UPDATE 1-Nasdaq, Nord Pool launch new UK power market

Tue Jan 12, 2010 5:44pm GMT

Quotes

   

* Initial trade higher than expected

* Hopes high for liquidity to rise

(Adds trader, analyst comments)

LONDON, Jan 12 (Reuters) - Britain's new N2EX wholesale power exchange launched succesfully on Tuesday, with initial trade volumes higher than expected, the market operators said.

Nasdaq Commodities, a business arm of Nasdaq OMX (NDAQ.O), and Norway's Nord Pool Spot officially opened the long-awaited exchange for trading physical UK power contracts. "After an intensive year of development and preparations with the UK market participants, we are very pleased with the day-ahead auction results and the volumes currently being traded on the first day of the prompt market," Hans Randen, director trading in Nord Pool Spot, said.

"The total traded volume on the day-ahead auction which closed at 1030 CET (0930 GMT) was 6,987 MWh (megawatt hours). The prompt market is still open for trading and so far traded volumes have exceeded expectations."

Some UK power traders said they hoped it would succeed in providing a reliable reference price for trading derivative contracts.

Good volumes traded on the platform on its first day and there appeared to be enough participants to increase liquidity, they said.

"I think it's reasonably well supported," a trader at a utility said.

"I think it was pretty good, and we've had generally favourably reports on it."

Hopes are high that the N2EX, backed by a number of big utility firms including E.ON (EONGn.DE) and RWE (RWEG.DE), will increase liquidity in Britain's splintered power market. [ID:nLP350972]

"It has the scope to be the most successful exchange as several big utilities and players are backing it, however only time will tell how popular it is and therefore how much impact it has on the liquidity of UK power," Nick Campbell, Inenco energy market analyst, said.

The N2EX launch had been delayed by 24 hours to allow more people to participate in the first day of trade, following a month of market trials in December. [ID:nLDE60A1YZ]

With no single trading platform winning the backing of all the large power generators, liquidity has been low in Britain's power market in the past few years. Other exchanges and broker screens are provided by APX Group, Spectron, and Tullet Prebon. (Reporting by Kwok W. Wan; editing by James Jukwey, Anthony Barker and Daniel Fineren)

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