This is exactly what I wanted to say… Even if cross exchange trading mandated, only the one with Higher players will attract more players…
I belive in this case winners will take larger pie. Icici and bse also coming with competitive exchange but remember BSE strength in Exchange platform not necessarily in Energy Domain which Mr Goyal is an expert of.
As per Gov MBED, they want to introduce to help discover lower prices in the market. As per me, the major change going to be following
With above points IEX will find it hard for growing exponential from this point if MBED is implemented – please correct me if I am missing some thing.
MBED will inflow the offline markets to platform ad volumes will shoot. IEX may loose some market Share but there will be enough for all.
MBED is not easy to implement, electricity is state subject, will take time.
The only risk is if only Market coupling (without MBED) gets implement, this Will destroy the lever platform has in terms of price discovery and these platforms will act like just members of price discovery operators.
But does market coupling make sense today? Ofcourse not… Our real time energy market is tiny… There is no advantage of this… Unless real-time goes above 30% of total energy traded online, like we have in European countries.
Very unlikely market coupling will get implemented in next few years.
So long story short… IEX is a great investment asset considering the context we have today…
Girish,
MCX’s MOU is wrt the derivatives based on electricity spot exchange data of IEX. There is no overlap, no threat and IEX will receive a fee for providing spot prices to MCX for their derivatives segment.
IEX will not make much with derivative contacts it’s rather MCX that will make most of the fee.
I think the following article gives a good primer on the concept of MBED, the hurdles and consequences. Do read.
As @Tar always says why people prefer zerodha over Sharekhan or any other broker. it’s about technology.IEX is still monopoly in most of the segment and increasing the volumes consistently.
Someone can’t take away its moat until and unless something innovative is offered.
It’ll take time for MSTC to be in same league with IEX
When MSTC itself has huge opportunity in recycling auction space, not sure why they want to focus on additional line of business.
Creating a platform is one thing but have ecosystem of buyers and sellers and Kickstart the value feedback loop is the real ball game…
Otherwise every IT company can create an Auction /price matching platform.
IEX has first movers advantage…
As far as I can see its onky Market coupling (with no MBED - which i think is a very low odds event) that can destroy IEX rest everything is noise.
As per the table, DAM+TAM average daily volume is 172MU and RTM ~51MU. Extrapolating these numbers for Q1 total volume comes to ~20,000 MU. As per PTC India Q1 2022 presentation their ST volumes form 57% of total volume of 22,911 MU i.e. 13,059 MU. Assuming a large part of PTC ST volume is traded on IEX, it means PTC controls a large part of trade on IEX.
PTC management was asked in latest coccall, if they would move completely to new exchange and the response was not clear. Though PTC, as promoter entity, would be highly incentivized to move the volume to Pranurja as they will earn ~22% (PTC share of Pranurja) of 4 p/U trading margin just by moving the volume they control.
Whats the probability of such scenario and if such scenario unfolds how will it impact IEX?
Disclosure - Invested in IEX while at the same time have larger position on PTC India. Therefore my views are biased.
Positive side of the story, increase in electricity trading in IEX
As per my understanding the broker or intermediary cannot trade in an exchange owned / controlled by them. The new exchange has to depend on non captive volumes to really make an inroad in the volumes of IEX.
Correct me if am wrong in my understanding.
Sub: Submission of Media Release on IEX Power Market Update , September 2021
f3d63210-8a06-4dcf-b9cb-b8af97f69fca.pdf (588.6 KB)
@BalajiJ - I am not aware about any such restriction. PTC holds ~22% of Pranurja which means it does not control the new exchange. Hope this point is clarified with PTC management during upcoming con call.
This entire document is filled with YOY comparison while we all know there is a bias of low base from last year being covid.
I wish they did qoq also. Nonetheless what I can conclude is the power value chain is adopting auction platform for doing real transactions and if that continues which I believe it would, its going to create some serious networks effect which eventually is the moat of IEX.
Ofcourse unless market coupling without MBED mandate kills power exchange platform players, which is very unlikely to happen as our real time transactions are low single single digits yet.
Also the electricity amendment bill is a tangible tailwind for DIACOMs to better manage their buying on auction exchange platform from generators with better price discovery and “as and when required” than making advance long contracts that caused “teji mandi” because of coal prices. Its like DIACOMS are in commodity business but fundamentally they are in service business which our current eco system never enabled them to behave like a service provider, also the discom porting right of consumer is going to create serious competition in DIACOMs for the best service. Remember what happend in telecoms recently because of better pricing? Eventually we the consumers snd DIACOMs with best efficiencies will win the game.
This whole amendment is going to turn entire Discom value chain profit generating which historically marred because of inefficiencies, coal pricing fluctuations, technical and commercial reasons.
I am Just trying to double click how power exchange platform enables electricity amendment bill and its downstream impact on discom bottom lines.
As per the Power ministry, the resolution of the jurisdiction issue between market regulator [SEBI ] and electricity regulator CERC, will further deepen the power market and pave the way for the introduction of longer duration delivery-based contracts on exchanges.
This development augurs well for IEX.https://www.business-standard.com/article/economy-policy/resolution-of-sebi-cerc-jurisdiction-issue-to-deepen-power-market-govt-121100700755_1.html
I think MCX will now have larger share of power trading volume as they have launched derivative products. derivative volumes are always in multiples of spot volumes in every products.
Disc - invested in IEX.
This is exactly true. MCX will make most out of this product as power players have to hedge their positions so there is a clear visibility of additional revenue for MCX IEX has least to gain.
But the way i see it is that now thr ecosystem has gotten even stronger for IEX as power companies can hedge so they will comfortably take position in spot. One will feedback other and so on.
The Indian Energy Exchange (IEX) traded 1.68 billion units (BU) of renewable energy in the third quarter (Q3) of the calendar year (CY) 2021.
The exchange traded 8.99 BU of energy during September, with a 59% YoY growth, across all market segments. In Q3, the market traded a volume of 25.86 BU, a 57% growth across market segments compared to the same quarter last year.
Energy consumption was flat during September at 114.5 BU, while peak power demand increased 2% to 180.7 GW, compared to the same period last year.
Source: mercomindia
