apx power uk spot market guide v3.0 - apx group · apx power uk spot market guide ... name...
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2
Document Control
Document Location An electronic version of this document is available in the member’s area of APX-ENDEX’s website
(www.apxendex.com). A valid username and password are required.
Revision History Revision Date Version Author Revision Summary
9 June 2009 2.0 Various Revision
04 September 2009 2.1 Louis Hems Amendment to market trading times
February 2011 3.0 Various Revision & Market Coupling
Approvals This document requires the following approvals.
Name Signature Title Date of Issue
Les Male LMA Commercial Director August 20, 2009
Les Male LMA Commercial Director September 5, 2009
Bert den Ouden; Pieter Schuurs
BDO; PSC
CEO; COO
30 March, 2011
3
Contents page
Document Control 2
Document Location 2
Revision History 2
Approvals 2
1 Introduction 7
1.1 Paragraph Title 7
1.2 APX Power UK 7
Services 7
Market Operator 7
Market Rules 7
Financial Services Regulation 8
1.2 Industry Context 8
1.3 Market Overview 9
1.4 Membership 10
Joining 10
Extending membership 10
Leaving 10
1.5 Document Structure 10
2 Spot Trading 11
2.1 EuroLight 11
2.2 Product Specifications 11
General 12
4
Half Hour 13
2 Hour Block 14
4 Hour Block 14
Opening Times 15
Clock Change 15
2.3 Product Codes 16
Codes 16
Variables 17
Conventions 17
2.4 Order Submission 17
Conditions for Trading 17
Order Details 18
General Validation 18
User Competence 19
2.5 Contract Matching 19
Matching Principles 19
2.6 Contract Notification 19
2.7 Manifest Error 20
Step 1 (Filtering) 20
Step 2 (Adjudication) 20
Step 3 (Cancellation and Broadcast) 20
Cancellation by Mutual Consent 21
2.8 Data Capture 21
Trade Capture 21
Order Capture 21
5
Chargeline Capture 21
2.9 Market Data 22
Real-Time Indices 22
Historic Indices 22
3 Credit Arrangements 23
3.1 Risk Capital Structure 23
Default Contributions 24
3. 2 Policy 24
Credit Management Policy 25
Position Limit 25
3. 3 Collateral 25
Cash 26
Irrevocable Standby Letters of Credit & On-Demand Bank Guarantees 26
Drawing of Collateral 26
Return of Collateral 26
3. 4 Exposure Calculation 27
Position Limit Amount 27
Unrealised Settlement 28
Initial Margin 29
Variation Margin 30
Initial Margin and Variation Margin during Delivery 31
Order Margin 32
3.5 External Margin Run Application and Back-Office Website 33
4 Financial Settlement 34
6
4.1 Final Settlement Statements 34
Energy Amounts 34
Fees 35
Pass-Through Amounts 35
Deemed Imbalance Charges 35
Value Added Tax 35
4.2 Payment 36
Timetable 36
Transfers 36
5 APX Power UK Contact Details 36
6 Appendix 37
6 Appendix 37
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1 Introduction
1.1 Paragraph Title This document describes the APX Power UK spot market, its products and its operation. It is designed to
be a resource for prospective, new and established Members.
1.2 APX Power UK
Services
APX Power UK offers:
� A spot market for UK power;
� A day-head auction market for UK power;
� A forward market for UK power;
� Third-party notification services for UK power;
� OTC Give-Up Service;
� Market data services.
This document deals specifically with the APX Power UK spot market. Similar guides for other APX Power
UK services are also available.
Market Operator
The APX Power UK spot market is operated by APX Commodities Limited. APX Commodities Limited is a
wholly owned subsidiary of APX-ENDEX Holding BV. Tennet Holdings BV, group parent of the Dutch
transmission system operator, has a majority shareholding in APX-ENDEX Holding BV.
Market Rules
All activity in the APX Power UK spot market is governed by the Market Rules of APX Commodities
Limited, accession to which must be completed by the Member prior to commencing trading. This
document is designed to be a user guide to complement the Market Rules but specifically is not a part of
the Market Rules.
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Financial Services Regulation
APX Commodities Limited is regulated by the Financial Services Authority as an authorised firm. Its scope
of permission covers dealing in investments as principal and agent, arranging deals in investments and
acting as an MTF operator (multilateral trading facility).
1.2 Industry Context
The trading of physical electricity in England, Scotland and Wales takes place within the BETTA framework
(British Electricity Trading and Transmission Arrangements).
Industry participants are free to contract with whomever they wish, and are not obliged to transact their
output using a centralised mechanism (as they were, for instance, under the old Electricity Pool of England
and Wales). Transactions can be executed on an organised market (as is the case with the APX Power UK
spot market), through a broker, or bilaterally. Participants notify the system operator of contract volumes
associated with such transactions by way of half-hourly ‘energy contract volume notifications’ (ECVNs),
which must be effected by ‘gate closure’ (currently 60 minutes before delivery commences for the half-hour
period in question). Whilst it is generally advisable for participants to transact their output ahead of gate
closure, there is no obligation to do so; and to the extent that they are not contracted, participants are
exposed to prices derived from the balancing mechanism.
In order to ensure that the transmission system is stable and balanced, the balancing mechanism operates
under the Balancing and Settlement Code (BSC). Within the balancing mechanism, industry participants
may submit to the system operator bids and offers to increase and decrease their physical output, thereby
allowing the system operator to balance the transmission system and manage transmission constraints.
The provision of such balancing mechanism services is entirely optional.
The major compulsory component of the BSC is the requirement to observe the imbalance settlement
process, within which participants are charged or remunerated under a ‘dual cash-out regime’ for being out
of balance (according to the difference between their respective energy contract volumes and metered
volumes). Participants who are short (generators who deliver less than they are contracted to deliver, or
suppliers who consume more than they are contracted to consume) are charged the ‘system buy price’
(SBP); participants who are long (generators who deliver more than they are contracted to deliver, or
suppliers who consume less than they are contracted to consume) are paid the ‘system sell price’ (SSP).
The active system price in any given half-hour (SSP where the system is long overall, SBP where the
system is short overall) is derived from the bids and offers accepted by the system operator in the
balancing mechanism; the reverse system price in any given half-hour (SSP where the system is short
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overall, SBP where the system is long overall) is derived from the volume weighted average price in the
APX Power UK spot market, which APX Power UK provides to the industry in its capacity as ‘market index
data provider’ (MIDP). Under normal circumstances, SBP exceeds SSP, often considerably.1 The spread
between them is designed to encourage participants to balance their physical positions accurately and in
real time. The APX Power UK spot market is a facility that allows its Members to do this effectively.
Naturally, the imbalance settlement process deals only with the settlement of energy imbalances.
Settlement of traded energy contracts themselves (the majority of the financial value) takes place directly
between the parties to those contracts outside the scope of the BSC (e.g. under the terms of the widely-
used Grid Trade Master Agreement (GTMA) or, as described later, in the APX Power UK spot market).
1.3 Market Overview
The APX Power UK spot market is an internet-based facility for the buying and selling of electrical power
for notification under the Balancing and Settlement Code. APX Power UK’s trading system EuroLight®
offers Members an integrated exchange trading solution providing everything from price discovery and
matching, to notification, credit management and financial settlement.
The APX Power UK spot market has the following key features:
� Secure internet access
� 24-hour operational support
� Integrated notification
� Central counterparty clearing
� Conservative collateralisation
� Anonymity
� Fair and equitable treatment for Members
1
The residual cashflow ‘windfall’ realized by the system operator in settling energy imbalances on the basis of SBP and SSP is periodically redistributed to participants proportionally according to metered volumes.
10
1.4 Membership
Joining
In order to take part in the APX Power UK spot market, prospective Members must first accede to the
Market Rules of APX Commodities Limited. The process for new Members is the subject of a separate
document (available on request).
Extending membership
Members of the exchange who wish to extend their membership to include the APX Power UK market may
do so by submitting an updated registration form signed by the authorised signatory, up to date accounts,
the company’s certificate of incorporation and collateral. There will be no need to re-sign the Market rules
for members which have already signed up to the Market Rules for APX Commodities Ltd.
Leaving
Under the Market Rules, Members have the right to terminate the agreement with effect from the 1st of any
calendar month by giving no less than thirty days written notice. The Member may not serve this notice
earlier than the date falling five months after the date of the Membership agreement.
1.5 Document Structure
This document broadly follows the transaction cycle within the APX Power UK spot market.
The main components are:
� Spot trading and contract notification
� Credit management
� Financial settlement
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2 Spot Trading
Formal details of APX Power UK’s spot trading and notification arrangements are contained within annex 3
to the Market Rules of APX Commodities Limited.
2.1 EuroLight
All trading activity in the APX Power UK spot market takes place in the EuroLight trading system.
Documents detailing how to use the EuroLight client application and how to connect to the EuroLight
trading system are available on request.
2.2 Product Specifications
Specifications for all product types in the APX Power UK spot market are tabulated on the following page.
All times are expressed in local UK time.
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General
PRDCT
TYPE
PRDCT
LNGTH
PRDCT
FRQCY
PRDCT
OPENS
STRT
TIME
1
END TIME
1
STRT TIME 2
END TIME 2
STRT TIME 3
END TIME
3
STRT TIME
4
END TIME
4
STRT TIME 5
END TIME 5
Half Hour 30 Mins 48/Day 96 See Below
2 Hour Block
2 Hrs 12/Day 24 See Below
4 Hour Block
4 Hrs 6/Day 42 See Below
Overnight 8 Hrs 1/Day 7 23:00 07:00
Block 3+4 8 Hrs 1/Day 7 07:00 15:00
Peak 12 Hrs 1/Day 7 07:00 19:00
Offpeak 12 Hrs 1/Day 7 23:00 07:00 19:00 23:00
Extended Peak
16 Hrs 1/Day 7 07:00 23:00
Base 24 Hrs 1/Day 7 23:00 23:00
Weekend 5 8 Hrs 1/Wk 2 Sat 15:00
Sat 19:00
Sun 15:00
Sun 19:00
Weekend 6 8 Hrs 1/Wk 2 Sat 19:00
Sat 23:00
Sun 19:00
Sun 23:00
Weekend Overnight
16 Hrs 1/Wk 2 Fri 23:00
Sat 07:00
Sat 23:00
Sun 07:00
Weekend 3+4
16 Hrs 1/Wk 2 Sat 07:00
Sat 15:00
Sun 07:00
Sun 15:00
Weekend Peak
24 Hrs 1/Wk 2 Sat 07:00
Sat 19:00
Sun 07:00
Sun 19:00
Weekend Extended Peak
32 Hrs 1/Wk 2 Sat 07:00
Sat 23:00
Sun 07:00
Sun 23:00
Weekend Base
48 Hrs 1/Wk 2 Fri 23:00
Sun 23:00
Peak Week 60 Hrs 1/Wk 4 Mon 07:00
Mon 19:00
Tue 07:00
Tue 19:00
Wed 07:00
Wed 19:00
Thu 07:00
Thu 19:00
Fri
07:00
Fri 19:00
Base Week 168 Hrs 1/Wk 4 Sun 23:00
Sun 23:00
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Half Hour
START TIME END TIME START TIME END TIME
Half Hour 01 00:00 00:30 Half Hour 25 12:00 12:30
Half Hour 02 00:30 01:00 Half Hour 26 12:30 13:00
Half Hour 03 01:00 01:30 Half Hour 27 13:00 13:30
Half Hour 04 01:30 02:00 Half Hour 28 13:30 14:00
Half Hour 05 02:00 02:30 Half Hour 29 14:00 14:30
Half Hour 06 02:30 03:00 Half Hour 30 14:30 15:00
Half Hour 07 03:00 03:30 Half Hour 31 15:00 15:30
Half Hour 08 03:30 04:00 Half Hour 32 15:30 16:00
Half Hour 09 04:00 04:30 Half Hour 33 16:00 16:30
Half Hour 10 04:30 05:00 Half Hour 34 16:30 17:00
Half Hour 11 05:00 05:30 Half Hour 35 17:00 17:30
Half Hour 12 05:30 06:00 Half Hour 36 17:30 18:00
Half Hour 13 06:00 06:30 Half Hour 37 18:00 18:30
Half Hour 14 06:30 07:00 Half Hour 38 18:30 19:00
Half Hour 15 07:00 07:30 Half Hour 39 19:00 19:30
Half Hour 16 07:30 08:00 Half Hour 40 19:30 20:00
Half Hour 17 08:00 08:30 Half Hour 41 20:00 20:30
Half Hour 18 08:30 09:00 Half Hour 42 20:30 21:00
Half Hour 19 09:00 09:30 Half Hour 43 21:00 21:30
Half Hour 20 09:30 10:00 Half Hour 44 21:30 22:00
Half Hour 21 10:00 10:30 Half Hour 45 22:00 22:30
Half Hour 22 10:30 11:00 Half Hour 46 22:30 23:00
Half Hour 23 11:00 11:30 Half Hour 47 23:00 23:30
Half Hour 24 11:30 12:00 Half Hour 48 23:30 00:00
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2 Hour Block
START TIME END TIME
Block 1a 23:00 01:00
Block 1b 01:00 03:00
Block 2a 03:00 05:00
Block 2b 05:00 07:00
Block 3a 07:00 09:00
Block 3b 09:00 11:00
Block 4a 11:00 13:00
Block 4b 13:00 15:00
Block 5a 15:00 17:00
Block 5b 17:00 19:00
Block 6a 19:00 21:00
Block 6b 21:00 23:00
4 Hour Block
START TIME END TIME
Block 1 23:00 03:00
Block 2 03:00 07:00
Block 3 07:00 11:00
Block 4 11:00 15:00
Block 5 15:00 19:00
Block 6 19:00 23:00
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Opening Times
All product types open for trading on a (‘one on, one off’) rolling product basis. The number of rolling
products is constant and is indicated in section 3.2.1 above. For example, there are 42 rolling 4 Hour Block
products open for trading at all times, thus any given 4 Hour Block product is open for seven calendar days
before it closes.
All products close for trading fifteen minutes before Gate Closure for the first BSC Settlement Period to
which they relate, with the exception of 4 hour block products, which close nineteen minutes before Gate
Closure for the first BSC Settlement Period, and 2 hour block products, which close seventeen minutes
before (capitalised definitions in accordance with the Balancing and Settlement Code).
Clock Change
Numbering of Half Hour products follows the convention in the Balancing and Settlement Code. On the
short clock-change day, the products are numbered 01 to 46; on the long-clock change day, 01 to 50.
All other products spanning the March or October clock change are one hour shorter or longer than normal
respectively.
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2.3 Product Codes
Codes
PRODUCT TYPE PRODUCT CODE PREFIX (FIXED)
PRODUCT CODE SUFFIX (VARIABLE)
EXAMPLE
Half Hour HH YYMMDD-NN HH060322-35
2 Hour Block 2H YYMMDD -NL 2H060322-5B
4 Hour Block 4H YYMMDD -N 4H060322-6
Overnight 1+2- DDD-DDMMMYY 1+2-THU-23MAR11
Block 3+4 3+4- DDD-DDMMMYY 3+4-THU-23MAR11
Peak PK- DDD-DDMMMYY PK-THU-23MAR11
Offpeak OFFPK- DDD-DDMMMYY OFFPK-THU-23MAR11
Extended Peak EXTPK- DDD-DDMMMYY EXTPK-THU-23MAR11
Base BL- DDD-DDMMMYY BL-THU-23MAR11
Weekend 5 WE-BK5- DDMMMYY WE-BK5-25MAR11
Weekend 6 WE-BK6- DDMMMYY WE-BK6-25MAR11
Weekend Overnight WE-1+2- DDMMMYY WE-1+2-25MAR11
Weekend 3+4 WE-3+4- DDMMMYY WE-3+4-25MAR11
Weekend Peak WE-PK- DDMMMYY WE-PK-25MAR11
Weekend Extended Peak WE-EXTPK- DDMMMYY WE-EXTPK-25MAR11
Weekend Base WE-BL- DDMMMYY WE-BL-25MAR11
Peak Week PEAK-WK WW-YY PEAK-WK13-11
Base Week BSLD-WK WW-YY BSLD-WK13-11
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Variables
SUFFIX VARIABLE DEFINITION RANGE
DD Day of Month (Two Digits) 01 to 31
DDD Day of Week (Three Letters) Mon to Sun
MM Month of Year (Two Digits) 01 to 12
MMM Month of Year (Three Letters) Jan to Dec
N 4 Hour Block Period (One Digit) 1 to 6
NL 2 Hour Block Period (One Digit, One Letter) 1a to 6b
NN Half Hour Period (Two Digits) 01 to 50
WW Week of Year (Two Digits) 01 to 53
YY Year (Two Digits) 00 to 99
Conventions
� Dates expressed within codes for Half Hour products are calendar dates.
� Dates or week numbers expressed within codes for all other products follow the widely-used EFA
convention (where the period 23:00 to 23:00 constitutes a day).
� Dates expressed within weekend product codes represent the Saturday of the weekend in
question.
2.4 Order Submission
Conditions for Trading
The Market Rules of APX Commodities Limited places upon the Member a number of generic
requirements surrounding fitness to do business, all of which must be met at all times, not least prior to
order submission. Most important of these are the requirements to:
� Enable APX Power UK to maintain a valid ECVNA (energy contract volume notification agent)
authorisation.
� Comply with the terms of the Balancing and Settlement Code.
� Comply with APX Power UK’s collateral requirements.
(See section 4 below)
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Order Details
When submitting an order using the EuroLight client application, the Member must specify:
� Buy or sell
� Product (by code, see section 3.3 above)
� Volume (in MW)
� Limit price (in £/MWh) or market price (in which case no value necessary)
� BSC energy account
� Order type
The four order types are tabulated below.
ORDER TYPE EXPLANATION IMMEDIATE MATCH OBLIGATORY?
PARTIAL MATCH ALLOWED?
[NULL] Minimum Lot Size N Y
AON All or Nothing N N
FAK Fill and Kill Y Y
FOK Fill or Kill Y N
General Validation
To protect the market from ‘fat-fingered’ errors, the EuroLight trading system enforces the following
validation limits on all orders at the point of submission.
LIMIT
Order Volume 2,000 MW
Order Price £2,000/MWh
In the interests of market orderliness, the EuroLight trading system is also configured to prevent any two
orders submitted by the same Member from matching with one another.
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User Competence
Ultimately, responsibility for competent use of the EuroLight client application lies with the Member. In
order to assist the Member in satisfying itself that its trading personnel are competent in their use of the
EuroLight client application, APX Power UK offers training sessions. For help with and training in the use of
the EuroLight software, Members should contact John Farthing, Training Services Manager for a be-spoke
training service allowing users to receive training in the most suitable format that suits, whether this is from
an individual’s desk, in a classroom setting or at an external venue for larger groups.
2.5 Contract Matching
Once matching has taken place, the Member automatically enters into an energy contract with APX Power
UK, in its capacity as central counterparty. At no time in the process does the Member have any
relationship with the other (anonymous) Member whose order causes the match to take place.
Matching Principles
� Orders are ranked primarily by price (best first), secondarily by time (earliest first).
� For a match to occur, the price of the buy order must be greater than or equal to price of the sell
order.
� Where the price of the buy order is greater than the price of the sell order, the resulting contract
price is the price of the order that was submitted earlier.
2.6 Contract Notification
Energy contract volumes in respect of all transactions in the APX Power UK spot market are automatically
notified to the energy contract volume aggregation agent (ECVAA). It is for this reason that the conditions
for spot trading include:
� Possession by APX Power UK of a valid ECVNA authorisation.
� Compliance by the Member with the terms of the Balancing and Settlement Code.
Full details of the notification process can be found in the APX Power UK notification guide (available on
request).
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2.7 Manifest Error
Where a Member has submitted an obviously erroneous order that has resulted in a contract(s) being
matched, they may make a manifest error claim. Claims should be made by telephone or facsimile as soon
as possible to the 24-hour operations helpdesk. Claims are assessed under a three-step process.
Step 1 (Filtering)
For a contract(s) to be the subject of a manifest error claim, three filtering criteria must be met.
� The manifest error claim must have been made within ten minutes of the erroneous contract(s)
being matched.
� The erroneous contract(s) must have been matched no less than thirty minutes from market close
for the product in question.
� The materiality of the error must be no less than GBP 5,0001.
� An administration fee of £1,000 is applicable
If all three filtering criteria are met, the manifest error claim proceeds to step 2; if not, it is rejected and no
further action is taken under the manifest error process (but see section on cancellation by mutual consent
below).
Step 2 (Adjudication)
If all three filtering criteria are met, the market operator decides at its sole discretion whether a genuine
manifest error has occurred, taking into account:
� The habitual trading patterns of the Member in question;
� The prevailing market conditions (seeking independent confirmation as to market price from
unaffected Members where appropriate.
Step 3 (Cancellation and Broadcast)
If the market operator is satisfied that a manifest error has taken place, the erroneous contract(s) is
cancelled and a message to this effect broadcast to the market via the EuroLight trading system; if not, the
manifest error claim is rejected and no further action is taken under the manifest error process (but see
section on cancellation by mutual consent below).
1 This was amended from 1
st May 2009, where the administration fee of £1,000 became applicable from that date.
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Cancellation by Mutual Consent
Where a manifest error claim cannot be upheld because the three filtering criteria have not been met, the
Member may nonetheless ask the market operator to contact the other Member(s) affected to request that
the contract(s) be cancelled by mutual consent. In such circumstances, the contract(s) may be cancelled
only if:
� The affected Member(s) agrees to the cancellation
AND
� The market operator agrees to the cancellation
2.8 Data Capture
APX Power UK provides a web-based data capture environment to which Members are able to connect for
the purposes of capturing trade, order and chargeline information in real time.
Trade Capture
Detailed use of the trade information available in the data capture environment is the subject of a separate
technical guide (available on request).
Order Capture
Detailed use of the order information available in the data capture environment is the subject of a separate
technical guide (available on request).
Chargeline Capture
Detailed use of the chargeline information available in the data capture environment is the subject of a
separate technical guide (available on request).
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2.9 Market Data
Real-Time Indices
APX Power UK acts as market index data provider (MIDP) under contract to the system operator. Index
prices are generated in respect of each BSC Settlement Period, and are calculated as each relevant Half
Hour product closes for trading. These index prices are used to set the ‘reverse price’ for the imbalance
settlement process.
Historic Indices
At the end of each day, APX Power UK generates a suite of historic market data products based on activity
in its spot market. Details can be found in the APX Power UK market data guide (available on request).
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3 Credit Arrangements
Formal details of APX Power UK’s general credit arrangements are contained within section 17 and
schedule 1 of the Market Rules of APX Commodities Limited.
APX Commodities Limited acts as central counterparty in the APX Power UK spot market.
3.1 Risk Capital Structure
The APX-ENDEX risk-capital structure operates with three tiers of risk capital as protection against
potential losses arising form Member defaults (see diagram below). Potential losses are covered first by
the defaulting Member’s collateral (both required and excess), then by ‘fund’ contributions (in the form of
the ‘public’ component of non-defaulting Members’ initial margin contributions), and lastly by APX-ENDEX
shareholder equity.
In the diagram below, the defaulting Member’s required collateral (initial margin) covers approximately 97%
of potential default losses. In the remaining (extreme) 3% of cases, potential default losses are covered
first by the defaulting Member’s excess collateral, and then by the mutualisation arrangement (‘fund’). One
can of course, never say ‘never’, but the protection provided by the risk-capital structure is such that the
viability of the APX-ENDEX clearing operation is assured in all but the most catastrophic of market
conditions.
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Default Contributions
In the event of APX-ENDEX experiencing a loss where a defaulting Member defaults under the market
rules of APX Commodities Limited and the collateral held in respect of that same defaulting Member’s spot
power position is insufficient, all other Members active in the power spot market at that time are liable to
make a default contribution to a maximum of 50% of their then prevailing initial margin contribution in
respect of APX Power UK spot products only.
Definitive initial margin amounts, for the purposes of deriving default-contribution amounts, where needed,
are recalculated once daily, shortly after 11am.
3. 2 Policy
The Member is required to collateralise APX Commodities Ltd’s net exposure to the Member. The Member
may not submit any order that would have the effect, if matched, of making the size of the net exposure
greater than the value of the collateral in place.
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Credit Management Policy
Position Limit
In addition, the Member must observe the position limit regime as described in section 3.3.
3. 3 Collateral
APX Commodities Ltd accepts collateral in the form of Sterling denominated:
� Cash
� Irrevocable standby letters of credit or on-demand bank guarantees
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Cash
APX Power UK administers cash collateral belonging to Members using the Natwest Clients’ Monies
Service. Under this arrangement cash collateral can be classified as either medium-term security or long-
term security.
CASH COLLATERAL INTEREST PAID NOTICE REQUIRED FOR RETURN
Medium-term 2% below base-lending rate of National Westminster Bank Plc
1 week
Long-term 1% below base-lending rate of National Westminster Bank Plc
30 days
Where the Member wishes to provide collateral in the form of cash, funds should be credited to the APX
Commodities Ltd collateral account (details available on request).
Irrevocable Standby Letters of Credit & On-Demand Bank Guarantees
Collateral in the form of irrevocable standby letter of credit should be delivered by the issuer in hard copy
form for the attention of the APX-ENDEX Settlements team. Documents must be made out in accordance
with the standard APX Power UK template (available on request) and should satisfy the criteria set out in
schedule 1 of the Market Rules of APX Commodities Limited.
Drawing of Collateral
APX Commodities Ltd may draw upon a Member’s collateral if amounts owing under the Market Rules
have not been paid by the due date. In addition, APX Commodities Ltd may draw upon an irrevocable
standby letter of credit or on-demand bank guarantee if a satisfactory renewal or replacement has not been
received within thirty days of expiry.
Return of Collateral
Where the value of the Member’s collateral exceeds the size of APX Power UK’s net exposure to it, the
Member may request that some or all of the excess be returned or cancelled. Such requests should be
directed to APX-ENDEX’s Settlements Manager. Requests are ordinarily processed within the timescales
set out above.
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3. 4 Exposure Calculation
Formal details of APX Commodities Ltd’s exposure calculation are contained within schedule 1 of the
Market Rules of APX Commodities Limited. The relevant APX Market Rules notice contains the definitive
prevailing values for the risk parameters whose use is exemplified in this section.
APX Commodities Ltd’s net exposure to the Member comprises:
� Unrealised settlement
� Initial margin (on net positions in contracts for which the physical delivery has not be completed)
� Variation margin (on net positions in contracts for which the physical delivery has not been
completed); and
� Order margin (on unmatched orders).
The margin cycle is depicted in the figure below.
APX Power UK Spot Market Margin Cycle
Position Limit Amount
The position limit regime is designed to address the risk of a Member’s energy contract volume
notifications (ECVNs) being rejected by the system operator. The position limit applies to net sell positions
(only), and is enforced against the position in each BSC Settlement Period within 24 hours of Gate
Closure.
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The Member is forbidden to trade beyond its established position limit. In order to establish or amend its
position limit, the Member must complete a ‘Position Limit Request Form’ (available on request).
Under the position limit regime, net sell positions are monitored in real-time (24-7); and where a position
limit is breached, the market operator may:
� Require the Member to provide more collateral;
� Require the Member to reduce the position;
Or, if necessary
� Reduce the position on the Member’s behalf.
The position limit amount is calculated by multiplying the position limit parameter by the position limit.
Position Limit Am (£) = Position Limit (MW) X Position Limit Parameter (£/MW)
EXAMPLE
A Member expects to sell a maximum of 1,000 MW in respect of any BSC Settlement Period. Thus, the
Member establishes a 1,000 MW position limit, and the position limit amount is as follows.
Position Limit Amount = 1,000 MW x £201/MW = £201,000
Unrealised Settlement
Unrealised settlement comprises:
� Unsettled amounts owed by the Member in respect of buy energy contracts (in products for which
trading is closed)
� Unsettled amounts owed to the Member in respect of sell energy contracts (in products for which
trading is closed and part or all of the physical delivery is fulfilled); and
� Unsettled amounts owing from and to the Member in respect of fees and other payables (including
relevant VAT).
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Initial Margin
Initial Margin is designed to address the expected cost of closing out a defaulting Member’s open position
for which the physical delivery has not been fulfilled.
Initial Margin (£) =
Undelivered Net Buy Volume (MWh) x Max [Market Price (£/MWh) x Parameter (%), Margin Floor (£/MWh)]
Or
Undelivered Net Sell Volume (MWh) x Max [Market Price (£/MWh) x Parameter (%), Margin Floor (£/MWh)]
EXAMPLE
A Member executes the following portfolio of day-ahead contracts on 9th February, 2011.
PRODUCT BUY
SELL
VOLUME
(MW)
VOLUME
(MWH)
CONTRACT PRICE
(£/MWH)
VALUE
(£)
BL-TUE-10FEB11 B 300 7,200 41.00 295,200
BL-TUE-10FEB11 B 100 2,400 42.00 100,800
BL-TUE-10FEB11 S 200 4,800 45.00 216,000
PK-TUE-10FEB11 S 100 1,200 50.00 60,000
PK-TUE-10FEB11 S 100 1,200 55.00 66,000
PK-TUE-10FEB11 B 100 1,200 53.00 63,600
BSLD-WK08-11 S 20 1,400 40.00 56,000
Subsequently on the same day, the prevailing market price for BL-TUE-10FEB11 is £45.00/MWh; price for
BL-TUE-10FEB11 is £60.00/MWh, and price of BSLD-WK08-11 unchanged. The portfolio resolves to net
positions, and attracts initial margin, as indicated.
PRODUCT BUY SELL
NET UNDELIVERED
VOLUME
(MW)
NET UNDELIVERED
VOLUME
(MWH)
MARKET
PRICE
(£/MWH)
PARAMETER INITIAL MARGIN (£)
BL-TUE-10FEB11 B 200 4,800 45.00 100% 216,000
PK-TUE-10FEB11 S 100 1,200 60.00 42.4% 30,528
BSLD-WK08-11 S 20 3,360 40.00 13.1% 17,606.4
Total 264,134.4
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Variation Margin
Variation Margin is designed to address the risk associated with the variation between the contract price
and the prevailing market price for positions for which the physical delivery has not been fulfilled.
Variation Margin (£) =
Undelivered Gross Buy Volume (MWh) x [Weighted Average Buy Price (£/MWh)
– Market Price (£/MWh)]
Or
Undelivered Gross Sell Volume (MWh) x [(Market Price (£/MWh)
– Weighted Average Sell Price (£/MWh)]
EXAMPLE
Consider again the portfolio of day-ahead contracts from the previous example.
PRODUCT BUY SELL
UNDELIVERED VOLUME
(MW)
UNDELIVERED VOLUME
(MWH)
CONTRACT
PRICE
(£/MWH)
VALUE (£)
BL-TUE-10FEB11 B 300 7,200 41.00 295,200
BL-TUE-10FEB11 B 100 2,400 42.00 100,800
BL-TUE-10FEB11 S 200 4,800 45.00 216,000
PK-TUE-10FEB11 S 100 1,200 50.00 60,000
PK-TUE-10FEB11 S 100 1,200 55.00 66,000
PK-TUE-10FEB11 B 100 1,200 53.00 63,600
BSLD-WK08-11 S 20 3,360 40.00 134,400
31
Again subsequently later on 9th February 2011, the prevailing market price for BL-TUE-10FEB11 is
£45.00/MWh, price for BL-TUE-10FEB11 is £60.00/MWh, and price of BSLD-WK08-11 unchanged. The
portfolio resolves to gross volumes, and attracts variation margin, as indicated.
PRODUCT BUY SELL
UNDELIVERED GROSS
VOLUME
(MWH)
WEIGHTED
AVERAGE
BUY
PRICE
(£/MWH)
WEIGHTED
AVERAGE
SELL
PRICE
(£/MWH)
MARKET PRICE (£/MWH)
VARIATION MARGIN (£)
BL-TUE-10FEB11
B 9,600 41.25 N/A 45.00 (36,000)
BL-TUE-10FEB11
S 4,800 N/A 45.00 45.00 0
PK-TUE-10FEB11
B 1,200 53.00 N/A 60.00 (8,400)
PK-TUE-10FEB11
S 2,400 N/A 52.50 60.00 18,000
BSLD-WK08-11 S 3,360 N/A 40.00 40.00 0
Total (26,400)
Initial Margin and Variation Margin during Delivery
At 11:00 am on 16 February 2011, the BL-TUE-10FEB11 and BL-TUE-10FEB11 products are already fully
delivered, and 12 hours, i.e., 240 MWh of the BSLD-WK08-11 contract has been delivered. The
undelivered volume of the contract BSLD-WK08-11 is 3,360-240=3,120 (MWh). Suppose the BSLD-WK08-
11 price at this moment is £43/MWh. Only the undelivered part in the portfolio attracts initial margin, as
indicated.
BUY
SELL
UNDELIVERED VOLUME
(MW)
NET UNDELIVERED VOLUME
(MWH)
MARKET PRICE
(£/MWH) PARAMETER
MARGIN FLOOR
(£/MWH)
INITIAL MARGIN
(£)
BL-TUE-10FEB11
B 0 0 N/A N/A 0 0
PK-TUE-10FEB11
S 0 0 N/A N/A 0 0
BSLD-WK08-11
S 20 3,120 43 13.1% 0 17,574.96
Total 17,574.96
Suppose at these market prices, the margin run is conducted to calculate the default contribution. The
calculate default contribution of this Member for 19 March 2011 is £17,574.96 x 50% = £8,787.48.
32
The variation margin is calculated as indicated.
BUY
SELL
UNDELIVERED GROSS VOLUME
(MWH)
WEIGHTED AVERAGE BUY PRICE (£/MWH)
WEIGHTED AVERAGE SELL PRICE (£/MWH)
MARKET
PRICE
(£/MWH)
VARIATION
MARGIN
(£)
BSLD-WK08-11 S 3,120 N/A 40 43 9,360
Total 9,360
Order Margin
Order margin is designed to address the exposure that would arise if an outstanding order were matched
in full.
Order Margin (£) =
Buy Volume (MWh) x Max [Bid Price (£/MWh) x Parameter (%), Margin Floor (£/MWh)]
Or
Sell Volume (MWh) x Max [Offer Price (£/MWh) x Parameter (%), Margin Floor (£/MWh)]
Type “T1” and Type “T2” Order Margin Parameters
Two types of order margin parameters which differ in value level are used in APX Power UK Spot Market.
At the time point of calculating the order margin for a submitted order, if the commencement of first delivery
period of the product is less than 24 hours, Type “T2” order margin parameters apply. If the
commencement of first delivery period of the product is more than 24 hours, Type “T1” order margin
parameters apply. Buying-side Type “T2” order margin parameters may be higher than Type “T1”
parameters because the former relate to products which are shortly about to be delivered.
Detailed specifications of Type “T1” and Type “T2” order margin parameters are available in the relevant
market rules notice of APX Commodities Limited.
33
EXAMPLE
A Member submits the following orders on 4th February 2011.
BUY
SELL
VOLUME
(MWH/day)
VOLUME
(MWH)
ORDER
PRICE
(£/MWH)
PARAMETER
MARGIN
FLOOR
(£/MWH)
ORDER
MARGIN
(£)
BL-TUE-10FEB11
B 300 7,200 41 34.2% 0 100,958.4
Total 100,958.4
A Member submits the following NBP orders on 9th February 2009.
BUY
SELL
VOLUME
(MWH/day)
VOLUME
(MWH)
ORDER
PRICE
(£/MWH)
PARAMETER
MARGIN
FLOOR
(£/MWH)
ORDER
MARGIN
(£)
BL-TUE-10FEB11
B 300 7,200 41 100.0% 0 295,200
Total 295,200
3.5 External Margin Run Application and Back-Office Website
The new risk-capital structure is supported by APX-ENDEX’s External Margin Run Application (EMRA)
which functions as a margin calculating module outside the EuroLight system, and which is more precise
than the EuroLight system for the purposes of margin calculations. The ‘bottom line’ output of EMRA is
periodically fed back into the EuroLight system as a corrective adjustment. The detailed output of EMRA,
including definitive default-contribution amounts, is visible on the APX back-office website.
34
4 Financial Settlement
Formal details of APX Power UK’s financial settlement arrangements are contained within paragraphs 13
and 14 of the Market Rules of APX Commodities Limited.
Financial settlement in the APX Power UK spot market takes place on a daily basis.
APX Power UK bills Members electronically by making final settlement statements available on its back-
office website at https://[email protected]. Access is controlled by mandatory use of dedicated
usernames and passwords. Members have access only to their own contract and charge information.
4.1 Final Settlement Statements
A final settlement statement is produced in respect of each business day of the week. The final settlement
statement sets out all actual and estimated amounts owing to and owed by the Member, including:
� Energy amounts
� Fees
� Pass-through amounts
� Deemed imbalance charges
� Value added tax
� Any other amounts
The product code to which a given energy contract relates determines upon which daily final settlement
statement the charges in respect of that contract will appear.
Energy Amounts
The buyer pays and the seller receives an energy amount equivalent to the volume of the relevant energy
contract (in MWh) multiplied by the contract price (in £/MWh).
35
Fees
Fees are payable in accordance with the APX Power UK statement of charges (available on request). The
main items for a Member trading in the APX Power UK spot market are:
� Entrance fee
� Membership fee
� View Only fee (if applicable)
� Clearing Membership fee
� Technology fee
Pass-Through Amounts
Costs borne on the Member’s behalf by APX Power UK are ‘passed through’ to the Member. Typical pass-
through items are:
� Connectivity costs (frame relay and ISDN); and
� The system operator’s notified-volume charge.
Deemed Imbalance Charges
In the unlikely event that APX Power UK or the Member were to suffer an energy imbalance as a result of
a ‘notification failure’ as contemplated by the Market Rules of APX Commodities Limited, then the non-
compliant party would be liable to make the compliant party whole to the full extent of the ‘deemed
imbalance’ loss suffered.
The method for calculating deemed imbalance charges is very similar to that specified in the widely-used
Grid Trade Master Agreement (GTMA).
Value Added Tax
Energy amounts in the APX Power UK spot market are subject to zero-rate VAT. This is because Her
Majesty’s Revenue and Customs has granted APX Commodities Limited VAT relief as if it were a terminal
market.
All other amounts are subject to standard-rate VAT.
36
4.2 Payment
Timetable
APX POWER UK SETTLEMENT TIMETABLE
Trade period Settlement
Monday, Tuesday, Wednesday, Thursday Following working day
Friday, Saturday and Sunday Monday
Bank holidays Following working day
Transfers
Member shall make all payments due to APX-ENDEX pursuant to the MarketRules by direct debit, standing
order or other recognised electronic means to the bank account specified by APX- ENDEX.
5 APX Power UK Contact Details
Contact Person Telephone Number Email
Commercial Manager, UK Louis Hems +44 (0)20 7841 5663 [email protected]
Account Manager, UK Therese Simberg +44 (0)20 7841 5675 [email protected]
Account Manager, UK Joanna McMaster +44 (0)20 7841 5635 [email protected]
Operational Account Manager John Farthing +44 (0)20 7841 5653 [email protected]
Data Manager Vlad Kaltenieks +44 (0)20 7841 5668 [email protected]
Operations 24/7 Helpdesk +44 (0)115 921 7400 [email protected]
ICT Manager, UK Barry Deevey +44 (0)115 921 7430 [email protected]
Credit Management Chris Spicer +31 20 305 4094 [email protected]
Settlements Team Credit & settlements enquiries +31 20 305 4071 [email protected]