ANNUAL REPORT JUNE 2010
FEDERATION OF EURO-ASIAN STOCK EXCHANGES
NASDAQ OMX
In the future, the need for transparency,
liquidity and efficiency in the world’s power
markets can be met by open, electronic
marketplaces for trading and clearing.
Stellan Råberg
Head of Advisory Services, NASDAQ OMX
In the future, the need for transparency,
liquidity and efficiency in the world’s power
markets can be met by open, electronic
marketplaces for trading and clearing.
There are many benefits to establishing an
open power market. The main ones include
increasing overall market efficiency by
creating clear price signals, and promoting
investment in additional production capacity
by creating a market to attract domestic and
international capital.
Open power markets already exist in some
geographies, most notably in the Nordic
countries of Finland, Sweden, Denmark and
Norway where Nord Pool ASA, recently
acquired by NASDAQ OMX, has been
operating since the early 1990s.
The Nordic financial power exchange is now a
part of NASDAQ OMX Commodities, which
offers global commodities trading and
clearing services. The NASDAQ OMX Nordic
power market now counts more than 385
members in 22 countries, and its operations
serve a wide range of energy producers,
consumers and financial institutions.
NASDAQ OMX Commodities also offers
trading in Dutch and German power
derivatives and has been part of starting a
new physical power market, N2EX, in the
United Kingdom.
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The Nordic experience
The underlying Nordic physical market,
operated by Nord Pool Spot, accounts for
over 60 percent of the total value of the
Nordic region’s power consumption. A key
benefit of the Nordic power market is that it
enables each country to assist each other
when additional electricity supplies are
required. If one country is unable to satisfy
demand from its own output, it can import the
necessary power from a neighbor.
The common Nordic market primarily involves
electricity generation from such resources as
water, nuclear energy and coal. Since the
generating modes differ and are distributed
differently in the various countries, the need
for additional power will vary from country to
country and at different times.
Well functioning power markets, such as the
Nordic, generally tend to ensure that
electricity gets generated wherever the cost of
generation is lowest at any time of the day.
Increases in demand are balanced against
more expensive modes of generation. In
socio-economic terms, this provides a clear
indication of the cost society would have to
bear to incorporate new output in the system.
Where commercial considerations are
concerned, generators will receive a good
indication of where the break-even point lies
for developing new generating capacity. The
Nordic’s physical market also helps to ensure
that power supply and demand are balanced
right up to one hour before the time of
consumption.
Risks associated with changes in physical
market prices can normally be managed
through a financial market for energy related
derivatives products. A buyer or seller of
power may be able to reduce the risk of
future price changes by selling or buying the
cost of future electricity to or from other
players with the ability and willingness to
accept these price risks. Players may thereby
have the opportunity to change their risk
exposure and to hedge the price of future
output or consumption.
With the acquisition of Nord Pool ASA,
NASDAQ OMX Commodities is now the
largest and most liquid energy exchange in
Europe. NASDAQ OMX Commodities also
includes a clearing house for all products
traded at the energy exchange, making it the
world leader in cleared power volumes.