Short-term electricity prompt prices will be less prone to spikes with more time to access crucial fundamental market data after new closing times on power exchange POLPX‘s day-ahead platform went live this week.
But Polish power traders told ICIS that with a reduction to fixing times, more volume would need to change hands during the entire trading session for the market to maintain high liquidity.
POLPX scrapped one of its closing times, referred to as fixings, for day-ahead trading on 1 October. Until this date, the Polish exchange had three fixings, the first published at 08:00 central European time, the second at 10:30 and the third at 11:30.
But the first, 08:00 fixing has now been scrapped.
Most day-ahead trading is still carried out on the country’s exchange rather than the over-the-counter (OTC) market but prompt prices on POLPX exert a significant impact on near- and far-curve products on the OTC.
Eventually, by the second half of 2016, POLPX aims to have only one fixing time, at 12:00, because the exchange is preparing to become a full participant on the North-West Europe (NWE) market coupling project.
Traders previously said they wanted the first fixing to be scrapped, saying it did not reflect fundamental factors for the spot market including weather forecasts, wind generation and publication of cross-border capacity between Poland, Sweden, Germany, the Czech Republic and Slovakia. But some added back then that this would decrease trading opportunities ( see EDEM 14 July 2014 ).
Cap on volatility
Most traders agreed that the scrapping of the 8:00 fixing was likely to mean less volatility on Day-ahead prices due to an additional time to access market data and make more conscious decisions for the first fixing of the day.
“Your knowledge about the fundamentals which are likely to shape the price would be much better after 10:00 rather than early in the morning,” one Polish trader remarked.
Last minute changes and insufficient data on significant fundamentals were blamed for prices sky-rocketing on the Polish prompt last month ( see EDEM 12 September 2014 ).
According to some Polish market participants, the previous system with the additional morning fixing was favoured by only very few market players, mostly big generators, who managed the supply side on the market.
Limiting supply was not a problem for those generators, because this way they had a guarantee to sell their energy for higher prices, another Polish trader said.
Volumes and buying interest was expected to increase on the new fixings for those who would be desperate to buy and close their positions. But some Polish traders emphasised, that overall liquidity would weaken unless more ongoing trading activity does not pick up between two remaining individual fixings.
The continuous trading phase runs from 8:00 to 10:00. “In the last two days volumes between the fixings amounted to 1,600MW, whereas before the change they would reach 2,000MW. I suspect this volumes drop is related to less speculation on the market, a trader remarked. Karolina Zagrodna