Physical delivery option on IDEX

Transcription

1 Physical delivery option on IDEX 1

2 Introduction A Decree of the Minister of the Economic Development promulgated on April 29th invited Gestore dei Mercati Energetici Spa (GME) to look for an agreement with Borsa Italiana in order to integrate the MTE (Mercato a Termine Elettrico) with IDEX Borsa Italiana, CC&G and GME agreed to perform the integration through the introduction of a physical delivery option on the futures traded on IDEX 2

3 What changes on the futures contract BIt Rules 1. Introduction of the physical delivery option; 2. Who can exercise the option; 3. When it is possible to exercise; CC&G Rules 1. Introduction of a new membership profile: the Qualified Member; 2. How to exercise the option; Rules of the physical electricity market (GME): when the exercise of the option will be accepted 3

4 Who can exercise the option Members of both IDEX and GME markets Members of IDEX on behalf of their clients that are members of GME markets When it is possible to exercise It is possible to exercise the physical delivery option for monthly futures on the third trading day preceding the beginning of the delivery period 4

5 How to exercise In order to exercise the physical delivery option the market participant needs to request its General Clearing Member a positions transfer on the GME account. The GME participates to the CC&G System as Qualified Participant (it is a direct counterparty of CC&G and it is not allowed to trade on the IDEX market) Once the option has been exercised, GME will perform deliveries and withdrawals of electricity on the GME platforms, by acquiring and managing the necessary guarantees The transfer cost for the Exercising Participant is /MWh 0,005 5

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8 Exercise of option of physical delivery (1/2) The Exercising Participant sends a requests through BCS to CC&G for the chosen energy futures contracts CC&G automatically submits the request to the GME GME performs the necessary checks GME confirms to CC&G if the request has been accepted or rejected CC&G communicates to the Exercising Participant GME s answer In case of positive answer, the Participant that exercised the physical delivery option will transfer to GME the positions related to the exercise. The position are registered in the GME account. As consequence of the transfer, GME is exposed to CC&G for the single net balance. The gross position has no more relevance. 8

9 Exercise of option of physical delivery (2/2) After the transfer the Participants are no more counterparty of CC&G, so they get back the initial margins As consequence of the transfer GME becomes counterparty of CC&G, so it has to settle the variation margins on the net positions to delivery/withdraw CC&G won t require to pay the initial margins on the net positions on delivery/withdrawal transferred to GME For the unexercised positions, the initial margin calculation for delivery position starts one day after the usual procedure: the third day of Open Market before the first day of the Delivery Period On the monthly power futures cash settlement day, GME will settle the difference between monthly PUN average and the last futures settlement price. GME, according to its procedures, will settle with any participant. 9

10 IDEX timing Quarterly and Yearly Futures Cascading (evening batch) Exercise of the physical delivery option for the montly future and Transfer positions at T-4 price Beginning of the Initial Margin Calculation for Unexercised Delivery Positions and Return of the Initial Margin to Exercising Participants Beginning of the Delivery month Settlement of the variation margins on the exercised positions Settlement of the variation margins on the exercised positions Settlement of the variation margins on the exercised positions T - 4 T - 3 T - 2 T - 1 T 10

11 Trading and Clearing A B GCM [A] Settles IM e VM Settles IM e VM A Electric operator operating also on IDEX Trading on market B Financial intermediary operating on IDEX Financial flows Z Electric operator Exercise of financial delivery flow Electricity supply flow 11

12 Exercise of physical delivery and next days A B x Exercises GCM [A] x Doesn t settle IM e VM Submits the request Settles IM e VM Position transfer Settles VM Takes on the corresponding financial position for clearing purpose Confirms the request 12

13 Settlement A B x GCM [A] x Doesn t settle IM e VM Receives electricity Cash Settlement (PUN Last Future Settlement Price) Z Provides electricity 13

14 January Cassa di Compensazione e Garanzia S.p.A. All rights reserved. The publication of this document does not represent solicitation, by Borsa Italiana Spa and Cassa di Compensazione e Garanzia Spa, of public saving and is not to be considered as suggestion by Borsa Italiana and Cassa di Compensazione e Garanzia as to the suitability of the investment, if any, herein described. This document has not to be considered complete and it is meant for information and personal purposes only. Borsa Italiana Cassa di Compensazione e Garanzia accept no liability raising, without limitation to the generality of the foregoing, from inaccuracies and/or mistakes, for decisions and/or actions taken by any party based on this document. Trademarks Cassa di Compensazione e Garanzia and CC&G are owned by Cassa di Compensazione e Garanzia S.p.A. London Stock Exchange, the coat of arms device and AIM are a registered trade mark of London Stock Exchange plc. The above trademarks and any other trademark owned by the London Stock Exchange Group cannot be used without express written consent by the Company having the ownership of the same. Borsa Italiana S.p.A. and its subsidiaries are subject to direction and coordination of London Stock Exchange Group Holdings (Italy) Ltd Italian branch. The Group promotes and offers the post-trading services of Cassa di Compensazione e Garanzia S.p.A. and Monte Titoli S.p.A. in an equitable, transparent and non-discriminatory manner and on the basis of criteria and procedure aimed at assuring interoperability, security and equal treatment among market infrastructures, to all subjects who so request and are qualified in accordance with national and community legislation, applicable rules and decisions of the competent Authorities 14