Your SlideShare is downloading. ×
Powernext   Trading, Clearing & Settlement
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Powernext Trading, Clearing & Settlement

2,421
views

Published on

This presentation gives an insight of Powernext. …

This presentation gives an insight of Powernext.
* it is more of a research work with references mentioned

Published in: Economy & Finance

0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
2,421
On Slideshare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
0
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. TRADING, CLEARING & SETTLEMENT ANURAG SINGH
  • 2.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    1
  • 3. ABOUT POWERNEXT
    • Incorporated in July 2001
    • Paris-based company operating a European energy exchange
    • Owned by NYSE Euronext
    • Powernext lists following complementary, transparent and anonymous markets on easy to access, straight through processing and reliable electronic platforms:
      • Powernext® Day-Ahead represents the benchmark short term market for energy actors to hedge hourly electricity balancing risk 365 days a year,
      • Powernext® Futures provides electricity price risk hedging and arbitrage strategy at medium term with a liquid market offering 3 years of maturities,
      • Powernext® Balancing GRTgaz is the result of the closed cooperation with GRTgaz . This platform will allow the Transmission System Operator GRTgaz to progressively cover its daily balancing needs through a market based mechanism. The prices of the transactions will serve gradually to valorise the daily imbalances of the shippers on the 4 balancing zones managed by GRTgaz.
    2
  • 4. AIM OF POWERNEXT
    • Create an indisputable reference price in France by stimulating the development of competition in France through a new means of trading; by increasing the diversity of market participants; and by benefiting from the privileged position of the French electricity hub.
    • Become a player in the rationalisation of European electricity markets by providing a day-ahead market of European scope (block products, clearing of bilateral contracts, indices, opening up to other hubs).
    • Become a major contributor towards the construction of the unified financial market for power in Europe and launch a range of products to cover all power related risk.
    3
  • 5. GENERAL MARKET OPERATIONS
    • Powernext Day-Ahead® is an exchange market for standardised contracts for the delivery of electricity within the French grid. This market is structured around three separate companies:
    • Powernext SA
      • Organises the market through the publication of legally binding rules and instructions with the objective of establishing the technical and legal framework for market operations;
      • Maintains the necessary system connections for matching and executing of orders;
      • Distributes market information.
    • b) LCH.Clearnet SA
      • Acts as credit institution under French law responsible for guaranteeing transaction security
      • Acts as CCP
    • c) Réseau de Transport de l’Electricité (RTE)
      • RTE is the French national grid company
      • Manages the physical delivery of power
      • Administers the financial flows resulting from imbalances within each balance responsible perimeter
    4
  • 6. OFFICIAL REGULATORS
    • Autorité des Marchés Financiers (AMF)
      • Body in charge of the regulation and of the monitoring of both regulated and OTC markets
        • It supervises compliance of Investment Service Providers with the proper working rules.
        • It approves Investment Service Providers business plan.
        • It oversees the compliance of the transactions performed on a regulated exchange.
    • Commission de Régulation de l’Energie (CRE)
      • The CRE’s two main missions concern access rights to the public electricity transport and distribution grid, and electricity market regulation.
    5
  • 7.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    6
  • 8. PRODUCT SPECIFICATION
    • Powernext® Day-Ahead
      • Powernext® Day-Ahead Auction
      • Powernext® Day-Ahead Continuous
      • Powernext® Day-Ahead Intraday
    • Powernext® Futures
    • PWX Balancing GRTGAZ
    7
  • 9. POWERNEXT® DAY-AHEAD AUCTION 8   Underlying Electricity traded on day d for delivery the following day in 24 hourly intervals   Quotation method Auction   Auction times The auction takes place at 11:00 am CET, 7 days a week (non-business days included)   Volume tick 1 MWh   Price tick 0,01 Euro per MWh   Trading interface ElWeb   Simple bids Members can send Powernext® an order form containing up to 256 price/quantity combinations for the 24 one-hourly periods of the following day   Block bids
    • Participants have the possibility to submit price limited block orders that link a minimum of four hours of the day together. By default, the offered block products are:
    • Block Bid 1-4 covering hours 1 - 4,
    • Block Bid 5-8 covering hours 5 to 8,
    • Block Bid 9-12 covering hours 9 to 12,
    • Block Bid 13-16 covering hours 13 to 16,
    • Block Bid 17-20 covering hours 17 to 20,
    • Block Bid 21-24 covering hours 21 to 24,
    • Block Bid 1-24 covering hours 1 to 24,
    • Block Bid 9-20 covering hours 9 to 20,
    • Block Bid 1-6 covering hours 1 to 6,
    • Block Bid 1-8 covering hours 1 to 8,
    • Block Bid 9-16 covering hours 9 to 16.
    • Block bids are necessarily price-limited as only a single price (between 0.01 and 3000 €) can be entered per block. Each trading day, the participants are allowed to submit 8 block bids per portfolio and per block type. Only 3 portfolios per participant are allowed to submit block bids. The maximum quantity allowed is fixed at 150 MW per block.
      Settlement The value of the settlement is equal to the MCP multiplied by the volume traded. LCH.Clearnet SA, as the central counterparty, ensures the financial security of the transactions and is responsible for collecting payment from net buyers and distributing it to the net sellers   Delivery Powernext SA nominates all physical commitments of the balance responsible members. Deliveries are made to the French electricity grid managed by RTE
  • 10. POWERNEXT® DAY-AHEAD CONTINUOUS 9 Underlying Electricity traded on day d for delivery the following day on 11 standardized blocks of hours Quotation method Continuous trading Trading hours From 7:30 am to 11:30 am CET, 7 days a week Volume tick 1 MWh Price tick 0,01 Euro par MWh Trading interface Global Vision Block bids
    • Offered block products are:
    • Block Bid 1-4 covering hours 1 - 4,
    • Block Bid 5-8 covering hours 5 to 8,
    • Block Bid 9-12 covering hours 9 to 12,
    • Block Bid 13-16 covering hours 13 to 16,
    • Block Bid 17-20 covering hours 17 to 20,
    • Block Bid 21-24 covering hours 21 to 24,
    • Block Bid 1-24 covering hours 1 to 24,
    • Block Bid 9-20 covering hours 9 to 20,
    • Block Bid 1-6 covering hours 1 to 6,
    • Block Bid 1-8 covering hours 1 to 8,
    • Block Bid 9-16 covering hours 9 to 16.
    Bid types
    • Limit orders
    • All-or-none/ Fully or partially
    • Iceberg
    • Market-to-limit
    • Must-be-filled
    Settlement The value of the settlement is equal to the MCP multiplied by the volume traded. LCH.Clearnet SA, as the central counterparty, ensures the financial security of the transactions and is responsible for collecting payment from net buyers and distributing it to the net sellers Delivery Powernext SA nominates all physical commitments of the balance responsible members. Deliveries are made to the French electricity grid managed by RTE
  • 11. POWERNEXT® DAY-AHEAD INTRADAY 10 Underlying Electricity traded on day d for delivery on the same day or on the following day on 24 individual hours, 11 standardized blocks or on user-defined blocks linking at least 2 consecutive hours Quotation method Continuous trading Auction times From 7:30 am CET to 11:00 pm CET, 7days a week. Trading hours for the following day begin at 11:30 am CET Volume tick 1 MWh Price tick 0,01 Euro par MWh Trading interface Global Vision Block bids Participants have the possibility to submit price limited block orders that link a minimum of two hours of the day together. By default, the offered block products are: Block Bid 1-4 covering hours 1 - 4, Block Bid 5-8 covering hours 5 to 8, Block Bid 9-12 covering hours 9 to 12, Block Bid 13-16 covering hours 13 to 16, Block Bid 17-20 covering hours 17 to 20, Block Bid 21-24 covering hours 21 to 24, Block Bid 1-24 covering hours 1 to 24, Block Bid 9-20 covering hours 9 to 20, Block Bid 1-6 covering hours 1 to 6, Block Bid 1-8 covering hours 1 to 8, Block Bid 9-16 covering hours 9 to 16. Bid types
    • Limit orders
    • All-or-none/ Fully or partially
    • Iceberg
    • Market-to-limit
    • Must-be-filled
    Settlement The value of the settlement is equal to the MCP multiplied by the volume traded. LCH.Clearnet SA, as the central counterparty, ensures the financial security of the transactions and is responsible for collecting payment from net buyers and distributing it to the net sellers Delivery Powernext SA nominates all physical commitments of the balance responsible members. Deliveries are made to the French electricity grid managed by RTE
  • 12. POWERNEXT® FUTURES 11 Baseload Peakload Underlying The physical power delivered 24h a day on the French hub during the delivery period The physical power delivered during the peak hours (8 am to 8 pm) on the French hub during the delivery period (including holidays and excluding weekends) Delivery periods 3 Months 4 Quarters 3 Years Nominal 1 MW x 24hours x number of days=number of MWh (744 MWh for 31 days) 1 MWx12 hours x number of peak days=number of MWh (240MWh for 20 days) Price tick 0,01 €/MWh Minimum volume 1 MW Trading hours 9:00 am - 4:00 pm on business days (according to the Banque de France Target calendar) Clearing LCH.Clearnet SA is Powernext Futures™‘s central counterparty. It guarantees the financial settlements and the delivery of the electricity that has not yet been nominated to RTE, i.e. the electricity which delivery is to start the day after tomorrow at the earliest. All contracts are cleared as one or a series of individual months. Daily variation margin Variation margins are calculated as the delta of value of the position valued at daily settlement price minus previous daily settlement price or traded price for the new open or closed positions Last trading day The first business day prior to the calendar day preceding the first day of the delivery month Settlement Physical delivery on the basis of the last settlement price fixed on the last day of trading Method of last settlement Open position on the last trading day are delivered (nominated to RTE every day of the delivery period and the money amount is called to the purchaser)
  • 13. PWX BALANCING GRTGAZ 12 Balancing Gas Within-Day Nord Balancing Gas Within-Day Sud Balancing Gas Day-Ahead Nord Balancing Gas Day-Ahead Sud Commodity High calorific natural gas Quantity Need Set by GRTgaz. Can be different for each of the 4 products. Send by GRTgaz before each gate closure Direction Set by GRTgaz (Buy or Sell). Can be different for each of the 4 products. Published after delivery*. Counterparties GRTgaz and the Member Delivery Point
    • Choice of:
    • PEG North H
    • PEG West
    • PEG East
    PEG South
    • Choice of:
    • PEG North H
    • PEG West
    • PEG East
    PEG South Price Tick 0,01 €/MWh Volume Tick 1 lot = 150 MWh at 25°C Bookbuilding period 60-minute period before opening Matching Technique Fixing Delivery Day Running gas day Coming gas day Gate opening time 10:15 CET 15:15 CET Gate closure time 11:15 CET 16:15 CET Results Publication Time 11:30 CET 16:30 CET Trading Calendar French working days .Members will be informed in advance by Powernext and GRTgaz
  • 14.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    13
  • 15. MEMBERSHIP
    • Traders vis-à-vis Powernext SA
    • Clearing counterparties vis-à-vis LCH.Clearnet SA
    • Balance Responsible Entities vis-à-vis RTE (or must have signed an attachment Agreement with an existing Balance Responsible Entity)
    14
  • 16. MEMBERSHIP (CONTD.) 15
  • 17. MEMBERSHIP (CONTD.) Membership Application
    • The Trading Agreement duly signed with Powernext SA
    • The Clearing Agreement signed with LCH.Clearnet SA
    • The existing Balance responsible Contract signed with RTE or an Agreement with a third party’s balance perimeter.
    • A PP-DPES agreement signed between a bank
    • Receipt of the registration to the Ministry in charge of energy
    • Current documents enabling an assessment of the candidate’s legal and financial status and representation
    The Agreement Letter
    • Agreement Letter
    • The membership file is completed
    • LCH.Clearnet SA has agreed to sign the clearing agreement
    • RTE has confirmed the existence of balance responsible contract
    Start-up Notice
    • Start-up Notice
    • The Technical Parameters
    • The member identification form,
    • The trader authorisation form,
    • The portfolio form
    • Preparing Financial Settlements
    • The agreement between Payment Participant and Direct Participant to LCH.Clearnet SA External System Participant,
    • The appendixes to this agreement: payment declaration and payment limit.
    16
  • 18.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    17
  • 19. FEES/ TARIFF 18
  • 20. FEES/ TARIFF (CONTD.)
    • Entrance fee : this fee is charged upon the signing of the membership agreement.
    • Annual fee : the annual fee is charged quarterly, upon signing the membership agreement.
    • Execution fee : this fee is levied on the member by Powernext SA for the execution of its order on the trading system.
    • Registration fee : the registration fee is levied on the member by Powernext SA for registering the trade with LCH.Clearnet SA.
    • Clearing fee : the clearing is levied by LCH.Clearnet SA
    19
  • 21.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    20
  • 22. CLEARING trade order order Powernext® Seller Buyer Trade Acceptance LCH Registers the contract in the name of clearers Novation LCH acts as CCP Netting Netting will result in Payment & Delivery obligations at each account level Nominations Cash Settlement Only in case of physical products LCH Clearnet SA 21
  • 23. NETTING
    • Conversion of Individual Contracts into monthly positions, thus resulting into payment & delivery obligation
    • Netting will be done at the end of each trading day till the beginning of the Delivery Day
    • LCH Clearnet supports 4 types of account for Clearer – House(1), General Client(1), Market Maker(1) & Client (many)
    • Netting done at account level & only as mentioned below
      • Contract done on Clearer’s own account netted in House Account
      • Contract done by Client, netted in the specific client account
      • Contract done for market making to be posted on Market Making Account.
        • If Clearer acts as Market Maker, the Market Making position is netted with House Account for nominations & margin
        • If the client acts as Market Maker, then a new Market Maker Account is opened in the name of Clearer. This will be treated as a separate Client Account & will be netted separately
        • All net client account position to be netted per calendar month to result in a Net General Client Monthly Position
  • 24. NOMINATIONS
    • Powernext S.A. makes separate Nominations on the last day before the Delivery Period, and every other day of the Delivery Period until the next before last day of the Delivery Period inclusive, acting on behalf of the relevant Balance Responsible Entity and on the basis of information received from LCH.Clearnet SA, for the parts of the Deliverable Net Position registered in the House Account, Client Account(s) and Market Maker Account(s), corresponding to the one day volume of Physical Flows to be physically delivered on the French Hub the day ahead
    • Nominations shall be deemed to be made at 10 a.m at the earliest and 2 p.m. at the latest every relevant day, on the basis of the series of sequential deliveries to be effected during the Delivery Period, by Powernext S.A.
    • After Nominations, the series of sequential deliveries to be effected during the Delivery Period shall be updated.
    • Nominations shall be made by Powernext S.A. via its own systems.
    • The guarantee of the actual delivery of the Physical Flows is provided by RTE once Nominations are made for the day ahead.
    • In exceptional circumstances and without limitation where a Clearer other than the Clearer is in default, LCH.Clearnet SA shall be authorised to perform the Delivery Obligation.
  • 25.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    22
  • 26. RISK MANAGEMENT
    • Margin Requirement
    • Clearing Fund
    • Collateral
    23
  • 27. MARGIN REQUIREMENT
    • Initial Margin:-
      • Covers the potential Product price fluctuations and the replacement costs in case of the Clearer’s default
      • Shall be calculated using a London SPAN type calculation adapted to energy derivatives
      • Sum of three components
        • the outright margin and the spread margin, which reflect future replacement costs under unfavorable scenarios and which are measured via the scanning risk rate and the spread margin rate, respectively; and
        • the commodity saving, which provides an offset between Products taking into account the relation between Baseload and Peakload Products, and which is defined by the portfolio saving rate
    24
  • 28. MARGIN REQUIREMENT (CONTD.)
    • Variation Margin:-
      • Daily adjusted Margin Amount for each of the Net House, Client and the dedicated Market Maker Account Monthly Position(s) separately, by an upward or downward Margin Call issued by LCH.Clearnet SA
      • Adjustment is made on a daily basis before the Delivery Period, or until the settlement of the Cash Settled Products
      • Calculated in accordance with a Settlement-to-Market method, and for the Net Monthly Positions
      • Variation Margins must be paid in cash denominated in Euro only.
    25
  • 29. MARGIN REQUIREMENT (CONTD.)
    • Delivery Margins
      • Calculated only for Physically Delivered Products
      • Consist of:
        • Initial Delivery Margin, which shall be calculated and called by LCH.Clearnet SA at the beginning of the Delivery Period; and
        • Contingent Variation Delivery Margins, which shall be calculated and called by LCH.Clearnet SA daily during the Delivery Period
        • An ad hoc Margin in the case where no Contingent Variation Delivery Margin can be calculated
    26
  • 30. MARGIN REQUIREMENT (CONTD.)
    • Additional Upward Margin Call
      • Imposed in order to increase the amount of the available Margin in addition to the Variation Margin
      • May be part of the fund call issued every day by LCH.Clearnet SA
      • May also be part of a fund call outside such time frame (intra-day Margin Call)
    27
  • 31. CLEARING FUND
    • A mutualised system of risks coverage available to LCH.Clearnet SA when further to a default by a Clearer and use of the Collateral, losses remain
    • Clearer is obliged to contribute to the Clearing Fund according to the terms and conditions
    • Non-payment by a Clearer of a call to contribute constitutes a default of the Clearer
    • LCH.Clearnet SA will promptly report to the Clearers on and account for any withdrawals made from the Clearing Funds
    28
  • 32. CLEARING FUND (CONTD.)
    • Contribution to the Clearing Fund
      • Calculation of the Uncovered Risk
      • Contributions Amount
      • Contribution Timing (occurs on a monthly basis as set up in a Notice)
    • Replenishment of Contribution
      • Call for Replenishment
      • Replenishment and Termination of Membership
    • Clearing Fund Withdrawal Conditions
    • Collateral Accepted
    29
  • 33. CONTRIBUTION TO THE CLEARING FUND
    • Calculation of the Uncovered Risk
      • Clearing Fund is intended to be sufficient in size to cover a default of the largest Clearer on Powernext Futures® market
      • “ Largest Clearer” is defined as the Clearer that is responsible for the highest uncovered risks
      • Size of the Clearing Fund is floored as stated in a Notice, with each Clearer contributing pro rata its uncovered risk
      • For a Clearer and on a given day (D), the uncovered risk is defined as the difference between a stress-testing type calculation and Initial Margin and Variation Margin required
      • Uncovered risk is calculated for each Clearer at the segregation type level Client, House & Market Maker
      • A total uncovered risk, taking into account all accounts (Client, House and Market Makers Accounts), is also calculated
      • The maximum of house and total uncovered risk is taken in consideration for each Clearer
      • The timeframe and the parameters regarding calculation of the uncovered risk is set out in a Notice.
  • 34. CONTRIBUTION TO THE CLEARING FUND
    • Contributions Amount
      • Clearer contribute pro rata to their respective uncovered risk once a month
      • The monthly distribution of the contribution is stopped in the evening of the fourth Clearing Day of the month
  • 35. CLEARING FUND WITHDRAWAL CONDITIONS
    • Following the default of a Clearer LCH.Clearnet SA will draw amounts from the Clearing Fund as follows :
      • defaulting Clearer share in the Clearing Funds shall be used in the first instance,
      • and If a need remains
      • the shares of the other Clearers in the Clearing Fund shall be used pro rata to their respective contributions for that monthly period. The Clearers’s contribution thus calculated shall not exceed the total Clearing Fund contribution set for that monthly perio
    • If LCH.Clearnet SA draws upon the Clearing Fund, it shall use the sums provided to perform its obligations pursuant to its guarantee under these Operation Rules and to cover the repayment of any related loans, expenses, damages, interest charges and other expenditure
  • 36. COLLATERAL
    • Clearer agrees to provide LCH.Clearnet SA with Collateral, in full ownership
    • Accepted Collateral
      • Collateral in Cash
        • Eligible Currencies
          • Euro, GBP, USD
          • Variation Margin only in Euro
          • Applicable Haircut needs to be applied on payment in GBP & USD
        • Cash provided as Collateral shall be remunerated as set-up on the LCH.Clearnet SA Treasury Fee Grid
        • Transfer of Excess of Cash
      • Collateral in Securities
        • Eligible Securities
          • Debt securities issued by the French, German (Bunds), US, British (Gilts), Belgian, Dutch, Italian, Portugese Treasury
          • Shares incorporated in index PSI-20, CAC 40, BEL 20, AEX, European index EURONEXT 100, European index DJ EURO STOXX 50, DJ STOXX 50
          • Corporate bonds if the shares of the relevant company
          • Zero coupons and strips debt securities will not be accepted as Collateral
        • Depending on the Maturity an haircut will be imposed on the securities
    30
  • 37.
    • Agenda
    • About Powernext
    • Products Specification
    • Membership
    • Fees/ Tariff
    • Clearing
    • Risk Management
    • Settlement
    31
  • 38. SETTLEMENT
    • LCH.Clearnet SA is responsible for the financial aspects of trading
    • Réseau de Transport de l’Electricité (RTE) guarantees that the electricity is actually injected into or withdrawn from the grid in pursuance of the commitments made on the market
    • The procedure is identical to the nomination procedure generally used by participants on the French electricity market
    • It is included in the balance equation as a purchase or sale of electricity
    • The Balance Responsible Entity
      • Acts as Settlement Agents
      • Participants are required to sign a Balance Responsible contract with RTE or an agreement with an existing balance responsible entity in order to guarantee power delivery and withdrawal.
      • Each balance responsible entity is obliged to maintain the balance between electricity consumption and production within a certain perimeter
    • Imbalance Settlement
      • If members are unable to fulfil their delivery commitments, RTE will compensate for the imbalances and will guarantee the stability and balance of the power grid
      • RTE will then record an imbalance against the Balance Responsible entity which is financially liable for settling the difference.
    32
  • 39. BALANCE EQUATION
  • 40. REFERENCES
    • Powernext website
    • LCH website
    • RTE website
    33
  • 41. Thank You 34