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Gregorian testing looms for UK electricity market

20 Aug 2013 18:04:18 | edem

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UK power traders are gearing up for the market's first Gregorian calendar testing session on Thursday, with four major counterparties now set to take part and at least two more likely to join sessions scheduled for September and October.

"We are interested in putting as many orders out there as the traders can manage and seeing some volume go through," one participant said on Tuesday.

Gregorian calendar contracts will be available through the test environments of brokers GFI, ICAP, Marex Spectron and Tullett Prebon, before the actual, coordinated cutover of liquidity, which is due on 1 November (see EDEM 20 June 2013).

The first testing window, which will not result in live transactions, is set for Thursday of this week from 13:00-15:00 London time. A further seven tests are planned, five of which will result in live trades, with the first live test planned for 25 September (see box).

Trading systems firm Trayport issued the following instructions to ICIS for participants wishing to take part in the testing:

"Companies will need to map the following sequences and sequence items on to their test Trayport trading gateway environment, which has connections to the brokers' test environments:

UK EFA prompt

UK Gregorian months

UK Gregorian quarters

UK Gregorian seasons

"Once the sequence and sequence item mappings are configured on the trading gateway test environment, companies will need to configure a workbook with the Gregorian contracts for traders to test entering and hitting orders.

"Counterparties can use the price sheet wizard in the GlobalVision front-end to build a basic worksheet with these products."

The company added that, if counterparties are subscribed to the Trayport gold mappings service then their trading gateway should already have the sequences configured and mapped.

Trayport added it has a gold UK power workbook which contains the EFA and Gregorian products side-by-side.

The testing plan note can be accessed online here.

Support

The switch from the existing EFA calendar to a Gregorian system is being overseen by the Power Trading Forum which operates under the Futures and Options Association.

Market participants on Tuesday reported few glitches in preparatory work, with back-office systems being reconfigured and ready for testing.

The switch, which will affect contracts from Winter '14 out, has progressed relatively quickly, garnering cross-market support from physical participants, financial institutions and trading houses.

It is intended to boost liquidity by aligning the UK power market with energy markets it is either physically linked to or financially linked to through spread trade.

These include the British NBP natural gas hub and the French and Dutch power markets, all of which have long operated in line with the Gregorian calendar.

The move should go some way to satisfying regulator Ofgem, which has long called for industry-led solutions to the ongoing problem of dwindling liquidity on the UK power market.

Despite the industry-led move however, the regulator is pressing on with its Secure and Promote licence condition - an interventionist approach intended to artificially increase liquidity through the imposition of market makers on curve products (see EDEM 12 June 2013). Jamie Stewart

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