IDEX - Italian Derivatives Energy Exchange

IDEX is the new segment of the Italian Derivatives Markets IDEM dedicated to trading of derivatives based on commodities and related indices. Initially baseload futures on electrical power delivered in Italy will be negotiated on this new segment.
In order to encourage financial players to trade and to increase market liquidity, all power derivatives on IDEX will be cash settled.
The “Cassa di Compensazione e Garanzia” (CC&G) clearing house will be the central counterparty for all contracts executed on IDEX.

ADMISSION TO TRADING ON IDEX

a) persons authorised to provide the services and engage in the activity of dealing for own account and/or executing orders on behalf of clients under the Consolidated Law on Finance, the Consolidated Law on Banking or other special provisions of Italian law;

b) banks and investment firms authorised to provide the services and engage in the activity of dealing for own account and/or executing orders on behalf of clients under laws of other EU countries or of non-EU countries;

c) firms set up in the legal form of a società per azioni or a società a responsibilità limitata or equivalent:

i. in which the persons performing administrative, management and supervisory functions and those responsible for trading activity and the internal control function satisfy integrity and experience requirements equivalent to those applying to intermediaries that deal in financial instruments; firms authorised to an investment service or activity or to the collective portfolio management by the competent Authority of an EU country are waived of this requirement;

ii. which have established an internal audit function that does not depend hierarchically on any person with operational responsibilities and that makes periodic checks on the activity of trading in financial instruments; Borsa Italiana may exempt intermediaries from this requirement after evaluating their size (proportionality principle);

iii. which have adequate shareholders’ equity as shown by their latest audited annual financial statements.

iv. participation in an EU electricity market.

POST TRADING

In order to be admitted to the IDEX segment, it is necessary to join the clearing and guarantee system in the “Energy Derivatives Section” of Cassa di Compensazione e Garanzia. 

It is possible to subscribe to CC&G as: General Clearing Member (GCM), Individual Clearing Member (ICM) and Non-Clearing Member (NCM).

Only GCM and ICM  participate in the system as counterparties of CC&G (Direct Members), while NCM participate in the system through a GCM.

GCM become a counterparty of CC&G for proprietary and/or client and/or Non-Clearing Members’ transactions.

ICM become a counterparty of CC&G for proprietary and/or client transactions.

NCM stipulate an agreement with a General Clearing Member so that the latter becomes counterparty of CC&G for the NCM’s proprietary and/or client transactions.

Banks and Investment Firms authorized to provide Investment Services in Italy can become GCM, ICG or NCM while other members of IDEX can become only NCM.

CONTRACT SPECIFICATIONS

• Monthly  Power Futures 
• Quarterly Power Futures
• Yearly Power Futures

TYPE OF ORDERS

Single order: a customer buy or sell order

•         Limit orders (with a limit price)

Can be specified the following methods of execution:

-         fill or kill:  the order is either executed in full or automatically cancelled

-         fill and kill: the order is filled, in whole or in part, up to the quantity available on the opposite side of the book and any unfilled quantity is automatically cancelled

-        good till maturity: the order remains on the book until the maturity of the contract

-        good till date: the order remains on the book until the date specified

-        daily: the order remains on the book until the end of the session

•        Market orders (without price)

 Can be specified the following methods of execution:

-        fill and kill

-        fill or kill

For daily single orders it is possible to specify the stop loss method of execution. This consists in the entry of an order that remains inactive until the market price of a financial instrument traded on the same segment of the IDEM market reaches the trigger price chosen on entering the stop-loss order. The trigger price may be chosen to be compared with the last price or the best bid price and the best ask price.

-        Quotations: bids and offers entered by the market makers and the specialists in compliance with their obligations. Quotations are daily limit orders.

Special procedures for the conclusion of contracts

-        Interbank orders: the counterparty is a specific trader whose identity is given. The price must be between the best bid price and the best ask price, excluding such prices.

-        Internal orders: the counterparty is the intermediary that entered the order. The price must be between the best bid price and the best ask price, excluding such prices.

-        Block Trades: Interbank and Internal orders may be entered  at a price outside the range between the best bid price and the best ask price if the order quantity is equal to or more than the number of contracts shown in the following table:

MARKET MAKERS

In order to improve the liquidity of the derivative instruments traded, Borsa Italiana may provide for the intervention of market makers. Types of market makers:

• Primary Market Maker are required to display bids and offers on a continuous basis for the monthly futures, quarterly futures and the first yearly futures.
• Market Makers are required to respond to request for quotations, for the monthly futures, quarterly futures and the first yearly futures, within two minutes of a their being made; the response must remain on the book for at least 15 seconds.
• Liquidity Providers are required to display bids and offers on a continuous basis for the monthly futures and/or quarterly futures and/or yearly  futures.

The quotation obligations shall begin at 09.30 and end at 17.40. Primary Market Makers and Liquidity Providers are required to restore their quotations within two minutes of a hit on the book.  In displaying the bids and offers and in responding to request for quotation, Primary Market Makers, market makers and Liquidity Providers must observe the following table (spread is the maximum permitted difference between bid and ask prices):

Borsa Italiana may temporarily relieve market makers from the quotation obligations  in case of anomalous movements in the volatility of the derivative instrument or any other circumstances preventing the regular performance of market making.

Contacts:

• Membership information: Membership Department tel. +39 02 72426 207; fax +39 02 72426 279;  email: membership@borsaitaliana.it
• IT information: Clients Services tel +39 02 72426 409; email: clients-services@borsaitaliana.it
• IDEX Segment: Ennio Arlandi, Derivatives Markets, tel. +39 02 72426 208; fax +39 02 72426 386;  email: ennio.arlandi@borsaitaliana.it
• Web site Borsa Italiana: http://www.borsaitaliana.it
• Web site Cassa di Compensazione e Garanzia: http://www.ccg.it