the role of omiclear as ccp in the iberian gas hub-pablo villaplana
DESCRIPTION
Institutional and Organizational Designs of Natural Gas Hubs: An Introduction to the Iberian Gas HubTRANSCRIPT
The role of OMIClear as CCP in the iberian gas hubP bl Vill l COOPablo Villaplana, COOOMIClear
“Institutional and organizational designs of the gas hubs in Europe: an
introduction to the iberian gas hub”
1
Bilbao, 24 June 2014
Index
1. OMIClear: who we are?
2. OMIClear as CCP. What we do?
3. Work in progress
2
IntroductionIntroduction: OMIClear: OMIClearIntroductionIntroduction: OMIClear.: OMIClear.WhoWho wewe areare
3
WhoWho wewe areare
OMI institutional organizationOMI Operador Mercado IbéricoOMI: Operador Mercado Ibérico
Portugal Spain
OMELOMIP SGPSHolding (Portugal)
OMELHolding (Spain)
10%
10%
50% 50%
50%50%
CommonOMIP Exchange (Portugal)
OMIE Exchange (Spain)
CommonBoard
50% 50%
O B dOMIClearClearing House (Portugal)
Own Board
4
OMIClear: regulated CCP under Portuguese financial legislation, “recognized “ (internationalagreement) under spanish and portuguese energy regulation. EMIR authorization in process.
Global Business Model (CCP – power and natural gas)g )
Clients
Mandatory flow ofexchange trades
Buyers
Non mandatory flowof OTC transactions
(Buyers)
Trading
Buyers
O C CMembersClearing HouseClearing House
OTC Contracts
ExchangesExchangesClearing Members
Brokers
Trading Members
OTC Contracts
Clients(Sellers)
Sellers
Over-The-Counter TradesOrganized/Regulated Markets
Participants (CM & TM) LocationTM – 1
TM – 1
TM – 1; CM - 1
TM – 12; CM - 3
TM - 4; CM - 3; FSA - 3; PSA - 2 Rascasse Energy Europe
TM – 3; CM – 2; FSA - 2TM – 1PSA – 1
Europe Limited
TM – 1
The Liverpool Limited
Updated 31 May 2014TM – 29; CM – 7; FSA – 2; PSA - 14
ExchangeExchange Clearing HouseClearing HousePSA – 1TM – 2;
LimitedPartnershipTotal: 55 Total: 17Kyonynsys
Century, S.L.U.
OMICl CCP OMICl CCP OMIClear as CCP. OMIClear as CCP. WhatWhat wewe dodoWhatWhat wewe dodo
OMIClearOMIClear as a Central Counterpartyas a Central Counterparty
- OMIClear’s activity is devoted to the role of Clearing House and CentralCounterparty (CCP) in trades made on several derivatives products: Power & Gas, energy and capacity, through ETD (Exchange Trading Derivatives) or OTC.
- As CCP, OMIClear becomes the buyer counterpart to every seller’s Clearing Member and the seller counterpart to every buyer’s Clearing Member, as soon as a trade is registered in OMIClear.
- As CCP, OMIClear performs the netting of positions
- As CCP, OMIClear register and manages the positions, performs risk management and settlements (physical and financial) that arise from the trades
Buy Position: + 15MW
Clearing Member
Sell Position: - 10 MW
Reduction ofM b ’ Ri k
Margin Lesscollateral
8
C ea g e beAccount
Net Position = +5 MW
Member’s RiskExposure
gReduction collateral
required
Risk MinimizationRisk MinimizationThe CCP ensures the multilateral Clearing of positions reducing risks such as:
Counterparty Risk
Guarateeing the fulfilment of contract’s obligations of
both counterparties
Cash SettlementRisk
both counterparties
Operational Risk
Debits & Credits are settled multilaterally
G
Reliable clearing system that calculates and
provides on real time basis i & l iin TARGET2
payment systemgains & losses, margins, collateral movements,
operational limits, statisticsSystemic Risk
If M b d f lt lIf a Member defaults only affects the CCP instead the
market as a whole
9OMIClear is at the final phase of the EMIR re‐authorization process
Systemic Risk reduced Systemic Risk reduced
Systemic Risk without CCP Systemic Risk with CCP
Default Member
Default Member
Member Member
Member A
Member Member
Member A
F B F B
Member C
Member E
Member C
MemberE
MemberD
MemberD
10Entities affected by the Default
OMIClear’sOMIClear’s Risk ManagementRisk ManagementA Multilayered SolutionA Multilayered Solution
Clearing Members Risk
Margins based on Positions
Assessment Exposure
P&L Daily Settlements
Clearing Fund
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Clearing Clearing MembersMembersClearing Members (CM) are the counterparties of OMIClear in the clearing and settlement activities regarding the CCP
To manage theGuarantees with CCP
(own / client /client
Participates(directly / indirectly)
(own / client, /clientwith segreg.&portab.)
To become the Buy or Sell (directly / indirectly)
in the Positions cash settlement
CM
Counterparty when the Positions are registered in CCP
(Open Offer Model) CM Functions & Obligations
Provide relevantInformation to CCP
When acting forclients’ account, mustreplicate obligations
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whenever requestedreplicate obligationsrequired by CCP to
the clients
Clearing Clearing Member TypesMember Types
A. General Clearing Members (GCM)
Own & Clients trades clearingOWN CLIENTS
B. Direct Clearing Members (DCM)
Own trades clearing
Clearing for dominated companies (>90% share capital) OWN
can be considered as Own Clearing
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Initial MarginInitial Margin
Purpose: Minimize the Risk of having to close out positions, in a short time period, belonging to a Clearing Member that enters into default
Applies whenthere is a
“Potential RiskE ” Always a
Responsibilityof a Member
Exposure”Covered withGuarantees(Cash / Bank
with open positions
IM
Guarantees / Securities)
IMApplies to both
Trading &
Based on a concept of Porfolio
Other complementaryDelivery Period
of contracts
Porfolio (SPAN based
model)Based on themax price
elements of the marginmodel are “VariationMargin” and “Mark to
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max. pricevaration within
“X” days
Market”
One Single Collateral Pool to Cover Multiple OMIClear Services
With OMIClear, Participants can pledge 1 single collateral (e.g. cash and/or bank guarantee) to cover responsibilities arising from their participation in multiple products g ) p g p p p por services:
Example:40%1 single collateral pool
( G /To cover positions
i f
tly
40%(Bank Guarantee and/or
cash)=> margins of
Spanish Power futures contracts20%
To cover positions => margins of Gas
Capacity Rights
Accepted Collateral:
15%25%
T iti i
Cash
Bank Guar. Gov. BondsTo cover positions => margins of Spanish
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To cover positions => margins Financial Power Transmission
Rights (PT-SP & SP-PT)
margins of Spanish Gas spot and
forwards contracts
OMIClear’sOMIClear’s Default Waterfall Default Waterfall
Collateralised
C ll t li d
Additional Guarantee (if applicable) of default CM
Margins of defaulting CM (IM, VM, BM, SM, NRPLM) Collateralised
DefaultCM CollateralisedClearing Fund (CF) contribution of default CM
OMICl D di t d F d
CF Autonomous Reserve
CM
CF contributions of non-defaulting CM
OMIClear Dedicated FundsSIG - Skin in the Game
g
CF Additional Responsibilities of
non-defaultingNon Defaulting non-defaultingCM
Non-DefaultingCMs
16Last Update: 28.Feb.2014
Specific advantages of OMIClear as a CCP in theIberian gas hub
Reduction of counterparty risk – OMIClear as CCP minimizes default probability OMIClear have default
g
Mitigation of credit minimizes default probability. OMIClear have default procedures in place already tested and approved by theregulators (CMVM and finalizing EMIR process)
grisk (counterparty)
Most players in the gas hub are already members of OMIClear as CCP in the power market
Broad participation (iberian non iberian; utilities
Market participantsboth at the Iberianpower and gas Broad participation (iberian, non-iberian; utilities,
financial players,…)power and gas market
Market participants may use one collateral pool to covertheir market risk exposure both for power and natural gas
Possibility of usingone collateral pool forboth power and NG gasp
OMIClear has a portfolio margin based on SPAN model
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‘Portfolio Margin’ formultiple products
OMIClear has a portfolio margin based on SPAN modelthat could allow for inter-commodity spreads
Work in progressWork in progress18
p gp g
Development of a Gas Hub in Iberia and OMIClear
• OMIClear is already working with BOTH trading platform initiatives (OMIE gas and IBGH) to clear and settle natural gas physical products with delivery in g ) g p y p ythe virtual point (AOC).– Short term and forward market: daily, weekly, BoM, monthly, year products …– Physical contracts.– Possible expansion to the Portuguese hub or joint virtual point (regulation)– Physical regulation (TSOs role) matter: OMIClear is following the discussions that y g ( ) g
trading venues are maintaining with the TSO (Enagas – GTS) in order to define the general framework and the relationship between “trades” and physical nominations and balancing mechanisms
• OMIClear is working to identify those changes (instructions, IT systems, risk management models,…) that would be needed to be developed or modified in order to be able to clear and settle natural gas productsorder to be able to clear and settle natural gas products.– OMIE gas – adapting the model to a short‐term organized market (energy regulation)– IBGH ‐main architecture will be applicable (EMIR) and more work is needed on the
i t (li idit & l tilit d l l d t i d & i i ti
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margin system (liquidity & volatility model – closed out period & price variation (EbMPS))
