MINUTES FROM THE PRODUCT GROUP FOR THE FINANCIAL MARKET

Transcription

1 Preliminary MINUTES FROM THE PRODUCT GROUP FOR THE FINANCIAL MARKET Date: 10 December 2003 Place: Lysaker, Norway Present: Absent: Fredrik Adolfson, Vattenfall AB Bjarne Walbech, Elsam (for Niels Grovn) Magnus Hesselmar, NESA EL AS Heine Rønningen, Hafslund Delta AS (part-time) Fredrik Bodecker, RWE Trading Gunnar Gjerstad, Forbrukerkraft Bjørn Kildahl, EGL Nordic Energy Present from Nord Pool: Robert Lillefloth Erik Villum Ola Ryen Erling Mork Hans Randen (part-time) Hartvig Munthe-Kaas (part-time) Kristin Rolfsen (part-time) Geir Reigstad (part-time) Trond Svensgaard (part-time) Åsmund Drivenes (part-time) Minutes_10_December_03.doc 1

2 33/03 Minutes from the previous meeting (Enclosure) It was commented that the CfD with reference to Germany (Phelix Base from EEX) might have little value as a CfD contract, due to the low correlation between Germany and Nordic Systemprice. There were no other comments to the minutes from the previous meeting 34/03 Market and operational status Nord Pool Physical market Financial market Nord Pool Clearing Elbas International Market surveillance informed that all the brokers have signed the new Broker Agreement, and that a new application for handling UMMs is soon ready to be launched, and believes that this will further improve the quality of the market information. It was further reported that during % of all reported OTC contracts were delayed and 3% have been cancelled, due to erroneous reporting. Nord Pool is working to improve the quality of information from Swedish nuclear power producers, and has had meetings with Statens kärnkraftinspektion, SKI. One case regarding market manipulation is being processed by the financial supervisor authorities in Norway (Kredittilsynet). One case of possible use of market power in Denmark on 2 September 03 is under investigation by the competition authority in Denmark (Konkurrencestyrelsen). There was a discussion regarding publishing of data from Swedish nuclear power producers and also the quality of the water reservoir numbers. It was also discussed whether the market should start to report/publish the various Nordic reservoirs of coal. The meeting also discussed the importance of the work with the media, to enable them to give an accurate and correct presentation of the power market, its facts and conditions. 35/03 Financial Market Nord Pool gave a presentation of its views on liquidity in financial contracts in the long end. It was commented that the analysis should be completed with OTC figures, instead of only Exchange figures. During the following discussion it was said that some of the liquidity shortage is due to the rise in coal prices, and the uncertainty regarding on CO2 pricing from It was asked what we realistically could expect for the long end, claiming that the American traders (more or less no longer present in the market) were dominant players in the long end, and that the ongoing processes of vertical integration in the power market is reducing open interest. It was agreed that an important focus for Nord Pool in the near future is to continue to recruit Minutes_10_December_03.doc 2

3 new members and new trading capital to the market. The meeting also discussed who the creators of liquidity are and should be at Nord Pool. In the Danish OTC group Handelsgruppen Danmark, all members are market makers for each other. It was argued that this would be impossible for Nord Pool with the current member structure, as a direct-member exchange. Different initiatives were discussed, among them aggressor pricing, meaning the price taker pays more for the trade than the member quoting the price, and more flexible market maker agreements. 36/03 Product development Nord Pool presented the following potential new Contracts for 2004 o CfD Months o Peak Contracts o DK1 contracts o CfD Nordic System-Phelix It was informed that CfD Month contracts had been delayed in according to previous plans, but will be tested in January, and is set to be launched in February -04. A more in-depth presentation on possible solutions for Peak contracts was given, leaving open a choice between 1) a peak forward contract, as it is traded today in Handelsgruppen Danmark, and on EEX, or 2) a differential contract (a so-called CfE, Contract for Effect) between peak and base. The CfE contracts have the advantage that it does not carry the delta of the forward, and will thus be less volatile. There was no unanimous conclusion on which contract to choose. The Danish members of the group asked that new DK1 contracts should be quoted in euros. Options project: o Delivery to Strike not discussed, information material has been released in Exchange Information no , Option Exercise - Delivery to strike/listing of Options in Euros. Trading rules: o Update on the new rulebook not discussed, information material to be sent after the meeting. 37/03 Trading system December patch release of PowerCLICK: Nord Pool informed that a patch release of PowerCLICK would be released in December pending the result of the last system tests. This version of the trading system will contain improvements in the graphing functions, a simplified Enter Order window, and a panic button to inactivate all the users orders from the market. In addition there are a few bugfixes. New functionality, ongoing development: Minutes_10_December_03.doc 3

4 As a part of the continuous system development, the following functions were presented and briefly discussed; Work up, Hidden order, Change in closing prices, Historical graphs, Combinations, Automatic options quoting. It was commented, that of these functions the Combinations are the most important. NPTrade: o Not discussed, information material to be sent after the meeting. 38/03 Nord Pool Spot AS (Oral presentation) New settlement system: Nord Pool Spot informed about the status of the project. Some members raised the question of why the members should post security for 7 days, when the risks are from 1 days to maximum 4 days, and why Nord Pool keeps the income of 2 days of interest float. Nord Pool Spot informed that these are the start up parameters, and that they may be gradually tuned when the system is fully up and running. Upon question, it was informed that the members using the new gross bidding model will be compensated for the loss of interest rate. Negative prices in Elspot: o Not discussed, work in progress. Danish - German border: o Not discussed, work in progress. 39/03 Nord Pool Clearing Upon prior request regarding unsatisfactory margin calculation, Nord Pool Clearing informed about a project called risk neutral positions, creating a synthetic product to enable a larger degree of netting between contacts covering the same delivery period, e.g. year contacts and appurtenant seasonal contracts. The aim is to implement this in Q1-04, with the possible risk that the transition to a new clearing solution with OM can create delays. It was also informed that Nord Pool Clearing would change the way the option delta is used in the clearing system. Today the delta is either 1 or 1 but in the future the delta will be calculated based upon a probability-weighted method to reflect the market Delta. The change will effect the margin calculations and the aim is to implement this in Q3/Q4 04. Nord Pool Clearing also informed about general status, and major projects, among them the work to get new clearing capital. The chosen model, insurance coverage of additional NOK 500 mill is expected to be in place during Q1-04, and have a cost of approx NOK 15 mill. This will be covered in the fixed fees. 40/03 Market Council Nord Pool presented briefly the minutes from the Market Council Meeting. Minutes_10_December_03.doc 4

5 41/03 Other The Product Group / Nord Pools role in public information o Briefly discussed under 34 and 35/03. Margin requirements o Discussed under 39/03. Euro implementation o Not discussed Medlemmer I prod gr- Nord Pool skulle legge fram no 42/03 Next meetings Nord Pool suggest the following meetings for 2004: March 10. June 10. September 9. December 9. The members are asked to return with comments/alternative dates. Lysaker, 13 January 2003 Nord Pool ASA Robert Lillefloth Minutes_10_December_03.doc 5