The Ukrainian electricity market has long operated under conditions of high price volatility. The financial results of suppliers, traders, producers, and large consumers depend to a significant extent on short-term price fluctuations in the day-ahead market. At the same time, exchange-traded instruments that would allow market participants to hedge such risks and plan their financial results for future periods are effectively absent in Ukraine.
One possible solution is the creation of a settlement futures contract on the DAM index. Such a contract does not provide for the physical delivery of electricity, and the financial result under it is determined based on changes in the relevant price index.
Since a settlement futures contract has the legal nature of a financial instrument, its launch requires appropriate exchange, regulatory, and clearing infrastructure. In particular, the fulfillment of obligations under such a contract must be ensured through a central counterparty.
Energy Club has appealed to the National Bank of Ukraine to obtain clarity regarding the participation of a central counterparty and the possibility of organizing clearing services for a potential futures contract on the DAM index.
At the same time, the appeal submitted does not mean that the model of the future instrument or its practical parameters have already been agreed upon. Questions of liquidity, possible manipulation, index reliability, contract terms, margin requirements, clearing, guarantees, and companies’ practical interest require professional discussion.
The purpose of the meeting is to obtain a systematic explanation from the Ukrainian Energy Exchange of the instrument’s concept, its legal preconditions, and the practical conditions for its launch, as well as to gather comments and proposals from Energy Club member companies.
Vice President of Energy Club, former Deputy Minister of Energy of Ukraine
Project Manager at the Ukrainian Energy Exchange, engaged in research and development of a settled futures contract for the RDN index
