I have spent time in the sector - specifically power trading (long back though). A lot of the buyers and sellers deal on the exchange through the traders. PTC used to hold 50-60% share of the trading market long back. They have a large pool of customers and depending on how they play it, PTC’s new exchange is a real risk.
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Ptc contributes 20% share of volumes in iex. Imagine you contribute 20% to nse volumes. You can make a dent but cannot break nse.
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The biggest threat according to me is regulation.
Usually monopolies are not favorably looked at. regulators / Govt. - they bring in regulations to curb the run away growth;
An area where they can influence is Pricing Discovery: Currently the exchange does both price discovery for the electricity contracts as well as providing the infrastructure for fulfilling the contract. There has been some noises emerging to bifurcate the two functions for some time. The moment that happens then IEX becomes just an execution exchange providing regular exchange features.
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One Threat which i came to know from recent updates from IEX is Power Plant Guys have started making STA(Short Term Agreement) with Discoms/Buyers Now with this if they can offer competitive prices on avg to Exchange then the expected Transfer of Expired Long Term PPA will negate and that will hamper growth.
Other Threat as mentioned by @Ravichand08 .
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Competition should be welcomed like in any other industry. Then only it benefits it’s stakeholders. Only 5% of the power produced is routed thru exchanges which gives room for others to join. How are they going to succeed is to be seen. But there are enough example in other industries. Regarding the coupling thing, I read somewhere that the entire country or a mejor chunk of the power trading should go to exchange trading system and then only coupling can happen. That will not happen atleast for another 5 years minimum. To end the existing PPAs between the power producers and buyers itself may take many years. So IEX has a long innings to bat on.
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There is no specific reason given in the article except that it trades at high PE.
Although every investor has his/her own ways of analyzing companies but I would suggest that such articles with juicy headlines bring little on the table in terms of information/ fact based analysis.
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What do you think is a possible time frame for that to happen…the bifurcation. Or is it impossible to predict
Lot of comments about PTC selling power on their own exchange. I have simple question here, Will it not be a conflict of interest where you are selling products and you also own exchange. Will regulator not object to this? Currently BSE shares can’t be traded on BSE. So will there be similar restriction on PTC where they can’t do business on their own exchange?
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Don’t think that would be an issue. PTC held stake in IEX as well and was trading on IEX.
Regulators are cognizant of a owner trading on its own exchange and thus regulations limits that any trading member cannot hold more than 5% in the exchange. PTC will end up with only 5% stake in the new exchange.
It is not PTC selling power. They would channel their customers power on their own exchange which currently might be on IEX
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If PTC has stake in both exchange then there is less fear that they would move volume from one exchange to another. And if it is limited to just 5% then PTC would definitely look for efficiency for it’s customer rather than which exchange they have stake.
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PTC has exited IEX completely, they do not own any stake now.
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Ptc contributes 20% volume to iex. Can a trader with 20% volumes, ask the remaining 80% traders to come to other exchange?
I think we are focusing too much on PTC and their intent here when this business/exchange is less like zerodha/broking where it’s individual investors who can switch easily and much harder to just drop and leave when the price discovery dictates volume and vice versa since most clients are organizations with massive costs and margins matter most
Also might be anecdotal but I have heard from people that govt discoms etc are training their employees to use IEX, which should be stickier than just moving to a brand new exchange lacking volume/features and relearning from scratch
Standard risks of market coupling, complacency on features/ease of use etc do apply so trying to keep upto date on those
D - Invested and biased
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Can MCX become a competition for IEX?
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Such demand surges are good news for IEX
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Could someone explain about the counterparty risks that exchanges take?
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What is everyone’s view on the current valuations. Stock has run up 3X in an year and market is expecting 20-25% CAGR for 10 years. Do we see 7X growth in Revenues in 10 years (Revenue has less that doubled in last 7 years). We are basically at very optimistic levels with very low margins of safety. No doubt this is a quality business but currently this is looking like ideal scenario for time correction.
Disc: Invested but consistently reducing position with each rise
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