Paving the Way in Energy Brokering

Q: How does Tradeon rate the Mexican electricity market?

A: The market is extremely complex in its design, but the pace at which regulation has been rolled out is admirable. The MEM at the moment continues to be in the early stages of development, where most of the trades take place in the OTC/Bilateral format. Once there is enough liquidity and processes are improved further, we will begin a shift toward more standardized products that can be cleared through a single entity. There are still challenges and details being addressed that will shape our market. These include the mediumterm auction and the financial transmission rights, which will allow for the proper integration of all the regulatory pieces. But it is now up to the participating entities to continue the joint effort to create liquidity. In that sense, we will continue contributing while acting as the market’s “window,” where all the different interests and positions are brought together. Our focus remains on the midrange duration of transactions, from one week up to five years, as we are deeply involved in the design of products and universal contracts to facilitate transactions between players in a faster and more efficient way. As an example of our commitment, we held in June 2017 a dynamic trading simulation called the Tradeon Games, where all participants were presented with the opportunity to trade electronically with other parties over two weeks, using real products and settlement processes. We saw more than 1,400 trades take place, 8GW in energy swaps, 6.5GW of TBPots and more than 3.5 million in CELs.

Q: How is Tradeon working toward the implementation of the CELs and financial transmission rights?

A: CELs are proving to be quite a relevant and somewhat complex product. The main issue or bottleneck until now has been tied to Declaracel, and the uncertainties about the exact settlement and transfer of ownership process through which participants will register their transactions,.This is key for a bilateral and liquid market to function. Tradeon has assumed a proactive role by proposing a CELs market on its platform, with live and firm prices shown on a curve of up to five years. As for financial transmission rights, we have received feedback from many active participants and created a swap market based on the PMLs from the most relevant SIN nodes (11 at the moment), plus the two interconnected nodes for Mexicali and La Paz, where nodal differences can be traded between them, representing the most simple and efficient version of FTRs.

Q: What is Tradeon’s added value regarding the development of the Mexican electricity market?

A: We have two lines of business. One is our brokerage service offered to the wholesale market and the second is our function as an agent to end users. For this branch, we take advantage of the relationships and position developed through our brokerage service to guide our clients through the entire process of understanding the market, its products, their position within it and the available opportunities and alternatives that can translate into cost-effective and efficient ways to manage their energy consumption. On the technology side, Tradeon offers a state-of-the-art platform already used to clear all OTC bilateral markets in Europe. We have extensively adapted this platform in conjunction with our effort to create products that can help all participants manage their risks and create much needed liquidity, while allowing users to monitor the market’s movements in real time. This service was already used for the first financial derivatives transaction completed in Mexico, which took place at the end of 2016, representing the starting point in the development of an efficient secondary market. We are committed to continue paving the way in supporting the growth of our wholesale electricity market, innovating and continuing to offer fully transparent and impartial services to all of its participants.

Tradeon Energy supports the creation and development of the Mexican electricity market. Located in Mexico City, the company offers brokerage and consultancy services to every stakeholder along the value chain.