Exchanges are essential in a liberalised market, as they offer open and transparent platforms where market parties can trade anonymously. The barriers to entry for market trading are lowered making trading easy regardless of the size or origin of the trading party, which facilitates the active participation of new entrants and acts as a catalyst for liquidity.

APX-ENDEX advocates the development of transparent and liquid markets. In this respect, APX-ENDEX is involved in discussions with policymakers, regulators, and politicians as well as industry groups. Furthermore, APX-ENDEX plays an active role in the think tank of EuroPEX, the association of European Power Exchanges.

APX-ENDEX publishes its price and volume indices on a daily basis. The APX NL price index is used as a benchmark price in, amongst others, bilateral contracts and by governmental bodies to monitor market development. A guaranteed existence of an exchange is in the interest of a well functioning and orderly market. Therefore all exchanges of APX-ENDEX are regulated.

APX-ENDEX operates in a complex regulatory environment characterized by different jurisdictions, a variety of government bodies and energy- as well as financial regulators.

The Netherlands

In the Netherlands, the Dutch Electricity Act (1998) and Gas Act contain articles ensuring the existence of power and gas exchange. Based on the Gas Act, APX Gas NL B.V. and ENDEX N.V. have both been appointed as Gas Exchange Operator by the Dutch Minister of Economic Affairs. APX B.V. has also been appointed as Electricity Exchange Operator by the Dutch Minister of Economic Affairs.

The Dutch Office of Energy regulation, DREV, is responsible for implementing the Energy Act (1998) and Gas Act, as well as supervising compliance with these Acts. Due to these appointment, APX B.V., APX Gas NL B.V. and ENDEX N.V. are supervised by DREV. ENDEX N.V. is a securities exchange recognized by the Dutch Minister of Finance and is supervised by the Netherlands Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB).

United Kingdom

In the UK, APX Commodities Ltd. is appointed by the Transmission System Operator National Grid Transco and regulated by Ofgem. APX Commodities Ltd. is regulated by the Financial Services Authority (FSA). APX Commodities Ltd. continues to conduct regulated business in respect of its APX Gas UK and APX Power UK markets in the capacity of Multilateral Trading Facility (MTF) operator. The scope of regulatory permission of APX Commodities Ltd. includes – besides operating a multilateral trading facility – dealing in, and arranging deals in, derivative instruments.

On 9 December 2003 the Tabaksblat Committee on Corporate Governance presented its Code on the subject. Corporate Governance comprises good entrepreneurship and accountability to the Supervisory Board, which implies an executive management operating with integrity and transparency and under adequate supervision. APX-ENDEX has voluntarily adopted the code, where reasonably practical to do so.

APX-ENDEX is led by a Management Board, consisting of three statutory directors; a Chief Executive Officer (CEO), a Chief Financial Officer (CFO), a Chief Operating Officer (COO) and one director. The Management Board is responsible for the general policy and the strategy of APX-ENDEX. The tasks, duties and appointment procedure for statutory directors are set out in the Articles of Association of APX B.V.

The Supervisory Board supervises the general policy and strategy of APX-ENDEX and provides advice to the Management Board. The Supervisory Board performs its duties in the interest of the group and considers all relevant interests. Full information on the Supervisory Board and its members can be found here.

The Supervisory Board has selected two of its members to form an Audit Committee. Rules have been set to govern the way the Committee operates and are published here. The Committee assists the Supervisory Board in decision making and reports its findings to the Supervisory Board.

The Audit Committee is charged with monitoring the company’s financial reporting, its financial reporting policy and procedures, its internal control framework, the independent external audit of the financial statements and the performance and valuation of the external auditor.

PricewaterhouseCoopers (PwC) has been appointed as external auditor and is required to provide an Auditor’s report for each of APX-ENDEX companies. PwC provides a Management Letter for entire APX-ENDEX. The external auditor also attends Audit Committee meetings and the Supervisory Board meeting in which the Annual Report is discussed. The General Meeting of Shareholders has the right to question the external auditor on the reporting including the auditor’s report stating that the financial statements give a true and fair view of the financial position.

All other services provided by PwC comply with independent auditor requirements. The guidelines of the Royal Netherlands Institute of Chartered Accountants (NIVRA) require a switch to a different external auditor once every seven years in the interest of independence. This requirement is also in line with the Dutch Corporate Governance Code. In 2006 such a switch to a different audit partner has been made.

The Risk Committee acts as an advisory committee to the APX-ENDEX CFO with regards to counterparty risk, assisting in the oversight and direction of APX-ENDEX clearing arrangements.

The Committee's remit is entire APX-ENDEX and any joint ventures which may be entered into. The Committee consists of APX-ENDEX’s CFO, COO, Head of Risk and Compliance, Head of Market Surveillance & Operations ENDEX, Finance Manager and Corporate Lawyer, with additional attendance as required by the Commercial Director and Business Services Director. Other persons attend meetings of the Committee from time to time if this is considered desirable to assist the Committee in the fulfilment of its duties.

The Committee meets at least six times a year, usually on the second Tuesday of alternate months, and at other times as required. A review of its performance is conducted annually, to ensure that the Committee is provided with sufficient resources to undertake its duties and responsibilities, as specified in the Committee’s Terms of Reference.

The Management Board is responsible for developing the company strategy and achieving business objectives, operating within relevant rules and regulations, and managing the business risks. The Management Board is accountable to the Supervisory Board and the General meeting of Shareholders. Once every three months, APX-ENDEX reports on results and status of business activities to the Supervisory Board and the Shareholders.

APX-ENDEX has set a framework for policies regarding internal control processes. The Management Board is responsible for managing processes within this framework for APX B.V. and its subsidiaries. All companies within APX-ENDEX are required to prepare annual plans including operating budgets, investment plans and financing requirements. According to the Articles of Association, the Supervisory Board and the General meeting of Shareholders then approve the consolidated business plan.

New business activities and investments that are outside the scope of the approved business plan require specific approval by the Supervisory Board and the Shareholders. The Audit Committee monitors the quality of the financial reporting and internal controls. The Audit Committee together with the APX-ENDEX Finance Director discuss the Annual Report and the underlying accounting principles on an annual basis.

Certain best practice provisions within Tabaksblat relate to internal risk management and control. In view of the new management structure that was effective as of January 2007, APX-ENDEX undertook an extensive exercise to further enhance its internal control process during 2007. The exercise included the development of a new internal control framework, drawing upon the widely-used COSO integrated framework for internal control. Features of the new framework include periodic analysis of risks to the business objectives of APX-ENDEX, and an integrated system of risk and control monitoring and reporting. These developments were discussed with the Audit Committee of the Supervisory Board during 2007.

The Corporate Governance Code stipulates that a Code of Conduct should be in operation at listed companies. APX-ENDEX has decided to adopt this aspect as well, albeit that it has placed it in a broader context, with the core values ‘Pioneering’, ‘Rigour’, ‘Integrity’ and ‘Market Orientated’ commanding a prominent position in the APX-ENDEX Code of Conduct. The Code has been drafted during 2007 in workshops with a broad representation of members of staff and can be found here.

The Corporate Governance Code recommends that a set of Whistleblower Regulations should be in place for all listed companies, so as to make it possible for employees to report alleged irregularities of a general, operational and/or financial nature within the company without their legal status being jeopardised. The whistleblower regulations can be found here.

The Corporate Governance Code contains principles and best practice provisions. The former could be seen as the currently prevailing general views – which have come to enjoy comprehensive support – on what satisfactory corporate governance should be. These have been worked up into concrete best practice provisions, as a benchmark of sorts against which to vet the conduct of executive and supervisory directors including in their dealings with external auditors and shareholders.

The code of conduct is a selection of agreements, points of view, and guidelines that apply within a company, outlining the responsibilities of, or proper practices of a company.