NASDAQ OMX Commodities Europe provide markets for day-ahead power, future power and for emissions allowances and emission credits.
The Nordic physical power market
The benefit of the Nordic physical electricity market derives from the opportunity it provides for Finland, Sweden, Denmark and Norway to assist each other when additional electricity supplies are required. If one country is unable to satisfy demand from its own output, it can import the necessary power from a neighbour. The common Nordic market primarily involves electricity generation from such resources as water, nuclear energy and coal. Since the generating modes differ and are distributed differently in the various countries, the need for additional power will vary from country to country and at different times. This makes it possible to share Nordic electricity resources.
A common Nordic resource pool for electricity helps to optimise the use of available power and reduce local deficits. That allows the various countries to reap socio-economic gains.
What influences the physical and financial power prices »
The physical market function (spot)
Nord Pool Spot AS runs the largest electricity market in the world, offering both day-ahead and intraday markets to its participants. 330 companies from 20 countries trade on the exchange. The Nord Pool Spot group has offices in Oslo, Helsinki, Stockholm, Fredericia (Denmark), Tallinn and London. Nord Pool Spot is owned by the Nordic transmission system operators. In 2009, the group had a turnover of 287 TWh representing a value of EUR 10.8 billion.
To read more about the physical market and the price calculation, please visit Nord Pool Spot ».
The financial market function (derivatives)
Risks associated with changes in physical market prices can be managed through the financial (forward) market for electricity. A buyer or seller of power can reduce the risk of future price changes by selling or buying the cost of future electricity to/from other players with the ability and willingness to accept this price risk. Players can thereby change their risk exposure as required, and are able to hedge the price of future output or consumption.
Using the marketplace allows players to secure the greatest possible transparency around pricing, and reduce the risk of incorrect price formation in the future. The alternative is to do this bilaterally with limited information about the overall position.
Another important component of the financial market is the clearing business, which means that NASDAQ OMX Commodities clearinghouse, NASDAQ OMX Stockholm AB, enters into contracts as a counterpart and thereby accepts responsibility for their future settlement. The most important function of the clearing process is to provide members with a quick and effective settlement process after carrying out a trade through NASDAQ OMX Commodities Europe or the OTC market. At the same time, it reduces the financial risk for exchange members.
Power derivatives in general at NASDAQ OMX Commodities »
The carbon market
When the EU introduced its own trading system for carbon dioxide emission allowances (EUAs) on 1 January 2005, NASDAQ OMX Commdities Europe (former Nord Pool ASA) was the first exchange to list EUAs as standardised exchange contracts. In June 2007, NASDAQ OMX Commdities Europe (former Nord Pool ASA) was also the first exchange to offer trading global carbon contracts called CERs through the Clean Development Mechanism, organized by the UN.
Emission rights are closely associated with electricity generation. The power industry emits substantial volumes of carbon dioxide, since much of its output is fuelled by coal or gas. Because the emitter must now pay for these emissions, generating costs have risen.
The intention is to offer carbon products which allow NASDAQ OMX commodities’ members to manage the price risk these allowances present for electricity generation or industrial production. The NASDAQ OMX Commdities Europe trading platform facilitated an efficient, transparent and confidence-inspiring development of an emissions market similar to the one for Nordic power. This is achieved by offering standardised products in a regulated marketplace with strict requirements for information management.
Membership alternatives
Existing members of the NASDAQ OMX Commodities Europe Financial Market may trade and clear UK power futures contracts under their existing memberships, but need to establish new bank accounts for settlement and collateral arrangements in the United Kingdom.
Members of N2EX need to sign separate membership agreements for trading and clearing of the UK power futures contracts.
There are three membership alternatives for N2EX participants:
1) As a non-clearing member through the Nord Pool GCM network
2) As a client of a GCM
3) Direct membership
For more information about how to become a member and the membership agreements, please contact our sales and marketing representatives:
Knut Rabbe, phone +47 6752 8032, knut.rabbe@nasdaqomx.com
Peter Böhmwalder, phone +43 664 263 7197, peter boehmwalder@nasdaqomx.com
Jukka Nygren, phone +358 50453 6300, jukka.nygren@nasdaqomx.com
Nick Wallis, phone +44 (0) 207 0658 074, nick.wallis@nasdaqomx.com
Khadija Kapasi, phone +44 207 0658 133, khadija.kapasi@nasdaqomx.com
Staffan Friberg, phone +46 8 405 6293, staffan.friberg@nasdaqomx.com
Market participants are invited to start technical preparations for trading and clearing of the UK cash-settled power futures contracts.
For more information, please see:
Product specification
Product calendar »
Time spread netting and inter commodity spread credit
The clearing house NASDAQ OMX Stockholm AB may in some cases accept netting of initial margin between delivery periods for contracts in the same risk group (time spread netting).
The clearing house may also accept netting of initial margin for contracts in different markets (risk groups). This is also referred to as Inter Commodity Spread Credit.
The correlation between the contracts determines the possibility for time spread netting and inter commodity spread credit.
For more information about the parameters for time spread netting, please visit:
ICSS parameters »
The parameters are updated regularly.
For more information about inter commodity spread credit, please visit:
Inter commodity spreat credit »
The UK power futures market
NASDAQ OMX Commodities Europe launched trading and clearing of N2EX referenced UK power futures contracts from 31 January 2011.
N2EX is the name of the UK wholesale power market operated by NASDAQ OMX Commodities and Nord Pool Spot AS.
Trading days follow the UK banking calendar, and the N2EX referenced futures contracts are traded in pound sterling.
Contract types
The contract types are cash-settled pound sterling UK power futures listed for weeks, months, quarters and seasons (summer and winter).
The contracts are cleared by NASDAQ OMX Stockholm AB and NASDAQ OMX Oslo. Electronic trading is conducted on the proven Genium INET Trading Workstation/Clearing Workstation.
