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Business Standard
6 days ago
- Business
- Business Standard
Are we ready to handle market manipulations in electricity derivatives?
With the imminent launch of electricity derivatives in India, regulatory preparedness has become a matter of urgency. The recent Securities and Exchange Board of India (Sebi) order against Jane Street Group (JSG) offers a cautionary tale of strategic exploitation in derivative markets — one that India's electricity sector cannot afford to ignore. The Jane Street case: A wake-up call The JSG case exposed classic intraday manipulation. The group purchased large volumes of BANKNIFTY index and constituent stocks early in the trading day, driving prices upward. Concurrently, it took reverse positions in the options market. Later, they offloaded their holdings, pulling down prices and reaping disproportionate profits in the derivative segment, while absorbing manageable losses in the cash market. This trading pattern, which came to light through a US court case in April 2024, evaded Sebi and exchange surveillance for over 15 months until interim orders were finally issued on July 3, 2025. Notably, the detection did not stem from domestic oversight but through disclosures in litigation abroad. Sebi's timeline illustrates the vulnerability of surveillance systems, even when both cash and derivative markets are governed by the same regulator (Sebi) and the exchange ecosystem is tightly knit (NSE). The strategy deployed by JSG hinged on exploiting illiquidity in the cash segment and leveraging high liquidity in derivatives—particularly BANKNIFTY options around expiry periods. Electricity spot markets: The challenge of dual regulation The electricity market, structured differently, introduces additional layers of complexity. Three power exchanges—Indian Energy Exchange (IEX), Power Exchange India Limited (PXIL), and Hindustan Power Exchange (HPX) — serve primarily the Day Ahead Market (DAM) and Real-Time Market (RTM). IEX dominates both, handling roughly 3.9 per cent and 2.47 per cent of national generation respectively, amounting to just 7 GW and 4.8 GW in traded capacity. These figures do not reflect a truly liquid market. Further complicating matters, derivative contracts will be settled at prices derived from IEX and PXIL — despite PXIL's minimal volumes. In contrast to equities, where Sebi governs both segments, electricity markets have split jurisdiction: the Central Electricity Regulatory Commission (Cerc) oversees spot contracts, while Sebi regulates derivatives. Some of the large power generators individually control substantial capacity. As such, their ability to influence prices in illiquid markets is undeniable, especially since comprehensive trade disclosures aren't mandated under current protocols. Launch of electricity derivatives: Regulatory coordination is key With derivative contracts having debuted on MCX (July 10, 2025) and set to debut on NSE (July 14, 2025), regulatory silos present risks. While volume caps have been prescribed to prevent distortions, these are not fail-proof. Coordination between Sebi and Cerc must be seamless. Miscommunication or lag in action could have ripple effects — raising costs for electricity consumers and undermining market integrity. The JSG episode underscores the need for real-time surveillance, rapid response frameworks, and clear inter-regulatory protocols. If Sebi's mechanisms struggled with manipulations in tightly monitored equity markets, can the electricity sector — divided between two regulators — claim immunity? Time to ringfence and reform India's electricity derivative market is at a formative stage. This moment demands a forward-looking approach. Regulators must not only anticipate the nature of manipulative strategies but act decisively to prevent their execution. Surveillance infrastructure must be upgraded, communication lines clarified, and cross-market behaviour monitored in tandem. Regulatory failures in one segment must not cascade into others. It is imperative for Sebi and Cerc to insulate their constituencies, proactively guard consumer interests, and evolve with the market. While early action may have been missed, the JSG case offers a chance to set the ball rolling before it's too late.
Time of India
26-06-2025
- Business
- Time of India
Power play: NSE sees electricity derivatives market surging to $475 billion
New Delhi: The electricity derivatives market in India is projected to scale between $175-475 billion (₹14-39 lakh crore), with rising demand from generators, distribution companies and industrial consumers seeking to hedge price volatility in the energy sector. The National Stock Exchange (NSE) has launched monthly electricity futures contracts to tap this opportunity and deepen market participation. In a detailed presentation, NSE stated that electricity derivatives could reach a volume of 8,000 billion units (BU) annually, benchmarked to global markets. India's current power generation stands at 1,900 BU, and the short-term market accounts for 16% of all transactions, or roughly 300 BU. The new contracts aim to offer hedging certainty beyond the day-ahead and bilateral deals that dominate this segment. The contracts are based on the volume-weighted average price (VWAP) of the Day Ahead Market (DAM) across all power exchanges and are cash-settled. Trading units are set at 50 MWh with a tick size of ₹1/MWh. A total of 12 monthly contracts will be available in a cycle. Client-wise open interest is capped at 3 lakh MWh or 5% of market-wide open interest, whichever is higher. Members can hold up to 30 lakh MWh or 20% of market-wide open interest. 'By offering long-term pricing visibility, these futures can reduce price risk for generators and ensure procurement stability for DISCOMs,' NSE said in its presentation. Generators facing falling spot prices can hedge by locking in rates on futures, while consumers can secure stable rates against expected price surges. Globally, electricity derivatives are known to reduce volatility by up to 50%. In the US and EU, such instruments are widely used by energy firms, retailers, and heavy industries. NSE aims to replicate this success with phased rollout of quarterly, annual, and contract-for-difference (CFD) variants. In India, OTC bilateral trading and DSM transactions still dominate the non-PPA market. NSE's product seeks to offer transparency, standardisation, and a hedging option across sectors including industry, hospitality, and large retail. The exchange added that electricity derivatives will also support power sector reforms by allowing better demand forecasting and enhancing reliability of supply for large users.
Time of India
10-06-2025
- Business
- Time of India
India's power demand falls 4.3% to 149 BUs in May due to unseasonal rains, industrial slowdown: Report
New Delhi: India's electricity demand declined by 4.3 per cent year-on-year in May 2025 to 149 billion units (BUs), down from 155 BUs in May 2024, according to a report by Crisil Intelligence . The drop was attributed to unseasonal rainfall and easing industrial activity. Rainfall during the period from May 1 to 28 stood at 103.5 mm, which was 91 per cent above the historical average of 56.8 mm, the report stated. The early arrival of the southwest monsoon and lower average temperatures contributed to the cooling in demand. The monsoon arrived eight days ahead of schedule this year, marking the earliest onset since 2009 The northern region saw an 8 per cent fall in power demand compared with a 30 per cent increase in the same month last year. The Indian Meteorological Department data showed 443 per cent excess rainfall in central India, 171 per cent in the southern region, and 31 per cent in the north-west. Crisil Intelligence said that the demand downturn was also driven by reduced industrial activity. India's seasonally adjusted Purchasing Managers' Index (PMI) dropped to 57.6 in May 2025, the lowest in three months. This figure, while above the long-term average of 54.1, indicated slower growth in output and new orders compared to April. In the power market, the Real Time Market (RTM) registered a 42 per cent year-on-year growth in traded volumes, reaching 4,770 million units (MUs) in May 2025. By contrast, the Day Ahead Market (DAM) volumes declined 20 per cent to 3,510 MUs. Average Market Clearing Price (MCP) in the RTM declined 28 per cent to ₹3.43 per unit in May 2025. During solar hours (11 am–4 pm), MCP averaged ₹2.2 per unit, while during non-solar hours it averaged ₹3.8 per unit. The corresponding figures for May 2024 were ₹3.5 and ₹5.2 per unit, respectively. The share of RTM in total power traded on the Indian Energy Exchange rose to a record 44 per cent in May 2025, up from the average of 24 per cent recorded since June 2020. On the supply side, total power generation in May declined 4.1 per cent year-on-year to 160 BUs. Coal-based power generation dropped 7.4 per cent. In contrast, generation from nuclear and hydro sources increased 14.7 per cent and 14.8 per cent respectively. Renewable energy generation also grew by 10.4 per cent. Coal's share in the total generation mix fell to 69 per cent from 72 per cent in May 2024. Renewable energy's share rose to 15.5 per cent, while hydro and nuclear accounted for 9 per cent and 3.2 per cent, respectively. Coal stock levels at thermal power plants improved due to reduced power generation. By May 31, 2025, coal stock stood at 60 million tonnes, up from 48 million tonnes a year earlier, providing 21 days of inventory compared with 16 days in May 2024. Crisil Intelligence stated that while weather was the key reason for the demand drop in May, demand going forward will depend on consumption by industrial and commercial segments, which together account for nearly 50 per cent of India's electricity usage.
Mint
09-06-2025
- Business
- Mint
IEX share price jumps over 4% after strong growth in electricity trade volumes. Should you buy?
Indian Energy Exchange (IEX) share price rallied over 4%, extending gains for the second consecutive session, after the company reported strong growth in electricity trade volumes. IEX share price surged as much as 4.70% to a high of ₹ 211.75 apiece on the BSE. IEX reported over 14% growth in electricity traded volume at 10,946 million units (MU) in May as compared to 9,568 MU in the year-ago period. A total of 17.43 lakh Renewable Energy Certificates (RECs) were traded during the month, registering a 65% year-on-year (YoY) increase, IEX said in a regulatory filing. Market clearing price in the Day Ahead Market (DAM) was at ₹ 4.12 per unit during May 2025, a decline of 22% YoY. Market clearing price in the Real Time Market fell 28% YoY at ₹ 3.43 per unit last month. The DAM achieved 3,510 MU volume last month, a decline of 20% from 4,371 MU volume in May 2024. The Real-Time Electricity Market (RTM) reported the highest ever monthly traded volume as the volume increased to 4,770 MU in May 2025 from 3,352 MU a year ago, an increase of 42%. Electricity derivatives are expected to complement the spot market (where IEX is present) over time by drawing in more participants, analysts said. 'Parallelly spot power requirement from renewable integration, real time balancing thereby stabilizing or even increasing spot volumes as seen in EU. IEX's business offers optionality as it aims to launch Green RTM product, 11-month contract (40 BU opportunity) International Carbon Exchange, and Coal Exchange. Over the mid to long term, an uptick in renewable power (from 44% share in FY24 to 60% by FY30) offers continuous opportunity for volume uptick for power exchanges in India,' said Antique Stock Broking. IEX has net cash on the balance sheet at ₹ 1,000 crore and a RoE of 40%. At a PER of 32x FY27E EPS, IEX share price is trading near its historical average, said the brokerage firm. It models 17% annual volume growth over FY26–27E, leading to a similar increase in PAT. Valued at 40x FY27E EPS, Antique Stock Broking maintains a 'Buy' rating on IEX shares with a target price of ₹ 254 apiece. IEX share price has broken out of a 22-week-long double bottom flat base at ₹ 191 and is now heading towards the major resistance at the swing high of ₹ 229, noted Anshul Jain, Head of Research at Lakshmishree Investments. 'Post breakout, IEX stock price has formed a minor base, which is acting as a propeller for continued momentum. The structure remains bullish, supported by strong price action, and further upside is expected as long as the stock sustains above its breakout zone,' Jain said. IEX share price has gained 28% in three months and 16% on a YTD basis. IEX stock has delivered 71% returns in two years and multibagger returns of 281% in five years. At 9:55 AM, IEX share price was trading 4.70% higher at ₹ 211.75 apiece on the BSE. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Time of India
04-06-2025
- Business
- Time of India
IEX electricity trade volume jumps 14% to 10,946 MU in May
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel The Indian Energy Exchange (IEX) on Wednesday said it has logged over 14 per cent growth in electricity traded volume at 10,946 million units (MU) in May as compared to the year-ago had achieved monthly electricity trade volume of 9,568 MU in May 2024, the company data showed.A total of 17.43 lakh Renewable Energy Certificates (RECs) were traded during the month, marking a 65 per cent year-on-year increase, an IEX statement clearing price in the Day Ahead Market was at Rs 4.12/unit during May 2025, a decline of 22 per cent year-on-year. Market clearing price in the Real Time Market fell 28 per cent year-on-year at Rs 3.43/unit last Day-Ahead Market (DAM) achieved 3,510 MU volume last month as compared to 4,371 MU volume in May 2024, a decline of 20 per Real-Time Electricity Market (RTM) reported highest ever monthly traded volume in May 2025 when the volume increased to 4,770 MU from 3,352 MU a year ago, an increase of 42 per Ahead Contingency and Term-Ahead Market (TAM), comprising contingency, daily & weekly and monthly contracts up to 3 months, traded 1,684 MU in May 2025 as compared to 1,221 MU a year ago. IEX Green Market , comprising the Green Day-Ahead and Green Term-Ahead Market segments, achieved 915 MU volume during the month under review as compared to 622 MU in May weighted average price in Green Day-Ahead Market (G-DAM) for May 2025 was Rs 3.59/unit.
