(Balancing) Reserves

Power capacities (MW) available for TSOs to balance the system in real time. These capacities can be contracted by the TSO with an associated payment for their availability and/or be made available without payment. Technically, reserves can be either automatically or manually activated. (ACER FG Balancing)

Arbitrage

The simultaneous purchase and sale of similar commodities in different markets to take advantage of price discrepancy without taking a risk. (Point Carbon)

Auction

Procedure for making transactions after a period of time during which the orders entered by exchange members in the order book are accumulated but not executed. The price determination algorithm aims at optimising the total welfare, i.e. the seller surplus, the buyer surplus and the congestion rent (if applicable). (EPEX SPOT)

Balance Responsible Party (BRP)

A market participant or its chosen representative responsible for its imbalances. (ACER FG Balancing)

Balance Service Provider (BSP)

A market participant providing balancing services to one or several TSOs within one or several control area(s). (ACER FG Balancing)

Balancing

All actions and processes through which TSOs ensure that total electricity withdrawals are equaled by total injections in a continuous way, in order to maintain the system frequency within a predefined stability range. (ACER FG Balancing)

Balancing Energy

Energy (MWh) activated by TSOs to maintain the balance between injections and withdrawals. (ACER FG Balancing)

Balancing Services

Balancing reserves or balancing energy. (ACER FG Balancing)

Bidding zone

The largest geographical area within which market participants are able to exchange energy without capacity allocation. (ACER FG Balancing)

Book

The total portfolio of a trader. (Point Carbon)

Broker

A company or individual that executes physical or financial products in a market place. In commodity markets a broker normally does not take price of volume risk and hence does not normally take positions. A broker may however sometimes function as a portfolio manager – trading behalf of a commercial entity. (Point Carbon)

Buyer Surplus

Difference between the submitted price and the market price, multiplied by the quantity actually purchased. (EPEX SPOT)

Buying hedge

Buyer futures contracts to protect against a possible price increase of cash commodities that will be purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. (Point Carbon)

Call option

An option that gives the buyer the right, but not the obligation, to purchase (go “long") the underlying futures contract at the strike price on or before the expiration date. (Point Carbon)

Carrying charge (cost of carry)

For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. (Point Carbon)

Carryover

Commodities not consumed during the marketing year and remaining in storage at the end of a period. These stocks are "carried over" into the next marketing year. (Point Carbon)

Cash commodity/ physical commodity

An actual physical commodity someone is buying or selling, e.g., Co2e, power, soybeans, corn, gold, silver, Treasury bonds, etc. Also referred to as actuals. (Point Carbon)

Cash settlement

Transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument. (Point Carbon)

Cash/physical contract

A sales agreement for either immediate or future delivery of the actual product. (Point Carbon)

Central West Europe (CWE)

Region encompassing the power spot markets of France, Germany, Belgium, Netherlands and Luxembourg, which are coupled since 9 November 2010. (EPEX SPOT)

Charting

The use of charts to analyse market behaviour and anticipate future price movements. Those who use charting as a trading method plot such factors as high, low, and settlement prices; average price movements; volume; and open interest. (Point Carbon)

Closing price

The last price paid for a commodity on any trading day. Also referred to as settle price. (Point Carbon)

Code of Conduct

The Code of Conduct sets forth the rules of conduct and market behavior which must be respected at all times by the Exchange Members. (EPEX SPOT)

Commission fee

A fee charged by a broker for executing a transaction. Also referred to as brokerage fee. (Point Carbon)

Commodity

An article of commerce or a product that can be used for commerce. The types of commodities include oil, oil products, power, gas, agricultural products, metals, petroleum, foreign currencies, and financial instruments and index. (Point Carbon)

Congestion Rent

Price difference between two markets linked by market coupling arising when there is congestion on the border. (EPEX SPOT)

Contango

A condition in which distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity. The opposite of backwardation. (Point Carbon)

Contract Month

A specific month in which delivery may take place under the terms of a futures contract. (Point Carbon)

Control Area

A coherent part of the interconnected system, operated by a single TSO responsible for load-frequency-control for physical loads and generation units connected. (ACER FG Balancing)

Control Area

A coherent part of the interconnected system, operated by a single TSO responsible for load-frequency-control for physical loads and generation units connected. (ACER FG Balancing)

Coupled Markets

Price or Volume Coupled Markets. (EPEX SPOT)

Cross-border (Transmission) Capacity

A capacity to transfer the energy from one congestion management bidding zone to another one. (ACER FG Balancing)

Cross-border balancing

Exchanges of balancing energy and/or reserves between control areas and/or between bidding zones. (ACER FG Balancing)

Curtailment

Imbalance of purchase and sale leading to extreme prices on the Auction Segment. (EPEX SPOT)

Day traders

Speculators who take positions in futures or options contracts and liquidate them prior to the close of the same trading day. (Point Carbon)

Day-Ahead

Market timeframes where commercial transactions are executed one day ahead of the day of delivery of traded products. (ACER FG Balancing)

Delivery

The physical fulfilment of transactions. (EPEX SPOT)

Delivery Area

Power transportation grid managed by a TSO. (EPEX SPOT)

Delivery Day

Day on which the Contracts negotiated on EPEX SPOT area to be delivered. (EPEX SPOT)

Demand response

Changes in electric usage by end-use consumers from their normal load patterns in response to changes in electricity prices and/or incentive payments designed to adjust electricity usage, or in response to the acceptance of the consumer’s bid, including through aggregation. (ACER FG Balancing)

ELIX

European Electricity Index. ELIX is calculated daily, based on the order books of the three EPEX SPOT markets – which account for 40% of the European power consumption – under the assumption of no congestions between the countries. (EPEX SPOT)

Equilibrium price

The market price at which the quantity supplied of a commodity equals the quantity demanded. (Point Carbon)

Exercise

The action taken by the holder of a call option if he wishes to purchase the underlying futures contract or by the holder of a put option if he wishes to sell the underlying futures contract. (Point Carbon)

Exercise price (strike)

The price at which the futures contract underlying a call or put option can be purchased (if a call) or sold (if a put). Also referred to as strike price. (Point Carbon)

Exit

The point at which a trader closes out of a trade. (Point Carbon)

Firm bid

A firm bid is a bid that a trader or broker can execute directly without any further consultation with the bidder. (Point Carbon)

Firm bid

A firm bid is a bid that a trader or broker can execute directly without any further consultation with the bidder. (Point Carbon)

Firm offer

(opposite of “firm bid”) (Point Carbon)

Flexible Intraday Trading scheme (FITS)

Flexible Intraday Trading Scheme, used for the intraday market. It enables exchange members to trade cross-border freely between Germany and France, on an integrated market platform. (EPEX SPOT)

Frequency containment reserves

Operating reserves necessary for constant containment of frequency deviations (fluctuations) from nominal value in order to constantly maintain the power balance in the whole synchronously interconnected system. Activation of these reserves results in a restored power balance at a frequency deviating from nominal value. This category typically includes operating reserves with the activation time up to 30 seconds. Operating reserves of this category are usually activated automatically and locally. (ACER FG Balancing)

Frequency restoration reserves

Operating reserves used to restore frequency to the nominal value and power balance to the scheduled value after sudden system imbalance occurrence. This category includes operating reserves with an activation time typically up to 15 minutes (depending on the specific requirements of the synchronous area). Operating reserves of this category are typically activated centrally and can be activated automatically or manually. In these Framework Guidelines, automatically activated reserves refer to reserves activated by an automatic controller. (ACER FG Balancing)

Futures Contract

Standardized contract between two parties to buy or sell a specified asset of standardized quantity and quality at a specified future date at a price agreed today. (EPEX SPOT)

Gate Closure Time

Deadline for the participation to a given market or mechanism. (ACER FG Balancing)

Hedging

The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. (Point Carbon)

Holder

The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the Option Buyer. (Point Carbon)

Horizontal spread

The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. This is also referred to as a calendar spread. (Point Carbon)

Imbalance Settlement

A financial settlement mechanism aiming at charging or paying BRPs for their imbalances. (ACER FG Balancing)

Imbalance Settlement Period

Time unit used for computing BRPs’ imbalances. (ACER FG Balancing)

Imbalances

Deviations between generation, consumption and commercial transactions (in all timeframes – commercial transactions include sales and purchases on organised markets or between BRPs) of a BRP within a given imbalance settlement period. (ACER FG Balancing)

Implicit / Explicit

An auction is called implicit, if market price calculation and cross-border capacities are calculated simultaneously. If cross-border capacities are determined separately by the TSOs, it is called explicit. (EPEX SPOT)

Indicative bid

A bid given by a trader and or quoted by a broker that is an indication of where the trader is willing to trade. Another trader or a broker cannot execute a trade based on this bid without prior consultation with the bidder. An indicative bid needs to be “firmed up” (e.g. where the broker calls the trader to confirm that he is willing to trade at that price (if the trader is willing to trade at that price he will give a Firm bid.

Indicative offer

Opposite of “indicative bid” (Point Carbon)

Injection

Power produced or declared to the TSO and included as a positive figure in the calculation of the Balance Responsible Imbalance. (EPEX SPOT)

Interconnection Capacity

Cross-border electric energy transfer capacity on the interconnections. (EPEX SPOT)

In-the-money option

An option having intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures contract. A put option is in-the-money if its strike price is above the current price of the underlying futures contract. The amount by which an option is in-the-money. (Point Carbon)

Intraday

Market timeframe beginning after the day-ahead gate closure time and ending at the intraday gate closure time, where commercial transactions are executed prior to the delivery of traded products. (ACER FG Balancing)

Intraday Margin

Additional margin which has to be deposited in the course of an exchange trading day in highly volatile market situations. (EPEX SPOT)

Intraday Market

Part of the spot market where the commodity is tradable up to 45 minutes before physical fulfilment. (EPEX SPOT)

Intrinsic value

The amount by which an option is in-the-money. An option having intrinsic value. A call option is in-the-money if its strike price is below the current price of the underlying futures contract. A put option is in-the-money if its strike price is above the current price of the underlying futures contract. (Point Carbon)

Inverted market

A futures market in which the relationship between two delivery months of the same commodity is abnormal. (Point Carbon)

Lift(an offer)

Refers to execution related to buying at the current best offer in the market. (Point Carbon)

Liquid

A characteristic of a security or commodity market with enough units outstanding to allow large transactions without a substantial change in price. Institutional investors are inclined to seek out liquid investments so that their trading activity will not influence the market price. (Point Carbon)

Long

One who has bought futures contracts or owns a cash commodity. (Point Carbon)

Long hedge

Buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge. (Point Carbon)

Low

The lowest price of the day for a particular futures contract. (Point Carbon)

Market Area

An area comprising one or several Delivery Areas. (EPEX SPOT)

Market Clearing Price

Synonym for auction price. The market clearing price corresponds to the intersection between the aggregated supply and demand curve. (EPEX SPOT)

Market Coupling

Market coupling allows the matching of power exchanges orders and the implicit allocation of the available cross-border capacities received from the Transmission System Operators (TSOs). (EPEX SPOT)

Merit Order List

In the balancing markets a merit order list is a list of all valid balancing bids submitted by Balance Service Providers and sorted in order of their bid prices. (ACER FG Balancing)

Minimum price fluctuation

The smallest allowable increment of price movement for a contract. (Point Carbon)

Moratorium

Refers to the suspension of activity or an authorized period of delay. In the context of support to renewable energy, it means the suspension of support. Moratoria can be introduced by law or in fact, for definite or indefinite time. The Spanish law of January 2012 would be an example of a moratorium introduced by law. Not holding any new tenders in a tendering scheme would be de facto a moratorium. In France, a moratorium was introduced suspending and cancelling the application of all new renewables projects to a support scheme from a date even prior to the date of the publication of the moratorium, and thus with retrospective effect. However, even if not retrospective, the adoption of a moratorium entails major damage to the industry by abruptly stopping all support to the sector and letting the industry without market and therefore leading to massive bankruptcy and job losses (20-20 Keepontrack)

Moving average

A mathematical procedure to smooth or eliminate the fluctuations in data and to assist in determining when to buy and sell. Moving averages emphasize the direction of a trend, confirm trend reversals and smooth out price and volume fluctuations or "noise" that can confuse interpretation of the market; the sum of a value plus a selected number of previous values divided by the total number of values. (Point Carbon)

Nomination

Daily declaration of power supply, of purchase and sale or of imports and exports made to the TSO by the Balance Responsible Party. Physical delivery of transactions is fulfilled by means of reporting schedules/nominations to the TSO. (EPEX SPOT)

Offer

An expression indicating one's desire to sell a commodity at a given price; opposite of bid. (Point Carbon)

Option

A contract that conveys the right, but not the obligation, to buy or sell a particular item at a certain price for a limited time. Only the seller of the option is obligated to perform. (Point Carbon)

Option buyer

The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the holder. (Point Carbon)

Option premium

The price of an option the sum of money that the option buyer pays and the option seller receives for the rights granted by the option. (Point Carbon)

Option seller

The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the writer. (Point Carbon)

Option spread

The simultaneous purchase and sale of one or more options contracts, futures, and/or cash positions. (Point Carbon)

Option writer

The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the option Seller. (Point Carbon)

OTC

Abbreviation for "Over-The-Counter". An OTC contract is a bilateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future. (EPEX SPOT)

OTC Clearing

Service offered by exchanges. OTC transactions which correspond in their contract specification to exchange transactions can be registered. In this case clearing and settlement of the OTC transactions will be done by the respective clearing house. (EPEX SPOT)

Peakload

Characterizes the load type for the delivery or procurement of electricity at a constant load over 12 hours from 08:00 am until 08:00 pm on every working day (Monday to Friday) during a delivery period. (EPEX SPOT)

Premium

(1) In speaking of price relationships between different delivery months of a given commodity, one is said to be "trading at a premium" over another when its price is greater than that of the other. (2) The price of an option, the sum of money that the option buyer pays and the option seller receives for the rights granted by the option. (Point Carbon)

Price Coupling

Price coupling between different countries allows creating a single exchange zone – and consequently single price zones when interconnection capacities do not limit cross-border power exchanges. It contributes to improve the market liquidity and participates in the creation of a single European electricity market. (EPEX SPOT)

Price discovery

The generation of information about "future" cash market prices through the futures markets. (Point Carbon)

Program Time Unit

Time unit used for scheduling and programs. (ACER FG Balancing)

REMIT

Regulation on Energy Market Integrity and Transparency. It is a proposal by the EU Commission of a harmonised EU-wide regulation of energy markets. (Point Carbon)

Replacement Reserves

Operating reserves used to restore the required level of operating reserves to be prepared for a further system imbalance. This category includes operating reserves with activation time from 15 minutes up to hours. (ACER FG Balancing)

Reservation of cross-border transmission capacity

A portion of available cross-border capacity which is reserved for cross-border exchange of balancing reserves and thus is not accessible to market participants for cross-border energy trade. (ACER FG Balancing)

Retroactive Changes

An expression widely used to designate these abrupt changes impacting past investment. However, from a legal perspective, retroactivity means that a law is applied to facts that have occurred before the publication of the law. Thus, a certain transaction has been completed before the new law was published and thus the legal consequences of the law applicable at the time of the transaction are invalidated. Therefore, the appropriate legal terminology to identify the changes renewables support schemes are facing is “retrospective changes” (20-20 Keepontrack)

Retrospective Changes

Changes brought upon by laws – in this case- to renewable energy support schemes which, while taking effect only from the date of publication, change existing rights and obligations of RES producers and investors. A reduction of a current Feed-In-Tariff (FIT) level for already existing projects would be an example. Those changes apply to the future but change the status of already made investments and therefore strongly affect what an economic operator, such as a renewable energy producer, may have legitimately expected in terms of return on benefits and seriously challenge the business case based on the agreement already concluded. This has led in several countries such as the Czech Republic and Spain to thousands of bankruptcies in the renewable energy sector. (20-20 Keepontrack)

Seller Surplus

Difference between the submitted price and the market price, multiplied by the quantity actually sold. (EPEX SPOT)

Settle

The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settlement price or closing price. (Point Carbon)

Settlement price

The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settle or closing price. (Point Carbon)

Short

One who has sold futures contracts or plans to purchase a cash commodity. Selling futures contracts or initiating a cash forward contract sale without offsetting a particular market position. (Point Carbon)

Spot

Usually refers to a cash market price for a physical commodity that is available for immediate delivery. (Point Carbon)

Spot market

A market in which commodities, such as grain, gold, crude oil, or RAM chips, are bought and sold for cash and delivered immediately. Also called cash market. (Point Carbon)

Spot month

The futures contract month closest to expiration. Also referred to as nearby delivery month. (Point Carbon)

Spread

The price range between best bid and best ask is called spread. (EPEX SPOT)

Stop order

An order to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a market order when the futures contract trades (or is offered) at or below the stop price. (Point Carbon)

Swap

An exchange of streams of payments over time according to specified terms. The most common type is an interest rate swap, in which one party agrees to pay a fixed interest rate in return for receiving an adjustable rate from another party. (Point Carbon)

Tick

The smallest allowable increment of price movement for a contract. (Point Carbon)

Trade

Outcome of the matching of buy and sell orders. (EPEX SPOT)

Volatility

Volatility is a measure of the price fluctuations in the course of one day. The additional margin parameter and the spread margin parameter can then be determined on the basis of volatility. (EPEX SPOT)

Volume

The number of purchases or sales of a commodity futures contract made during a specific period of time, often the total transactions for one trading day. (Point Carbon)

Withdrawal

Power consumed or declared to the TSO and included as a negative figure in the calculation of the Balance Responsible Imbalance. (EPEX SPOT)