SGX Powers up Asia's first electricity futures market
29 October 2013
Category: News, Asia, Singapore
By Asia Asset Management
Singapore Exchange (SGX) is developing Asia's first electricity futures market with a targeted launch by end-2014, subject to regulatory approval, it announced on October 28.
SGX was selected by the industry as the preferred exchange for the electricity market following a consultation exercise by the Energy Market Authority (EMA). SGX is working closely with the EMA, Energy Market Company (EMC) and market participants to design the futures products and develop a vibrant marketplace for generators, electricity retailers, customers and other participants.
"As Asia's appetite for energy continues apace, wholesale electricity products and investors will require efficient solutions to enable resource and capital investment allocation," said Michael Syn, head of derivatives at SGX. “We will continue to provide our clients a trusted and flexible platform to manage the complexity of Asia's evolving market structure.”
By transacting at SGX's electricity futures market, the power industry can hopefully better manage its risks, and benefit from price discovery and the ability to optimise capital-intensive assets. The new futures market is supported by main generators who have indicated their interest to be market makers, including YTL PowerSeraya Pte, Senoko Energy Pte, Tuas Power Generation Pte, Sembcorp Cogen Pte, Keppel Merlimau Cogen Pte, and Tuaspring Pte. The physical spot market, through which Singapore's electricity is traded, is operated by EMC and regulated by EMA.
The electricity futures market should serve as a strategic tool for market participants to manage price risks arising from business operations, and to enjoy the benefits of price discovery and asset optimisation in the electricity market.