New Market Operator Enters The I-SEM Fray- Here’s What It Means For You

  Today, Nordpool announced [1] that they will launch a day-ahead and intraday market to rival the one being designed and implemented by SEMO (with the help of EPEX Spot and ECC), known as “SEMOpx”. To date the assumption was that if market participants wanted to trade day-ahead and intraday, the only option to access these markets would be to register on the new SEMOpx exchange, run by SEMO, who were the sole Nominated Electricity Market Operator (“NEMO”) for Ireland. However, EU legislation allows for multiple NEMOs to set up exchanges and compete for customers within a jurisdiction. That’s exactly what Nordpool have done here. In effect, this means that Irish market participants will now have two options for how they trade on the I-SEM day ahead and intraday markets, either through Nordpool or through SEMOpx (or both, if one saw fit!). Both of these exchanges will have their own independent rules, products and costs. For instance, Nordpool acts as a central settlement & credit counterparty for their exchange, whereas SEMOpx outsources its settlement and credit functions to ECC, who in turn require you to employ a 3rd party clearing bank to manage these functions. An important detail to bear in mind is that a second NEMO will not result in splitting of liquidity. The I-SEM will operate a “shared orderbook” for its day ahead market, meaning that all trades end up in the same auction database, regardless of whether you enter your trades on a SEMOpx screen or a Nordpool screen. This “shared orderbook” is the same function that will be used to couple the day ahead market of I-SEM to GB and further afield. As most will be aware, there is no shared orderbook in place for European intraday markets yet (the solution, known as “XBID”, will not be available to the I-SEM at go-live). Regulators, Nordpool and SEMOpx will therefore have to work together to ensure an effective and liquid interim intraday solution is implemented for go-live. So in conclusion, Nordpool entering the I-SEM as an alternative route to access the day ahead and intraday markets should provide welcome competition and more options to market participants as they look to put in place the required route to market structures to effectively trade in the I-SEM. Trading on either Nordpool and SEMOpx will have associated pros and cons related to fees, collateral costs and participant structures. Please contact ElectroRoute Client Services to ascertain the best solution for your business. For more information, please contact clientservices@electroroute.com References [1] https://www.nordpoolgroup.com/message-center-container/newsroom/exchange-message-list/2017/q1/nord-pool-brings-power-market-competition-to-ireland/