SGX proposes new electricity futures, eyes 4Q 2014 launch

First to be introduced in Asia.

The Singapore Exchange (SGX) is consulting the public on the proposed introduction of SGX Uniform Singapore Energy Price (USEP) Quarterly Base Load Electricity Futures, to be traded on SGX-Derivatives Trading platform and cleared on SGX-Derivatives Clearing house.

This is the first electricity futures to be introduced in Asia.

The proposed contract will be a standard, cash-settled futures contract listed as contract quarters (i.e. January to March, April to June, July to September, and October to December).

The SGX USEP Quarterly Base Load Electricity Futures contracts provide a means for market participants in the Singapore electricity market to manage their risk exposures. Potential new participants to the electricity market can also use the futures market to back fixed price contracts for their consumers.

To better serve the needs of the industry, SGX is seeking feedback on the following contract specifications:

a. Position Limits – 1,000 lots net long or net short in all contract quarters combined

b. Price Limits – Unless otherwise prescribed by SGX, there is no price limit. This is in line with the practice of other international electricity futures markets

c. Last Trading Day – To be the last business day of the contract quarter

d. Final Settlement Price – The Final Settlement Price is the arithmetic average of all half-hourly USEP prices in the expiring contract quarter, rounded to two decimal places. The USEP is the weighted-average of the nodal prices at all off-take nodes as calculated by the Energy Market Company, which operates Singapore’s wholesale electricity market. The final settlement will be in cash.

SGX targets to introduce the SGX USEP Quarterly Base Load Electricity Futures contracts in the fourth quarter of 2014.