INTRODUCTION TO THE EXCHANGE

Transcription

1 31/01/2011 NASDAQ OMX COMMODITIES EUROPE. INTRODUCTION TO THE EXCHANGE INFORMATION FOR ISVs

2 TABLE OF CONTENTS HOW TO BECOME A CERTIFIED ISV... 2 CLICK/SECUR... 3 Market status... 3 Levels of market depth... 3 Order types... 3 Strategic trading... 4 PRODUCT SPECIFICATIONS AND SETTLEMENT... 5 Product calendar... 5 Products and settlement... 5 Cascading of products... 6 Power futures contracts... 7 Power forward contracts... 8 Contracts for Difference (CfD)... 8 Power options... 9 Carbon (emissions) Daily closing price Final closing price Clearing schedule Inter Commodity Spread Credit ADDITIONAL PRODUCT INFORMATION Trading hours Trading days Post trade amendments FAQ P a g e

3 This document is intended to help Independent Software Vendors (ISVs) understand NASDAQ OMX Commodities offers, trading on the exchange and the CLICK API. HOW TO BECOME A CERTIFIED ISV NASDAQ OMX Commodities (a NASDAQ OMX business unit) maintains an open platform which is designed to allow the development of independent software solutions to access and interface with the ETS and/or clearing platform. The following steps need to be completed prior to certification; a. Reading the ETS User Terms b. Signing the ISV Software License Agreement which governs technical issues and commercial terms c. Establish connectivity to NASDAQ OMX Commodities test environment d. Request for Technical Access to Test and Production environments. e. Request for User IDs to Test and Production environments. f. Once an ISV has conformed NASDAQ OMX Commodities updates the ISV web page to identify the newly certified ISV ISVs that are interested in developing a connection to NASDAQ OMX Commodities should contact Sean Williams to request further information. Sean Williams Senior Markets Developer sean.williams@nadaqomx.com Direct: Mobile: P a g e

4 EXCHANGE AND CLEARING SYSTEM CLICK/SECUR CLICK and SECUR are common names for the trading and clearing backend system. The system is maintained and developed by NASDAQ OMX. It consists of a range of modules with different tasks with regards to the trading and clearing processes. The environments are available for endusers via the common OMnet API, into which third party applications and vendors can integrate. In addition, NASDAQ OMX Commodities offers a range of applications to cover necessary trading and clearing operations. These are; SECUR Participant Interface (SECUR PI) CLICK Trade XT Clearing Report Application (CRA) Market status The two different trading statuses are Open and Closed. Levels of market depth CLICK offers full market depth. Order types CLICK offers several tools when entering orders in the system. - Limit order is the most common order type. The trader specifies price and volume and the order is only valid on the trading day. - Market orders can be specified to ensure that a specific amount of MW is traded at the current market price (CLICK will always trade on the best price available). - One may also trade using the Fill or Kill Fill and Kill options. These functionalities limit the potential trade to the rule chosen. 3 P a g e

5 Fill or Kill is chosen when a trader wishes to trade the entire quantity at a pre set price. If the whole volume is not acquired at the specific price, the order disappears from the market. Fill and Kill may be used when the trader wishes to fill as much as possible of the order at a specific price. The remaining amount not obtained at that price level consequently disappears from the market. Both functionalities mentioned above can be used with limit orders and market orders. Strategic trading CLICK currently offers two functionalities for strategic trading. - Strip Combinations allow the trader to create a list of products that one wishes to either buy or sell at market. This is a nonstandard strip combination consisting of forwards and/or futures and is sent to the market for instantaneous execution, meaning that the trade will not be executed if one or more prices are lacking. The strip combination window is easily reached through the Orders menu and will automatically calculate the average price for the products once the instruments and amount requested are specified. - Standard Combinations allow the trader to combine buying and selling products simultaneously and result in two separate underlying contracts. In the carbon market, EUA/CER swap and spread combinations (December delivery) are always available on screen. In the Power market, a set of popular traded combinations between Nordic products and cross market between e.g. Nordic and German products are listed at all times. All other combinations in the Emission, Nordic and German power market are listed on request. This functionality allows the trader to specify the required spread between the product bought and the product sold. The system automatically creates bait orders which fulfill the spread criteria at all times when all but one leg matches. Orders placed as bids, result in buying the near leg and selling the more distant leg (i.e. buy 4Q11 and sell 1Q12).Orders placed as offers, result in buying the more 4 P a g e

6 distant leg and selling the near leg (i.e. buy 4Q12, sell 2Q12). For example: A trader wishes to buy the combination SCENOYR-12/13 (buying ENOYR-12 and selling ENOYR-13) at the price of EUR 5,00. An ask price of EUR 100 is entered in instrument ENOYR-12. This generates a derived ask order in ENOYR-13 at EUR 95 stating that the buyer is willing to sell at EUR 95 and buying at EUR 100 (difference of EUR5). Bait orders are treated in the same priority as all other limit orders and follow the price and time criteria. The bait will continuously adjust against the best order, altering itself to conform to both the price and volume in the market. Please note that the system will not generate a bait from another bait order. PRODUCT SPECIFICATIONS AND SETTLEMENT Product calendar The product calendar is updated continuously. Please see: ductcalendar/ Products and settlement The products traded at NASDAQ OMX Commodities Europe s financial market comprise of Nordic, German, Dutch and UK power derivatives, European Union allowances (EUAs) and Certified Emission Reductions (CERs). The derivatives are base and peak load futures, forwards, options and contracts for difference (CfDs).These contracts are used for trading and hedging purposes. Contracts listed with NASDAQ OMX Commodities Europe are: days, weeks, months, quarters, seasons and years 1 and have a trading time horizon of up to five years. Base load contracts are delivered Mon-Sun, The Nordic, German and Dutch contracts do not include season. UK contracts do not include years 5 P a g e

7 24.00 CET during the length of the contract. Peak load contracts are delivered Mon-Fri, CET during the length of the contract. The reference price for Nordic contracts is the Nord Pool Spot system price, for the German power derivatives we use EEX Phelix and APX for the Dutch power derivatives. The reference price for the UK power futures contracts is based on the N2EX power market day-ahead auction price. There is no physical delivery of our financial market electricity contracts. Cash settlement is calculated throughout the trading- and/or the delivery period, starting at the due date of each contract, depending on whether the product is a futures or a forward. In addition we offer EUA/CER spot contracts and EUA/CER futures, forward and option contracts with physical delivery. NASDAQ OMX Stockholm AB (the Clearinghouse) is the contractual counterparty in all contracts traded at NASDAQ OMX Commodities Europe s financial market. The clearinghouse guarantees the financial settlement. The daily settlement is automatic, and members are connected to the settlement system through a variety of pre-approved settlement banks. Cascading of products All years, seasons and quarters are automatically cascaded. This operation is performed three working days prior to the delivery of all year products, and on the last trading day before delivery for the quarter products. The price of the cascaded contracts is the same as the original contract. It is the same procedure for all our cascaded products. For example, if the year contract has a price of EUR 35, the quarters have the same price when cascaded. On the cascading day the original position is closed and new trades are created in the underlying products. Margining and settlement will be performed in these underlying contracts. Nordic, German and Dutch contracts: 6 P a g e

8 UK contracts: For cascading dates please see the product calendar. Exceptions: In markets where only three quarters are listed, the fourth quarter is listed for trading one day in advance, prior to the cascading of the year. In markets where only two months are listed, the third month is listed for trading one day in advance, prior to the cascading of the quarter. Power futures contracts NASDAQ OMX Commodities Europe lists base load day and base/peak load week futures contracts. Settlement of futures contracts involves both a daily mark-to-market settlement in the trading period and a spot reference cash settlement in the delivery period Mark-to-market settlement covers gains or losses from the day-to-day changes in the daily closing price of the product. Spot Reference Cash settlement, which begins at maturity, covers the difference between the final closing price of the futures contract and the system price in the delivery period. Spot Reference Price Nordic system price/eex Phelix/APX 00-24(base)/ (peak) Nordic: Base - 10 D, 6 W Peak - 5 W German and Dutch Base - 4 W Peak(EDE) - 4 W UK Base - 5 W, 4 M, 5 Q, 5 S Peak(EDE) - Note we do not list Dutch peak contracts 5 W, 4 M, 2 Q 7 P a g e

9 Power forward contracts NASDAQ OMX Commodities Europe lists base and peak load contracts for each calendar month, quarter and year contracts. There is no settlement for forward products in the trading period. The mark-to-market amount is accumulated (but not realised) throughout the trading period as a daily loss/profit, and realised on a daily basis in the delivery period. In addition there is a Spot Reference Cash Settlement in the delivery period. The member must provide sufficient amount of cash and/or guarantees to cover the daily margin call and any negative settlement. There are two types of accounts; pledged and non-pledged. The non-pledged cash account must be supported by a bank guarantee. Spot Reference Price Nordic system price/eex Phelix/APX 00-24(base)/ (peak) Nordic: Base - 6 M, 2 years in Q, 6YR Peak - 2 M, 3 Q, 1 YR German and Dutch Base - 3 M, 3 Q, 2 YR Peak(EDE) - 3 M, 3 Q, 2 YR Note we do not list Dutch peak contracts Contracts for Difference (CfD) The reference price for Nordic forward and futures contracts is the Nord Pool Spot system price. Actual physical delivery purchase costs are determined by actual area prices. An area price differs from the system price when there are constraints in the transmission grid; CfDs allow members on the exchange to hedge against this area price risk. A perfect hedge using forward or futures instruments is only possible in situations where there is no transmission grid congestion in the market area, that is, area prices are equal to the system price. Hedging in forwards or futures implies a basis risk equal to the difference between 8 P a g e

10 the area price at the member s physical location and the system price. The market price of a CfD during the trading period reflects the market s prediction of the price difference during the delivery period. Spot Reference Price Load Product Area Difference between area price and the Nordic system price Baseload 2M, 3Q, 3YR Oslo,Tromsø, Stockholm, Luleå, Sundsvall, Malmö, Helsinki, Copenhagen and Århus A CfD is a forward contract with reference to the difference between the area price and the Nord Pool Nordic Spot system price. Example: SYOSL= Norway ΔP = Oslo area price - system price Power options NASDAQ OMX Commodities Europe lists for trading the nearest 2 quarters and two years in the Nordic Power Market. Please note that the front year option has two different versions, one were the option is to delivery three times a year and one with regular December delivery.the option contracts are European-style, i.e. they can only be exercised at the exercise date. Spot Reference Price Load Product Nordic system price Base load 2 Q and 2 YR When an option series expires, new series are listed, in accordance with product specification rules. These options are exercised the third Thursday in the month before delivery of the underlying product. For further information please see: 9 P a g e

11 and df chapter 8.6 for settlement procedures. Carbon (emissions) NASDAQ OMX Commodities Europe is the only exchange in the world to offer the full product suite of carbon products: spot, futures, forwards and options for EUA and CER. All futures, forwards and spot contracts are with physical delivery. One EUA/CER allowance contract equals the emission of one tonne CO 2 and our minimum size of contract is 1,000 tonnes (1 lot= 1,000 tonnes of CO 2 ) Settlement of carbon forward/future contracts are as follows: Time Spot contract Forward/Futures contract T (trading day) The net-seller must transfer the allowances to the clearinghouse registry account before CET. Final trading day. The netseller must transfer the allowances to the clearinghouse s registry account before CET. T+1 The clearinghouse transfers the EUAs/CERs to the buyer s registry account at one point during the day The clearing house transfers the EUAs/CERs to the buyer s registry account during the day. T+2 Payment instructions sent to the banks for seller s payment T+3 Cash is available to the sellers Payment instructions sent to the banks for seller s payment Cash is available to the sellers 10 P a g e

12 For further details on carbon contracts and settlement please see: tures/ otforwards/ tions/ The futures, forwards and options contracts are offered with both European Union Allowances (EUAs) and Certified Emission Reductions (CER) as underlying deliverables. The futures contracts are quarterly contracts, with delivery one clearing day after the last trading day, and settlement three business days after the last trading day. The delivery dates are industry standard. The allowance option contracts are quarterly option contracts for the two nearest years. The underlying contract is the December future of the relevant year. The expiry day is three Trading Days before the expiry of the corresponding quarterly contract. NASDAQ OMX Commodities Europe does not charge exercise fee on these contracts. CER projects accepted are in accordance with the EU-ETS directive, excluding projects related to nuclear, land use, land use change, forestry and hydroelectric power generation with a capacity exceeding 20 MW. CERs which have been surrendered for compliance within the EU allowance Scheme are also excluded from trading and clearing. Daily closing price All closing prices are determined at a randomly selected time in the final five minutes of each trading day of the specific product. The exact time is selected using a random number generator. The selected time is not disclosed to the market or NASDAQ OMX Commodities Europe until after market closure. Nordic power market: German and Dutch power market: CET CET 11 P a g e

13 UK power market: Emissions market: CET CET DETAILS REGARDING DAILY CLOSING PRICES ARE AVAILABLE IN CHAPTER 4 OF THE TRADING RULES, GENERAL TERMS, SECTION 4.2. PLEASE SEE: df Final closing price The final closing price for listed products is calculated the same way as for daily closing prices. DETAILS REGARDING THE FINAL CLOSING PRICES ARE AVAILABLE IN CHAPTER 4 OF THE TRADING RULES, GENERAL TERMS, SECTION 4.3 of SECTION 4.2. PLEASE SEE: df Clearing schedule The clearing schedule with an overview of the relevant hours during the day may be accessed through the following link: dix4.pdf Inter Commodity Spread Credit Inter Commodity Spread Credit (ICSC) has been introduced to meet members growing needs for margining efficiencies. The purpose is to enable collateral benefits to members by giving credit to off-set positions in products with sustained price correlation when calculating margins. The new methodology aims at reducing the size of margin calls for members pooling their positions in price-correlated instruments with the Clearinghouse. The objective is to reduce the cost of capital for members who decide to maximize the benefit of this solution. ICSC offers margin benefits both for products from the same product series (e.g. Nordic power vs German power) and for products from separate product series (e.g. Nordic power vs EUA allowances). 12 P a g e

14 ADDITIONAL PRODUCT INFORMATION Trading hours Nordic power market: German and Dutch power market: UK power market: Emissions market: CET CET CET CET Trading days To view NASDAQ OMX Commodities Europe s trading calendar for the Nordic, German, Dutch, and for Emissions please see: dingcalendar/ Post trade amendments All post trade amendments must take place intraday. Distribution As default, all trades are registered on the intraday account (DA). The member can access their accounts through the Secure Participant Interface (PI) or another third party system from which they will be able to distribute their trades to any existing account within their organizational structure. Trades which have not been distributed by the end of the day will be automatically placed in a pre-defined account (HOUSE). Fees will be charged accordingly from the account where the trade is distributed. 13 P a g e

15 Give up/ take up A give up takes place when the buyer or the seller chooses to give its trade to another party. The trade will not physically be moved until the receiver manually accepts the give up (this is what we define as the take up ). If the counter party does not accept the give up intra-day, the trade will be returned to the initiator. Option Exercise For the Nordic Power market the exercise date is always the third Thursday in the month before the delivery of the underlying product. Emissions options are exercised three trading days before the expiry of the relevant quarterly contract month. If the option is exercised you will receive the underlying product. One can both request and deny options to be exercised. For further information please see: Portfolio transfer This function entitles a member to move a portfolio to another member. This function can be performed at any point in time. This can be done in the clearing back office system or the member can perform the operation in PI. A fee is applied to portfolio transfers. FAQ For information on this topic please see: For further information please go to or feel free to contact NASDAQ OMX Commodities Europe at P a g e