Energy Markets: Exchanges

Vincent Kaminski

This article was first published as a chapter in Energy Markets on January 21, 2013, by Risk Books.

This chapter starts a review of different energy market participants. We begin with exchanges, and explain the general principles of their business models and operations using examples of the US- and Canada-based exchanges that are of critical importance to the energy markets. We shall also revisit this topic in discussions of the exchanges that specialise in certain markets such as, for example, European natural gas and electricity. We shall also a cover a number of topics related to trading on exchanges, such as:

• • position limits (ie, upper bounds on the size of positions held in the futures contracts) and hedge exemptions (ie, waivers given to commercial users of futures);

• • the SPAN system used for determination of initial margin;

• • comments on the organisation and mechanics of clearinghouses;

• • the contents and potential uses of the commitment of traders (COT) reports, which are followed closely by the trading community; and

• • controve