By offering the IPE's Natural Gas and Electricity contracts on the same screen and trading platform, the IPE is responding to the needs of the converging gas and electricity markets.
The Electricity futures contract will offer both base and peak load, and will comprise Dailies, Balance of the Month (BOM), Monthlies, Quarterlies and Seasons. The launch of Electricity futures prior to the proposed introduction of NETA on 21 November means that traders will be able to fully test all systems and processes. The first full monthly contract will be December 2000.
Additionally, from 2 October, Natural Gas futures traders will benefit from the introduction of Quarters and Seasons for the whole of the new gas year and beyond. The final fee structure for Electricity futures will be announced at a future date. It will be highly competitive and will be based on the standard futures charging methodology of a price per lot. The current price for the Natural Gas monthly contract is 30.5p per lot side.
The convergence of the gas and electricity markets in the UK has opened up opportunities for market participants to trade between the two. The IPE will therefore launch a calendar-based product in electricity rather than the EFA blocks that are currently used by industry. Spread and strip trading functionalities will also be available on the system.
The contracts will be operated within the secure and regulated environment of the IPE. Subject to certain risk criteria being met the contracts will be cleared by the London Clearing House and it is expected that margin offsets with the existing Natural Gas futures contracts will be available. These features will help keep trading costs low.
Stephen Gutteridge, Business Development Director, said, "the market is looking for a future where all types of gas and electricity product can be efficiently and securely traded on one screen. We share that vision and we are looking to co-operate with market participants in the spot physical electricity market to deliver that vision. We want to provide the best market conditions possible and by launching an integrated and flexible product we are taking the first steps towards that goal".
