Participants: Place/date: Lysaker, 2 September 2010 Jonas Melin for Torbjørn Haugen, Markedskraft

Transcription

1 Minutes THE FINANCIAL MARKET PRODUCT GROUP Participants: Place/date: Lysaker, 2 September 2010 Jonas Melin for Torbjørn Haugen, Markedskraft Referent: Frank Lien Håkon Røhne, EGL Nordic Morten Erik Pettersen, EDF Trading Oslo Lena Kapanen for Jukka-Pekka Häkli, Solidus Mårten Strömberg, Vattenfall Fredrik Öhrneman, E.ON Heine Rønningen, Hafslund Delta AS Knut Stensrød, NAET representative Ola Kvennås, Statkraft Absent: Present from Nord Pool/ NASDAQ OMX : Georg Aasen Frank Lien Arman Mohii Present from Nord Pool Spot: Hilde Rosenblad (part time) 07/10 Minutes from the previous meeting No comments. 08/10 Nord Pool Spot Physical Market Market and Operational Status Nord Pool Spot (NPS) presented their current status showing a continuous strong market share. So far in 2010 the market share is approx. 75%. They have the following ongoing projects: ITVC Market coupling of Nordic and CWE regions through EMCC. Start up date Nov 9 for CWE and ITVC simultaneously. Algorithmic and synthetic testing through the summer shows promising results. Implementation project is according to plan. Launch of coupling across NorNed is scheduled for Dec Implicit auction SwePol link market coupling NPS and PolPex from mid November In March this year the Polish and Swedish transmission system operators, PSE Operator and Svenska Kraftnät (SvK), signed a joint declaration to work for a market opening of SwePol Link. UMM and Elbas in Estonia from Oct Estonia has been a bidding area in Elspot since April and has 11 participants with an

2 Financial Market Minutes Product Group 02 September average daily volume of 14 GWh. Estlink is very often congested, is there a need for one more cable? New price areas in Sweden NPS is in a coordination group together with EI (Energi Inspeksjonen) and SvK (Svenska Kraftnät). There will be integrated technical testing together with SvK during spring Web project NPS have a hope to launch new functionality that will improve the way data is presented and make it easier to download data. N2EX - Status Physical market There are currently 17 members, which includes all the large ones. The turnover per day is promising with a majority on the Prompt market (60 GWh per day which gives a market share of 25%) while the Auction has 5 GWh per day. The turnover is slowly increasing, but liquidity is a challenge. N2EX Intra day spot market will be released on the 15 September N2EX is the name of the physical UK power market operated by NASDAQ OMX Commodities and Nord Pool Spot. The technical release in September marks the beginning of the second phase of product releases on N2EX according to the requirements set out by the Futures and Options Association (FOA). The spot market offers half hourly contracts with delivery periods covering the proceeding 48 hours. 09/10 Financial Market Market and operational status Financial Market The Nordic Market had a very volatile start in 2010 with high volumes, but the total volumes have declined during the summer compared with last year. Market share for the Exchange for 2010 is per week %. In the last product group meeting NP was asked to present a market share per country. This was presented with the following key figures; Nordic participants market share has dropped with 17.38% from 2007 (82.25%) to 2010 (64.87%), in the same period Great Britain has increased from 11% to 22% and other countries from 7% to 13%. Liquidity - How to improve liquidity in Nordic Power? As an introduction Fredrik Öhrneman presented EON s view and their suggestions on how to improve the liquidity. Opening hours The discussion from last meeting continued, some of the participants asked what kind of new price driving information was coming in the potential extended opening hours. Risk capital has been reduced in all markets the last two years and several customers have concerns that it will take longer time to get it back. Other meant it is more a discussion about the ability to trade than new information, which reduce the overnight risk and attract more liquidity from financial players. Some asked the question if the NAET feedback was representative as approx 40 customers is behind 80% of the total turnover at the Exchange and 13 customers behind 50%. Longer opening hours would incur extra costs for the customers if they should be in the market until close (shift work etc.).

3 Financial Market Minutes Product Group 02 September All or None functionality The product group was positive to introduce an All or None functionality in ClickTrade and meant this would contribute in a positive way to increase liquidity and transparency. Increase minimum lot size The majority of the group was negative to increase the minimum lot size from 1 MW, but meant the big players could contribute more to show more volume. German Power Nord Pool established the Liquidity Pool to our German Power contracts on June 1st, at the moment this Pool consists of 4 participants and Nord Pool is in a process of increasing this with additional 2 participants. We saw an increase in Exchange traded volume in June (3.1 TWh) of 51% compared with May (2.05 TWh) before the summer holiday. NP will continue to chase this from September onwards. Emissions NASDAQ OMX Commodities has now launched EUA/ CER futures with industry standard delivery dates and EUA/ CER option contracts where the underlying contract is the December future of the relevant year. We are in a process of signing market makers on all December futures contracts. We have competitive fees EUR/tCO2, combined fee for trading and clearing of forwards, futures and option contracts. For the options there will be no exercise fee on expiry. 10/10 Business Development NASDAQ OMX Commodities department informed that they have several projects in the pipeline and updated the group on the following: New CfD contracts NP will launch new CfD contracts in Sweden and Norway. Please see Exchange information no 30/10 New CfD contracts in Sweden and Norway and no 48/10 Definitions of new CfD contracts in Sweden and Norway for further information. UK Power derivatives There will be launched UK power derivatives which would be cash settled futures. 5 weekly, 4 monthly, 5 quarterly and 5 seasonally base load contracts 5 weekly, 4 monthly, 2 quarterly peak load contracts UK Natural Gas and UK spark spread contracts NASDAQ OMX Commodities are currently considering to launch UK natural gas and spark spread contracts.

4 Financial Market Minutes Product Group 02 September Nordic power options The options volumes have declined substantially compared to the peak years and the liquidity is limited and there is a lack of interest to trade options. Nord Pool asked the question what they can do to increase the interest for options in the Nordic market. New products such as early expiry? Re-introduction of Asian options? Volatility index trading? A participant commented that this is due to lack of available competence and traders. There is a need to develop and educate traders, so more advanced courses covering options could be an idea for Nord Pool to arrange in cooperation with the brokers. Another participant requested the possibility to clear options with decimals (0.1 MW). 11/10 Clearing The main focus from Clearing was to inform the product group on the UK Power Derivatives project. Product structure The walkthrough on the product structure had the following key points: The product codes will follow the same structure as the existing Nordic contracts EUK = Electricity UK, BL = Baseload, PK = Peak (different from existing Nordic contracts) The market will follow UK calendar Cascading: Seasons are cascaded into (two) Quarters two full trading days (i.e. bank days) before the delivery period for the Season begins The Quarters are cascaded into (three) Months one full trading day (i.e. bank days) before the delivery for the Quarter begins Thus, the three months origining from the quarter are all tradable during one day, before the first month in time goes into delivery (at the end of that trading day) Assigned contracts receive the final closing price of the product that cascades Cascading is mandatory See the product calendar to get full overview endar/ Account setup Exchange trading 07 a.m. 5 p.m. and OTC trading 06 a.m. - 5 p.m. (T) Bank accounts for settlement and collateral must be made available All members must open an additional bank account for GBP Cash settlement with Nordea London Plc

5 Financial Market Minutes Product Group 02 September All members must open a GBP Cash Collateral bank in any CHAPS supporting bank. Members must post required level of collateral at a given time the following UK banking day (T+1, 10 a.m.) Collateral may be posted as a guarantee, Letter of Credit and/or cash deposit Note that Base Collateral will be re-evaluated for existing participants Settlement occurs the following UK banking day (T+1, pay-ins 9 a.m. -outs 1 p.m.) Settlement includes: mark-to-market, spot reference cash settlement for positions in delivery and fees SPAN and ICSC will apply Members can choose between GBP and EUR as risk currency. 12/10 Other Transmission Rights Nord Pool is in a process of setting up a working group consisting of members from the product group, Nord Pool and other participants from the Nordic Power market. UK Power See 10/10 and 11/10 for comments related to this. 13/10 Next meetings Next meeting will be 7 December Frank Lien Lysaker, 28 October 2010