Analysis of the traded volume drivers of the Iberian power futures market

Abstract

a b s t r a c tA comprehensive assessment of the liquidity development in the Iberian power futures market managed by OMIP (''Operador do Mercado Ibérico de Energia, Pólo Português'') in its first 4 years of existence is performed. This market started on July 2006. A regression model tracking the evolution of the traded volumes in the continuous market is built as a function of 12 potential liquidity drivers. The only significant drivers are the traded volumes in OMIP compulsory auctions, the traded volumes in the ''Over The Counter'' (OTC) market, and the OTC cleared volumes in OMIP clearing house (OMIClear). Furthermore, the enrollment of financial members shows strong correlation with the traded volumes in the continuous market. OMIP liquidity is still far from the levels reached by the most mature European markets (Nord Pool and EEX). The market operator and its clearing house could develop efficient marketing actions to attract new entrants active in the spot market (energy intensive industries, suppliers, and small producers) as well as volumes from the opaque OTC market, and to improve the performance of existing illiquid products. An active dialogue with all the stakeholders (market participants, spot market operator, and supervisory authorities) will help to implement such actions.

The relationship between energy consumption and prices. Evidence from futures and spot markets in Spain and Portugal

“…In Ciarreta and Zarraga [ 6 ]; the same authors studied the volatility of hourly pricing from the Iberian intra-day electricity market for the period 2002–2014, concluding that the results show significant volatility transmissions between the sessions, arguing how results are driven by the market structure, the market design and the regulation of renewable generation. Regarding the futures market, Capitán-Herraiz and Rodriguez-Monroy [ 7 ] documents its lack of liquidity compared with other North European markets, mentioning that the main significant drivers are the traded volumes in the OTC trading and auctions. Thus, it would be advisable to attract new players in order to increase liquidity and price efficiency.…”

“…Ciarreta and Zarraga [ 6 ] found also relevant intra-day price and transmission volatility in the Iberian market, arguing how results are driven by market structure, market design and the regulation of renewable generation. Regarding the futures market, Capitán-Herraiz and Rodriguez-Monroy [ 7 ] documented its lack of liquidity in comparison with other North European markets.…”