By Nesil Staney
The National Stock Exchange (NSE) is likely to kick-start a cash-settled monthly electricity futures contract, a product that allows power buyers, sellers, traders, industrial and retailers to manage price risks, within a few weeks, following an approval from Sebi.
Despite receiving the Sebi approval for this product two weeks ago, the MCX is planning to launch the same only later this year.
“There is discussion with Sebi to launch annual contracts,” said Harish K Ahuja, head of sustainability, power, carbon markets and listing at NSE. Sriram Krishnan, CBDO at the exchange, said there is a huge pipeline of new products awaiting the Sebi clearance.
The monthly electricity contracts will have 50MWh as trading unit, Rs 1 per MWh as tick size and the maximum order size of 2,500 MWh. Additionally, the NSE is exploring contract for difference (CfD) that enables renewable projects to achieve stable revenue.
“The product also opens doors to banks, insurers and project financiers to enter the electricity market,” the NSE said. The ELECMBL contracts will be available for 12 months a year, listed for current month and the next three months.
Globally, the derivatives market is 2-4 times the size of physical power traded. The NSE will offer members (collectively for clients) 3 million MWh or 20% of market wide open position (MWOP). For individuals, it will be 300,000 MWh or 5% of MWOP.
The NSE is the world’s largest derivatives exchange for trading contracts volume, according to the statistics of the Futures Industry Association. It oversees compliance by trading, clearing members and listed companies.