Products

Definition

The Electricity MIBEL contracts registered in the Clearing House are cash settled swaps and futures traded in MEFF directly arranged by the Members (or between Member’s Holders).

Both these instruments are agreements between two parties to buy or sell a specific amount of electricity on a future date at a fixed price.

The difference between futures and swaps is the frequency of the variation margin.

• In swap contracts the variation margin is not settled daily although they have a periodical settlement. 
• In futures contracts the variation margin is settled daily.

The Clearing House provides a mechanism guaranteeing the successful outcome of the trades to both counterparties. The Exchange specifies standard contract features to facilitate trading and Trade Register.

How are they used?

There are three different types of trading strategies:

• Hedging: these contracts are a tool for managing price risk. Buyers and sellers can hedge spot market positions against adverse price movements, mitigating or eliminating market risk. Hedging entails taking a forward position that offsets an existing position and may be total or partial.
• Speculation: here the idea is to take on market risk in order to generate a profit by correctly betting on future price trends.
• Arbitrage: this strategy entails simultaneous trading in various instruments in order to leverage temporary price distorsion. MEFF's exchange traded contracts are very similar to the products traded OTC, fostering arbitrage opportunities.

The existence of market participants with differing trading interests in respect of these contracts bolsters market liquidity and efficiency.

Features

Financial derivative contracts are accepted for Trade Registration, i.e. they are settled in cash.

The underlying asset is the delivery of notional electricity, during all the relevant hours depending on the type of product, on the Polo español del Mercado Ibérico de Energía (MIBEL):

• Base Load: Delivery of the underlying asset from the first hour of the day (0:00 to 00:59 hours) until the last hour of the day (23:00 to 23:59 hours) of all the days included in the delivery period. There will be one additional hour or one hour less for spring and autumn daylight saving time changes. It has a Flat Profile: all Relevant Hours compute the same.
• Peak Load: Delivery of the underlying asset from the ninth hour of the day (08:00:00 to 08:59:00 hours) until the twentieth hour of the day (19:00 to 19:59 hours) of every Monday, Tuesday, Wednesday, Thursday and Friday included in the delivery period.It has a Flat Profile: all Relevant Hours compute the same.

The unit of registration is 1MW or 100KW (0.1MW).

The nominal/multiplier of the contract is determined in MWh, using the following formula:

                MW * No of contract days * No of product type relevant hours

For contracts with unit of registration 0.1 MW:

               0.1 MW * No of contract days * No of product type relevant hours

For Spring and Autumn daylight saving time, there will be one additional hour (if day has 25 hours) or one hour less (if day has 23 hours).

The contract is priced in Euros per MWh, with two decimal places.

The registration period is between 08:00 and 19:00.