU is solidarity. It will negatively affect the EU’s weight across the world,” Birol said of the latter scenario.

Norway’s Nordic neighbours last month blasted Oslo for “selfish” behaviour as it considered pausing electricity exports while it refilled its hydroelectric reservoirs.

Andreas Bjelland Eriksen, state secretary in Norway’s petroleum and energy ministry, denied it would halt exports, however, telling the Financial Times that the country was simply “prioritising filling reservoirs for the same reason as Europe is filling its gas (storage)”.

The EU has faced opposition from Hungary and some other member states as it deepened sanctions on Russian in response to its invasion of Ukraine.

Birol also cautioned against European complacency after the continent succeeded in building up natural gas stockpiles ahead of the winter months when demand peaks.

Even if the continent avoided “negative surprises” in gas supply, such as a colder-than-expected winter, Europe would suffer “bruises” in the coming months, Birol said, including economic recession and “significant damage to household budgets”.

The crisis for Europe would also last well into 2023, he said, given stagnant global supply and the likelihood of increased competition for liquefied natural gas from a recovering China and other importers.

“When we look around there are not many new gas [projects] coming . . . And the Norway, Algeria, Azerbaijan pipelines are near their maximum capacity. It will be another challenging period,” he said.

But Birol was also adamant that Moscow had “already lost the energy battle” with Europe as the continent seeks out alternative suppliers.

Most of Russia’s gas and oil exports had gone to Europe before the war, he said — but that was now over.

“Russia has lost a good client, and forever. This client paid the money on time and didn’t create any political problems,” Birol said.

The IEA chief dismissed Russian efforts to replace Europe’s gas market with exports to Asia. “You are not selling onions in the market. You have to build pipelines, infrastructure, logistics. This will take at least 10 years,” he said.

Russia will also struggle to maintain output as sanctions restrict its access to the western technology and capital it needed to continue repairing ageing oilfields and gasfields, Birol said.

FT : Aveva investors plan to reject Schneider takeover

Aveva investors plan to reject Schneider takeover
Mawer and M&G say £9.5bn bid from French group undervalues UK software developer

A top-10 investor in Aveva plans to reject Schneider Electric’s £9.5bn takeover of the software developer on the grounds that it represents an “opportunistic bid” that undervalues the UK group.

Schneider said on Wednesday that it would pay £31 a share for the 40 per cent of Aveva it did not already own — a 41 per cent premium over the company’s closing share price in August, before the potential offer emerged.

Peter Lampert, a portfolio manager at Canada-based Mawer Investment management, which has C$77bn in assets under management and is one of the top five external shareholders in Aveva, said the offer price did not reflect the long-term potential of the company.

“Aveva is a great business with a very promising long-term outlook,” he said. “It’s an opportunistic bid taking advantage of share price weakness in recent months.”

Schneider’s takeover attempt is the latest example of an undervalued UK company being snapped up by a foreign buyer or removed from the stock market by private equity.

Lambert’s views echo those of M&G Investments, another Aveva shareholder that said on Wednesday it opposed the terms of the deal and planned to vote against them.

Spun out of Cambridge university in the 1960s, Aveva is one of Britain’s oldest technology companies. Its software has focused primarily on the energy, infrastructure and manufacturing sectors — areas Schneider also covers — although it has expanded beyond that.

Aveva issued a profit warning in April, saying competition for engineering staff and the need to invest more in cloud computing would push down its margins. The company is also navigating a shift to rely more on subscription revenue, which analysts say could be challenging and take several years.

Schneider aims to close the deal in the first quarter of 2023, but will need to secure support from at least 75 per cent of minority shareholders in a vote set for mid-November. Given the French group cannot vote, it would only take about 10 per cent of the overall shareholder base to reject it for the deal to be blocked.

Schneider has said it believes the price it has offered is fair and reflects the challenging economic environment affecting software companies.

The board of Aveva has also recommended the offer after receiving advice from Lazard, JPMorgan Cazenove and Numis. “We believe that the acquisition represents attractive, certain cash value,” said chair Philip Aiken.

Mawer is a long-only equity investor that looks to buy positions in strong businesses and hold them for at least a decade.

Lampert said he could consider a revised offer for Aveva “in the higher thirties” but “otherwise I’m inclined to vote against the deal.” He added: “It has a great outlook. We take a 10-year view and I’m willing to be patient . . .[as Aveva changes its business model] the economics and profitability will become more apparent and value will be more fully reflected in the stock price.” 

Rory Alexander, UK equity fund manager at M&G, said Aveva’s share price was “trading at depressed levels due to the combination of low technology valuations, macroeconomic uncertainties and a complex business model evolution from licence to subscription based revenues”.

Berenberg analysts wrote in a note that the bid was lower than the £32- £37 per share they had expected and the “valuation does not fully reflect Aveva’s true potential”. But they predicted shareholders would be tempted to support the deal given their “fatigue resulting from a material derating of the share price” and the challenges Aveva faced.

Jefferies also expected the deal would go through, saying Schneider was “the only possible buyer given it is already the majority shareholder.”

Schneider declined to comment. Aveva did not return a request for comment.

FT : Alzheimer’s drug trial brings pivotal test of maligned brain plaque theory

Alzheimer’s drug trial brings pivotal test of maligned brain plaque theory
Study of Eisai treatment will be one of last chances to prove amyloid hypothesis, say experts

A late-stage trial of an Alzheimer’s drug set to generate results within weeks is shaping up as a pivotal moment in a three-decade quest to prove that removing sticky amyloid plaques from the brain can slow down the disease.

The phase 3 trial is being led by Eisai, a Tokyo-based pharmaceutical company that has partnered US biotech Biogen to develop lecanemab. Earlier studies suggested the monoclonal antibody treatment can clear plaques known as beta amyloid that are at the centre of an increasingly acrimonious scientific debate over what causes Alzheimer’s.

A positive result could lead to approval of a new medicine for a disease affecting 50mn sufferers worldwide that has no known cure. It would be encouraging for Eli Lilly and Roche, which are conducting trials on similar drugs that could generate tens of billions of dollars in sales if they are proven to slow the progression of Alzheimer’s.

But scientists say disappointing test results would deal a significant blow to the so-called amyloid hypothesis, the idea that clearing clumps of toxic cells that bind together in the brain can slow the rate of cognitive decline in sufferers.

Alberto Espay, professor of neurology at the University of Cincinnati, said some researchers had become far too tethered to the amyloid hypothesis, which has been tested in dozens of studies that have failed to provide conclusive proof that removing the plaques slows cognitive decline.

“We’ve run into a dogma,” he said. “And it is very hard to test new ideas when the overarching theme of funding is centred on the idea that removing amyloid must be the only way to go.”

Disappointing results might also act as a catalyst for a shift in funding for Alzheimer’s research, with some scientists arguing that promising areas of study and potential treatments have been crowded out by Big Pharma’s focus on amyloid.

The amyloid hypothesis is the most tested of the many theories of what causes Alzheimer’s, which range from an inflammation of some types of brain cells to the presence and formation of various proteins in the brain. It has been the focus of more than a fifth of the more than 2,000 clinical trials related to the disease as of 2019.

The botched launch last year of Biogen’s aducanumab — the first amyloid-clearing drug to win approval and the first new treatment for the disease in almost two decades — has served only to heighten doubts over similar drugs.

Aducanumab, which is sold under the brand name Aduhelm, was given the fast-track green light by US regulators despite questions over its effectiveness and the robustness of two late-stage clinical trials that underpinned its approval. Widespread scepticism among clinicians deepened further when the company priced the treatment at $56,000 a year, a move that also sparked a backlash among politicians and policymakers.

In April US authorities delivered a crippling blow to Aduhelm by severely restricting reimbursement by government-funded health schemes, a move that limits its use to a few thousand people taking part in clinical trials. Any similar amyloid treatments approved under the FDA’s fast-track procedure would face the same restrictions, a hurdle that Eisai acknowledges complicates the approval process for lecanemab.


“Yes I admit that it does raise the bar. That is why the design of the trial . . . is so important,” Ivan Cheung, US chief executive of Eisai, said in an interview.

In a bid to build public trust, Eisai is running one of the largest trials ever undertaken on an Alzheimer’s drug, enrolling 1,795 patients in the early stages of the disease. It has also sidelined its partner Biogen by assuming what Cheung describes as “final decision-making authority” as the drug moves through the regulatory process.

Eisai is aiming to match or better the results of an earlier trial that showed giving patients a 10mg dose of lecanemab every two weeks over 18 months can slow the rate of cognitive decline by 26 per cent, compared with those who were given a placebo.

It is using the Clinical Dementia Rating scale to measure the symptoms of dementia in patients in six categories, including memory, judgment and problem solving.

Critics allege this scale is an imprecise mechanism and question whether it is worth approving amyloid drugs that may only slightly reduce the pace of cognitive decline and that can cause life-threatening side effects.

But patient groups such as the Alzheimer’s Association say even relatively small delays in disease progression can provide significant benefits to people suffering a terminal disease.

“It could mean six more months in that stage where you can maintain your independence, enjoy your family and attend a wedding,” said Maria Carrillo, Alzheimer’s Association chief science officer.

Despite the controversy over Aduhelm, Carrillo said it was an encouraging time for Alzheimer’s research, pointing to increased government funding and key findings from clinical trials.

Eisai said that following the Aduhelm controversy a result showing a rate of slowing below 25 per cent might “trouble” its FDA application for accelerated approval for lecanemab, a process that is due to conclude in January.

Under this fast-track process, the FDA could approve the drug on the basis that it reduces amyloid plaque and is only “reasonably likely” to predict a clinical benefit. Those were the same criteria used to approve Aduhelm, a contentious decision that prompted the resignation of three members of a committee advising the FDA on the drug.

Cheung said he was confident the lecanemab trial would be a success and asked that amyloid sceptics study the data before passing judgment. “Everything should be fact based . . . I hope we will have a fair debate,” he said.

For Biogen, success might help rebuild its tarnished reputation following the disastrous launch of Aduhelm, which sparked $1bn of cost-cutting, the departure of its chief executive and investigations by multiple US government agencies.

Ronald Petersen, director of the Mayo Clinic Alzheimer’s Disease Research Center, said if the lecanemab trial was a “flat-out negative” then it would not be good for the “amyloid hypothesis”. But he said it would not bury the theory altogether because of forthcoming results from late-stage trials of three drugs from Roche and Eli Lilly.

Petersen said his best guess was that one of the trials would show a positive clinical impact, although of a modest magnitude.

“This would give us a foot in the door for treatments because ultimately down the road its going to take combination therapy to have a voilà kind of effect,” he said.

“If all four of these [trials] really show no evidence of any kind of a clinical impact . . . it may just suggest we probably should look elsewhere for clinical targets,” he added.

>>> US Close Dow -0.35% S&P -0,84% Nasdaq -1,37% Russell -2,26% VIX 27,35 -2,29%


Closing Stock Market Summary

The stock market had its issues today and they had mostly to do with interest rates. They had policy rate considerations on one side and market rate considerations on the other, yet the two were interconnected. The connection is that policy rates and market rates were rising (again) and that made it difficult for the stock market to stage a concerted rebound effort following the sharp losses that were registered Wednesday in the wake of the FOMC decision. The jump in rates also raised concerns about the economy suffering a hard landing.

The major indices started the session on a soft note, giving in to follow-through selling interest as the yield on the 10-yr note moved precipitously to 3.70%. The 2-yr note yield, and the rest of the curve, also shot higher, responding to the Fed's policy rate guidance yesterday and a series of aggressive rate hikes from other central banks today.

Briefly, the Bank of England raised its key policy rate by 50 basis points to 2.25%, the Norges Bank raised its key policy rate by 50 basis points to 2.25%, the Bank of Indonesia raised its key policy rate by 50 basis points to 4.25%, the Hong Kong Monetary Authority raised its key policy rate by 75 basis points to 3.50%, and the Swiss National Bank raised its key policy rate by 75 basis points to 0.50%, exiting its negative rate domain for the first time since 2015.

The Bank of Japan bucked the rate-hike trend, choosing instead to leave its key policy rate unchanged at -0.10%; moreover, Governor Kuroda said the bank won't be raising rates for some time. In related news, Japan's Ministry of Finance intervened to support the yen for the first time since 1998. USD/JPY was down 1.2% to 142.35, but the yen's strength faded during the day.

Notwithstanding the stronger yen, the U.S. Dollar Index still gained 0.5% to 111.21, as the dollar continued to benefit from the interest-rate differential trade.

Stocks, meanwhile, did not benefit much from a buy-the-dip trade.

There were some individual winners, like Microsoft (MSFT 240.98, +2.03, +0.9%), which is confident regulators will approve its acquisition of Activision (ATVI 77.03, +1.71, +2.3%), and Lennar Corp. (LEN 77.43, +1.51, +2.0%), which moved higher after its earnings report, and Eli Lilly (LLY 310.92, +14.44, +4.9%), which jumped on a UBS upgrade to Buy from Hold that followed the news of the FDA approving Retevmo. Salesforce, Inc. (CRM 150.15, +2.52, +1.7%) also outperformed after providing an upbeat long-term outlook at its Investor Day.

Overall, there wasn't any concerted buying interest on a broad level. That point was evident in an advance-decline line that favored decliners by a better than 4-to-1 margin at the NYSE and a better than 3-to-1 margin at the Nasdaq. It was also evident in the 1.4% loss registered by the Invesco S&P 500 Equal Weight ETF (RSP).

When the closing bell rang, there were just two sectors showing a gain: health care (+0.5%) and communication services (+0.1%). The consumer discretionary sector (-2.2%) led the losers, underperforming as worries about rate hikes and a slowdown in discretionary spending hit home. Other notable sector laggards included the financial (-1.7%), industrials (-1.5%), and materials (-1.2%) sectors.

Semiconductors were one of the weakest industry groups, which weighed heavily on the information technology sector (-1.0%). The Philadelphia Semiconductor Index fell 2.8%, paced by losses in key constituents Adv. Micro Devices (AMD 69.50, -4.98, -6.7%) and NVIDIA (NVDA 125.61, -7.00, -5.3%).

Notably, the stock market tried to stage a late comeback effort, having traded in a narrow range for most of the session. That comeback effort, however, got stopped out shortly before the close as there was a rush of selling interest in the final ten minutes of the session that left the indices near their worst levels of the day.

Looking ahead to Friday, the market will receive the preliminary September IHS Markit Manufacturing and Services PMI readings at 9:45 a.m. ET.

Reviewing today's economic data:

  • For the week ending September 17, initial claims increased by 5,000 to 213,000 (consensus 220,000). For the week ending September 10, continuing jobless claims decreased by 22,000 to 1.379 million.
    • The key takeaway from the report is that the low level of initial claims -- a leading indicator -- will register with the Fed as a basis to maintain an aggressive line with its rate hikes since it sees a softening in the labor market as a necessary ingredient for helping to bring inflation back down to its 2.0% target.
  • The Q2 Current Account Deficit improved to -$251.5 billion (consensus -$260.0 billion) from an upwardly revised -$282.5 billion (from -$291.4 billion) in the first quarter.
  • The August Leading Economic Index decreased 0.3% month-over-month following a downwardly revised 0.5% decline (from -0.4%) in July.

Dow Jones Industrial Average: -17.3% YTD
S&P Midcap 400: -19.5% YTD
S&P 500: -21.2% YTD
Russell 2000: -23.3% YTD
Nasdaq Composite: -29.3% YTD

>>> US After Hours Summary: DOCU +1.2% higher as it names Google exec as CEO; COST -2.6% lower on earnings; GWRE +2.6% higher on share buyback news; BA +0.2% as it settles SEC case


After Hours Summary: DOCU +1.2% higher as it names Google exec as CEO; COST -2.6% lower on earnings; GWRE +2.6% higher on share buyback news; BA +0.2% as it settles SEC case

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CAMP +3.7%

Companies trading higher in after hours in reaction to news: CANO +5.6% (HUM in the running to acquire CANO, according to WSJ), GWRE +2.6% (authorizes new $400 mln share repurchase program), HUM +2.3% (HUM in the running to acquire CANO, according to WSJ), DOCU +1.2% (names Google exec Allan Thygesen as CEO), IMAX +1.1% (acquires streaming technology co SSIMWAVE for $20 mln in cash and stock), RTX +1.1% (awarded $985 mln U.S. Air Force contract), BA +0.2% (to pay $200 mln to settle case with SEC relating to former CEO misleading statements re 737 MAX), BJ +0.1% (in sympathy with COST earnings)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SCHL -3.3%, COST -2.6%, APEI -1.4%, AIR -0.1%

Companies trading lower in after hours in reaction to news: EDAP -6.8% (commences public offering of ADSs), LPLA -1.4% (reports monthly activity for August), QCOM -1% (automotive design-win pipeline has grown to $30 bln), MOS -0.9% (reports August revs and sales volumes), PFE -0.5% (US slashes target for vaccine donations abroad this year, according to Bloomberg), WMT -0.3% (in sympathy with COST earnings), RETA -0.2% (Point72 Asset Mgmt discloses 5.2% stake), ROKU -0.1% (names three senior execs as presidents)

WSJ : Audits of Chinese Companies Start to Face U.S. Inspections

Audits of Chinese Companies Start to Face U.S. Inspections
Accounting board to determine if Alibaba, Yum China and other firms can keep American listings

Audit firms’ engagement partners, who supervise the audit work and sign off on the audit report, will typically be asked about the company’s internal controls, revenue-recognition principles, and remote audit policies during the pandemic, Mr. Johnson added.

On top of audit working papers, internal documents including email exchanges between auditors and their issuer clients might be subject to scrutiny if the inspectors deem the information necessary, said Salvatore Collemi, founder of Collemi Consulting & Advisory Services LLC, which advises accounting firms on audit quality control.

Chinese authorities for years denied U.S. regulators access to the records, citing national-security concerns. However, the Chinese securities regulator said last month that audit working papers generally don’t contain state secrets, personal data or other sensitive information.

Some Chinese companies have pursued alternative or primary listings in Hong Kong to hedge the delisting risk. Last month, five Chinese state-owned companies said they would delist their American depositary shares, but they might still be subject to retrospective PCAOB inspections.

FT : EU casts doubt on ability to intervene in energy derivatives markets

EU casts doubt on ability to intervene in energy derivatives markets
Brussels concludes big swings in power prices are not due to ‘market malfunction’

European authorities have played down their ability to intervene in the region’s derivatives markets to help stretched energy companies after privately admitting energy price volatility was not due to the “market malfunctioning”.

The European Commission said that stress in markets like electricity futures “seems to reflect acute uncertainty on market fundamentals” like supply and demand, according to a presentation to diplomats on Wednesday that was seen by the Financial Times.

Underscoring the lack of options, the European Securities and Markets Authority (Esma) also on Thursday recommended the commission look at ways of clarifying existing standards on collateral to help ease the demands on energy producers. However officials raised doubts about the degree to which collateral rules could be broadened.

The conclusions will come as a blow to EU capitals, which had been looking at ways to intervene in Europe’s energy markets to tackle six months of volatile and soaring prices. The cost of buying and selling gas, electricity and power has fluctuated wildly since Russia’s invasion of Ukraine and been exacerbated by water droughts across the continent and the breakdown of around half of France’s nuclear fleet, raising the cost for households and businesses.

Last month Ursula von der Leyen, commission president, said the crisis had exposed the limitations of Europe’s electricity market design and it needed a new market model that “really functions and brings us back into balance.”

Wednesday’s presentation pointed out that the EU’s benchmark gas contract, called TTF, was based on market transactions, with no judgments from third parties, and was also considered the benchmark for the global natural gas market.

Large utilities that consume and produce vast quantities of energy have particularly felt the squeeze as they rely on futures markets to help guarantee the price they will receive, and ensure that power and electricity is supplied to millions of homes.

To open and maintain their positions, they have to make regular margin payments to clearing houses, the utilities that sit between two parties in a trade and prevent a default from infecting the rest of the market.

As prices have soared, the demands for utilities that have hedged their power sales — often months or years in advance — have ballooned to the point where few can afford to post more money, so creating a liquidity crisis. Some countries, such as Sweden, Finland and Germany, have had to step in and provide credit guarantees to local utilities to help them through the pinch.

The presentation admitted that the “current level of margins in cleared energy derivatives as well as their necessity is not questioned by market participants”.

One EU diplomat said any intervention needed to be made with caution. “Let’s not spill over from energy markets into financial markets,” they said.

Esma was responding to a Thursday deadline from the commission to examine possible rule amendments to allow more types of collateral to be used for margin calls. The types of assets that are accepted by clearing houses are dictated by regulation.

The main clearing houses are run by Nasdaq in Sweden, Ice Futures Europe in London and Amsterdam and Germany’s EEX, which host the primary markets for electricity, gas and Brent crude oil, and German power futures respectively.

Verena Ross, chair of Esma, told the FT that the agency was looking at clarifying existing rules or providing more flexibility on eligible collateral like EU sovereign bonds, bank guarantees or emissions allowances. It said it may allow uncollateralised bank guarantees only under strict conditions.

“We also need to make sure we are not creating risk in the system,” she said. “Clearing houses need high-quality collateral that they can realise quickly,” she added.

The European Commission has also asked Esma to investigate why circuit breakers, which temporarily halt trading on markets in volatile periods, had not been triggered during the energy crisis.

It additionally asked the agency if the standards that triggered circuit breakers needed to be harmonised so that markets that were often interlinked, like gas and electricity, would react in a unified way.