Australia Stock Exchange to launch electricity futures

The Australian Stock Exchange (ASX) is preparing to launch its electricity peak and off-peak futures contracts on October 14.

Each quarterly contract unit will be equal to one megawatt over the number of hours in the quarter as calculated by the National Electricity Market Management Company (Nemmco) in its hourly schedule.

For the peak contracts, the number of hours is calculated during working-week days, between 7am and 10pm, eastern Australia time, while off-peak contracts will be based on the number of hours between 10pm and 7am.

Prices will be quoted in Australian dollar value per megawatt hour, with a minimum price movement of A$0.05 per megawatt hour. According to the preliminary contract specifications, tick size is calculated by multiplying the specified number of hours in the hourly schedule for the relevant quarter by $0.05.

Trading will be anonymous, and normal trading hours will be from 10am to 4pm, with late trading from 4pm to 5pm. Central counterparty clearing will be done through ASX and its clearing house.

The ASX said it has “formally lodged these specifications and [is] now awaiting final [ministerial] approval".

The exchange added that market participants were concerned that trading volumes would be relatively low, and they would therefore need to impose high charges to support the contracts. Contract trading and registration charges are currently set at A$10 per contract, excluding taxes.

The ASX said it was very careful to make sure the specifications and charges would attract volume from the over-the-counter market as well as to compete against the revamped futures contracts the Sydney Futures Exchange is preparing to launch.