SGX Powers Up Asia’s First Electricity Futures Market

28/10/2013

Singapore Exchange (SGX) is developing Asia’s first electricity futures market with a targeted launch by end-2014, subject to regulatory approval.

SGX is pleased to receive strong industry support to pioneer the electricity futures market in Singapore. 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. Customers can also enjoy cross-margining benefits from a broad range of SGX energy products. We will continue to provide our clients a trusted and flexible platform to manage the complexity of Asia’s evolving market structure,” said Michael Syn, Head of Derivatives, SGX.

By transacting at SGX’s electricity futures market, the power industry can effectively 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 Ltd, Senoko Energy Pte Ltd, Tuas Power Generation Pte Ltd, Sembcorp Cogen Pte Ltd, Keppel Merlimau Cogen Pte Ltd, and Tuaspring Pte Ltd. The physical spot market, through which Singapore’s electricity is traded, is operated by EMC and regulated by EMA.

The electricity futures market will 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. In addition to providing a centralised and well-regulated trading platform, SGX helps customers mitigate counterparty credit risk through the clearing of all trades at its strongly capitalised and award-winning clearing house.

SGX is the world’s largest offshore market for Asian equity index derivatives and a leading exchange for commodity derivatives. With a strong capital base, SGX offers an extensive suite of financial and commodity derivative products which will complement an electricity futures market.