liquidity: statutory consultation on the ‘secure and promote’ licence condition power trading...
TRANSCRIPT
Liquidity: statutory consultation on the ‘Secure and Promote’ licence condition
Power Trading Forum
Martin Bell12/12/13
2
Secure and Promote Licence
Condition
Objective 1 (availability of products which support
hedging): Secure fair trading terms for
small suppliers through Supplier Market Access rules
Objective 2 (robust reference prices along the curve):
Promote improvements in forward liquidity through a market-making obligation
Objective 3 (an effective near term market):
Reporting requirements to facilitate monitoring of day-
ahead auctions
Reminder – structure of our liquidity proposals
3
•On 20 November, we published a statutory consultation on the proposed licence condition. This is a legal requirement before making changes to licences
•This stage focuses on the licence drafting. We would like to obtain feedback on the licence text. In particular, we want to check that it reflects our policy design
•The full set of documents we published were:
•Responses to the statutory consultation, and any feedback on the Impact Assessment and Guidance should be submitted by 18 December
Current stage – statutory consultation
Notice with the proposed licence text
Statutory consultation setting out our final policy
design
Draft Guidance on interpretation of the
licence textImpact Assessment
4
Market making design (1)
•Our design for the market making obligation remains broadly as set out in June
•However, following responses to the last consultation, we have updated our policy design to improve its effectiveness
Approach to market maker availability
•Trading windows have a number of advantages – these include:
Post prices for 50% of trading hours each
month
Post prices for two hour-long trading windows
each day
Requirement in June consultation
Requirement in November statutory consultation
Guaranteed opportunities to trade every day
Increased market depth
Afternoon window aligns with activity in the gas market
Practical benefits (eg monitoring
compliance)
5
Market making design (2)
Knock-on changes to availability rules
•As a result of moving to trading windows, some of the other availability rules also needed to be redesigned
• These rules are intended to provide protection for Secure and Promote licensees against specific risks, while still ensuring that the design delivers regular availability
Reloading rule
• Five minute period to replace prices after trading a particular product
Volume cap
• Net volume cap for a licensee of 30MW in a product per window
• Intended to mitigate risk of large open positions
Fast market rule
• Licensees allowed to withdraw from market making in a product if the price moves by 4% in a window
• Intended to deal with situations of extreme volatility
6
Market making design (3)
• Reframed rules – in general, we want to leave licensees flexibility about where to market makePlatform rules
• Uncertainty about the final shape - so we intend to carry out a review at an appropriate pointEuropean financial legislation
• Increased slightly for baseload productsBid-offer spreads
• Introduced short (three month) transition period with slightly wider spreads
• Full product range still available in transition periodTransition period
7
20 Nov 2013
Plus 20 days
31 Mar 2014
Statutory consultation published
Deadline for responses
Decision to modify licences (at least 56 days before changes come into effect)
Window for appeal to Competition Commission (20 working days)
Licence condition implemented
Contact details:Graham Knowles ([email protected]), Martin Bell ([email protected]) or Leigh Rafferty ([email protected])
Timetable
18 Dec 2013
Early 2014
